Media conglom shutters News of the World paper amid BSkyB bid

News Corp. said it will cease publishing its U.K. newspaper, the News of the World, as the media conglom continues to grapple with the fallout of the phone-hacking scandal that has engulfed the company in recent days and, crucially, to help ensure that Rupert Murdoch’s bid to own U.K. paybox BSkyB outright does not get further derailed.

That deal had been expected to receive government approval by the end of July, but pols — responding to public outrage at the News of the World’s transgressions — have now said they will not make a decision until September at the earliest.

That News Corp. is prepared to shut the profitable 168-year-old paper speaks much about the damage done to the company’s reputation in just four days as it became clear the paper

had intercepted phone messages of newsworthy members of the public, including aides to the Royal Family as well as various politicians and celebrities.

The hacks date back to 2002, when editor Rebekah Brooks (then Wade) was in charge. These included intercepting phone messages of a murdered adolescent girl, the parents of two other murdered girls, victims of the 2005 London bombings and relatives of soldiers killed in Iraq and Afghanistan. Brooks was promoted to editor of News Corp.’s daily newspaper, The Sun, in 2003.

Andy Coulson, who succeeded Brooks as News of the World editor, resigned in 2007 following the conviction of one of the paper’s reporters in relation to illegal phone-hacking. Coulson joined Prime Minister David Cameron’s staff as communications director but was forced out in January because of continued media coverage of the phone-hacking affair.

The News of the World, as well as Murdoch’s three other papers, are under the conglom’s News Intl. wing. James Murdoch, News Corp. deputy chief operating officer, announced the decision to shutter the paper, axing some 200 jobs, at News Intl.’s East London HQ on Thursday.

“The News of the World is in the business of holding others to account,” he told staff. “But it failed to when it came to itself.

“Wrongdoers turned a good newsroom bad and this was not fully understood or adequately pursued.”

James Murdoch, who is also chairman and CEO of News Corp. Europe and Asia, admitted the company had “made statements to parliament without being in full possession of the facts. This was wrong.”

He also confessed that he had authorized out-of-court payments to victims of the hacking.

“I now know that I did not have a complete picture when I did so,” he said. “That was wrong and is a matter of serious regret.”

Whether his apparent contrition will be enough to detoxify the News Corp. brand in the U.K. and secure its goal of buying the 61% of BSkyB it does not already own remains to be seen.

Rival newspapers, pols and commentators are calling for the head of Brooks, who is now CEO of News Intl., and a friend of Cameron.

Sky News — also owned by Murdoch — reported that Brooks, who Rupert Murdoch appointed Wednesday to lead an internal investigation into the scandal, was in tears when she told staff that the News of the World was to close.

The betting in the U.K. is that Brooks, and not just the paper, will have to be sacrificed before the storm battering News Corp. starts to subside.

Some commentators see the axing of the News of the World as a cynical sacrifice — and a business opportunity because it will enable the company to turn its bestselling daily tabloid, The Sun, into a seven-day-a week operation.

The Internet domain name thesunonsunday.co.uk was reportedly registered two days ago.

Effectively merging the two titles would cut costs and allow News Intl. to continue to exploit a still-valuable advertising market.

The News of the World was Rupert Murdoch’s first British newspaper acquisition in 1968. Its profits helped the mogul build his publishing and broadcasting empire in Blighty and the U.S.

The title remains the U.K.’s biggest-selling paper, with a circulation of 2.66 million as of May. The paper, famous for exposing the sexual indiscretions of priests and politicians long before Murdoch bought it, had a circulation of 6.66 million in 1962.

The difference in those two figures helps explain why Murdoch is determined to own BSkyB outright: Newspapers are in decline, while pay TV revenues are buoyant and expected to grow for the foreseeable future.

British Labour MP Tom Watson, who has been campaigning on the phone-hacking issue for two years, said: “Rupert Murdoch did not close the News of the World — it is the revulsion of families up and down the land as to what they got up to.

“It was going to lose all its readers and it had no advertisers left. They had no choice.”

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