Murdoch's News International on the ropes

After a series of damaging and costly scandals, the British newspaper arm of Rupert Murdoch's media conglomerate is becoming something of an albatross around News Corp's neck, and some say the octogenarian may offload it.

Rupert Murdoch was present for the launch of The Sun on Sunday on February 25. Arthur Edwards / AP Photo

To anyone casually looking last month at figures for last year from News Corp but who was unaware of the group's recent history, the appearance was of a business in rude health.

Net profit was up, in troubled economic times, by a whopping 66 per cent to US$1.06 billion (Dh3.89bn) from $624 million.

Advertising and fees from the group's cable television networks generated the higher gains, and good progress was being made with a share repurchase scheme.

There was, of course, a stain on this picture of corporate contentment. These excellent results have been achieved despite a scandal, or rather succession of scandals, that has rocked News Corp, and specifically its British newspaper publishing arm, News International, to its foundations.

And if some media analysts are to be believed, one possible result of the acute discomfort felt by Rupert Murdoch, the creator and chairman of the multinational media conglomerate, could be an abandonment of news as a key component of the empire.

On any dispassionate view, the scandals reflect extraordinary practices at the heart of British newspapers, politics and policing. There is evidence of dishonesty, corruption and currying of favour, all on a grand scale. It may never be known how many people's phones were hacked, how many police officers and public officials were given illicit payments.

For News Corp, it has been a painful episode and, in itself, expensive. Legal costs and compensation have reached $87m so far. It is a bill that is bound to climb far higher and would already have threatened the existence of a business that did not have such high-performing segments beyond the world of newspapers.

Not even Mr Murdoch has attempted to minimise the scale of the shocking conduct that has been revealed.

From reporters to the most senior executives, several journalists now or previously on his payroll have been arrested; some could face prosecution. Serving or former police officers and other public officials have been drawn into the investigation. There have been high-profile resignations at Scotland Yard, News Corp and 10 Downing Street as the originally sluggish investigation has gathered speed.

And despite a feeling in some quarters that righteous indignation has occasionally given way to hysteria, the inescapable conclusion is that something rotten has been found at the core of British public life.

Among the casualties, one newspaper, the News of the World, which has been killed off. Hundreds of people, most unconnected to the string of allegations of malpractice from the past, have lost their jobs.

But another paper, The Sun on Sunday, has been born, reviving conspiracy theories that a seven-day operation for its older sister, the daily British tabloid The Sun, was planned all along.

For much of the world, the tribulations of Mr Murdoch, who turned 81 on Sunday, became serious last summer when some of the most damaging allegations of phone hacking surfaced and the News of the World ceased publication.

But the scandal had been rumbling for some years. Other journalists, who judged an initial police investigation of illegal practices to have been unenthusiastic, had dug deeper, casting doubt on News International assertions that phone hacking had been restricted to one rogue reporter.

Clive Goodman, who reported for the News of the World on the British royal family, had been presented as a one-off maverick. He admitted to having paid a private investigator for hacking into the mobile phone conversations of members of the royal family. Both went to jail, but the suspicion of more widespread criminality lingered.

Members of the British parliament, where Mr Murdoch has many enemies, also beavered away to uncover the industrial scale of hacking.

It extended to other newspapers, not all part of News International, but the focus has remained on Mr Murdoch's titles.

What has been revealed is described by the US media commentator and journalism professor Edward Wasserman as "staggering misconduct by [News Corp's] UK newspaper arm".

Writing in The Miami Herald, Mr Wasserman said press interests, which included the sober Wall Street Journal and The Times of London as well as brash tabloids, remained part of News Corp largely at the insistence of Mr Murdoch, a "newspaperman and patriarch". But the possibility now loomed, he argued, that the group would rid itself of this troublesome division.

The evidence of irregular conduct goes back nine years and initially concerned payments to police officials rather than the interception of phone calls or emails.

In 2003, Rebekah Brooks became the editor of The Sun, while Andy Coulson, later the British prime minister David Cameron's communications chief until the gathering scandal forced his resignation, took over the News of the World.

And in that year, Mrs Brooks admitted to a parliamentary committee that her paper had paid policemen for information. It was four years before a complaint from the royal family led to the Goodman hacking case.

But as both aspects of the saga have been examined, the fallout has been spectacular.

Mr Murdoch's British newspaper business has taken a battering. He also had to abandon hopes of acquiring the remaining 61 per cent stake in BSkyB, a satellite television and communications provider, a project in which he previously had the British government's blessing.

The UK communications regulator Ofcom is also reviewing whether Mr Murdoch should be allowed to retain the 39 per cent of the stock he already has - and whether his son James, heavily embroiled in the parliamentary inquiry into who knew what at News International, should remain the chairman of BSkyB.

On phone tapping, compensation has been paid to many complainants, from celebrities and politicians to people simply caught up in the news, such as the family of the murdered schoolgirl Milly Dowler.

One member of parliament baiting the Murdoch empire, Chris Bryant, has described it as the UK's single largest corporate corruption case in 250 years because the cover-up reached the highest levels.

Internally, James Murdoch's apparent path to the top has been checked. He has stood down as the chairman of News International and is no longer seen as the automatic heir to his father's throne.

Mrs Brooks is among those to have fallen on their swords, eventually resigning as chief executive of the News International division, shortly before her own arrest; Mr Coulson succumbed in the end to mounting pressure to leave Downing Street. He, too, was arrested.

It is anyone's guess how many of the people caught in the net of the scandals will end up facing court action with the distinct possibility, if convicted, of imprisonment.

These are serious matters. But the saga descended into near-comedy when Mrs Brooks was reported to have been lent a retired police horse for her Oxfordshire farm. But even this was seen as raising doubts about the propriety of her links with Scotland Yard. "Now they are blaming R Brooks for saving an old horse from the glue factory," Mr Murdoch wrote on his Twitter account. "What next?"

What next indeed?

In more cheerful times for the newspaper corner of his empire, Mr Murdoch was a man decision-makers wanted to know. Other newspaper chiefs credited him with "concentrating minds" and forcing through the technological change that saved the industry from collapse under the weight of costly, old-fashioned printing methods.

The support of his newspapers at election time was actively courted by political figures; some observers believe he may well miss, more than anything else, the social influence he once commanded.

But in a story that has shamed British journalism and raised questions about a business giant's future, this week's latest arrests, notably of Mrs Brooks again, and her husband and others, show that several chapters remain to be written.

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