News Corp. shutters Paper, BSkyB deal in limbo.

News Corporation (NASDAQ:NWS) the worlds second largest media conglomerate has shuttered its embattled tabloid newspaper News of the World. News of the World which started in 1843 has been scheduled to close following the 10 July 2011 edition.

The who

The newspaper is published by News Group Newspapers of News International, a subsidiary of famed media baron Rupert Murdoch’s News Corp., and it is the Sunday sister paper of The Sun. In its lifetime the newspaper concentrated on celebrity-based news and populist news. The paper’s penchant for publishing news about celebrity sex scandals earned it the nickname “Screws of the World”. It also had a reputation for exposing celebrity scandals such as celebrities caught doing drugs or performing criminal acts, the paper had culture that encouraged setting up insiders and journalists in disguise to provide either video or photographic evidence, and phone hacking in ongoing police investigations. Sales of the newspaper averaged 2,812,005 copies per week in October 2010. The revenue loss to News Corp. from the closing of News of the World is expected to be 10-15 million pounds a year.

Bad call

The controversy began in 2006, when the Metropolitan Police laid charges against Clive Goodman, the News of the World’s royal editor, and Glenn Mulcaire, a private investigator, alleging that they intercepted voicemail messages left for members of the royal household. Both men were jailed in 2007. Allegations against the News of the World in relation to illegal voicemail interceptions have continued in subsequent years, implicating other journalists and staff at the paper; numerous public figures, including politicians and celebrities, were found to have been targeted by the interceptions. The Metropolitan Police began a new investigation into phone hacking allegations in February 2011, at which time more than twenty civil cases against the News of the World were also active. Attorneys for the victims allege that as many as 7,000 people had their phones hacked by the News of the World, and have estimated that litigation over the paper’s actions may cost News Corporation £40 million.

Straw that broke the camel’s back

In July 2011, further allegations were made that the News of the World hacked into the voicemails of local murder victim Milly Dowler, as well as victims of the 7/7 attacks and relatives of deceased British soldiers. The news was met with public outrage in the United Kingdom.

Backlash

Advertisers reacted by withdrawing from the News of the World and other News Corporation holdings. Companies including Ford, Lloyds Banking Group, Mitsibushi, The Co-operative Group, Vauxhall, and Virgin Holidays started suspending adverts in the News Of The World over the phone hacking claims. The advertiser exodus began on Tuesday night, as Ford announced it was cancelling deals with the newspaper, and others started following suit.

Uncertain future

News Corp. golden deal to buy the pay-television company British Sky Broadcasting (BSkyB ) is in limbo. Amid the widening phone-hacking controversy at the media empire, British officials indicated on Friday that it could take awhile to assess the proposed acquisition of BSkyB, sending shares of the broadcaster plummeting even further on fears of the deal not going through. By late afternoon London time, BSkyB’s share price was down 7.8 percent at 749 pence ($11.98). That means the company’s market value has lost over one billion pounds ($1.6 billion).

Information sources

The Met is currently being investigated for its links to News International and some of its officers are accused of making over £100,000 by selling information to the News of the World.

Darwin in action

The closure of the News of the World is having repercussions all across the British media. Shares in Trinity Mirror PLC were up around 7 percent, while those of Daily Mail & General Trust PLC spiked over 1 percent as investors conclude that their Sunday publications will be able to pick up readers from the axed News of the World, which was the most read British newspaper.

Click here to learn more about the actual technical “hacking” behind the phone hacking scandal.