Why the Murdochs Are Second Guessing Their Escape Route
UPDATE: Rupert Murdoch and James Murdoch caved to pressure from the British government and will appear before Parliament after all.
ORIGINAL POST: News Corp. CEO Rupert Murdoch and his son James, the company's deputy chief operating officer, are both refusing to answer questions before Parliament. Their refusal could be the first thing two have agreed upon since News Corp.'s phone hacking scandal began.
Rupert Murdoch's withdrawing his bid to acquire BSkyB lit a tiny fire under News Corp.'s stock price, but that flame probably burned James. According to The New York Times, the 38-year-old heir to his father's News Corp. throne, had been in favor of continuing to push the BSkyB deal, even when faced with the British government's threats to strike down the bid due to the recent controversy over phone hacking and bribing police at News Corp.-owned papers. Just as his father coddles his beloved newspaper branch, News International, James held the prospect of a bigger cable television presence dear. In the end, Rupert only consulted James about canceling the bid after he'd already made the decision. Jeremy Peters and John Burns at The Times report:
The announcement is particularly fraught for James Murdoch, who ran BSkyB from 2003 to 2007. He has been the principal champion of the BSkyB purchase within the News Corporation, pressing both his father and the company’s board to go along with the deal. With BSkyB reporting to James, who runs the News Corporation’s European and Asian operations, the businesses in his portfolio would account for half of all the News Corporation’s revenue.
The decision to cancel the bid certainly stung Rupert Murdoch as well, but the 80-year-old media mogul probably hopes it will save him from another heart-wrenching possibility: spinning off his British newspapers. Rupert Murdoch's biographer Michael Wolff said earlier this week that News Corp. executives were considering an exit from the newspaper business in the U.K. altogether, and The Wall Street Journal corroborated his comments on Wednesday. Having shuttered News of the World, which he's has owned and operated for nearly half a century, Murdoch would reportedly be devastated to lose all of his papers, but the emergency option could come down to the shareholders. Meanwhile, James Murdoch shares "none of his father's romantic notions about newspapers," says The Times.
One other option would be to sacrifice Rebekah Brooks, chief exectutive of News Corp.'s British newspaper division, News International. Brooks has already offered her resignation, which Rupert Murdoch refused to accept. Next week Brooks, who was editor of News of the World when phone hacking took place, is expected to appear before Parliament for questioning. (Both Murdochs said they are unable to attend; it's worth mentioning that Parliament could force Brooks, a British citizen, to answer questions while they cannot do the same with the Rupert Murdoch, a U.S. citizen, and James Murdoch, who holds both the U.S. and Australia.)
Meanwhile, the scandal continues to get worse. News Corp.'s head lawyer has resigned, the first executive casualty of the phone hacking debacle, and London police have arrested the deputy editor of News of the World. News Corp.'s trouble has also crossed the Atlantic. Multiple senators are calling for an investigation of News Corp.'s activities in the United States, and a group of shareholders in Delaware have already filed a class action lawsuit. Even The Wall Street Journal's former owners are speaking out against News Corp., saying they regret having sold their paper to Murdoch.
Pending any new revelations of awful misconduct, the Murdochs may be able to salvage their stake in the newspaper business. But the scandal has exacerbated known strains on Murdoch family ties, and that could illustrate the ultimate problem. As Michael Wolff wrote, "Credibility may be restored, and the public cry for blood sated, only when the company is no longer run by someone named Murdoch."
Correction: An earlier version of this post incorrectly stated that Rupert Murdoch was an Australian citizen. While he was born in Australia, Rupert Murdoch is now a U.S. citizen