Is this the end of Rupert? For decades the billionaire media baron relentlessly amassed power on three continents. As recently as July 4 only a fool would have bet against that process continuing. In New York, shares of News Corporation were trading at $18.54; having bought out his daughter Elisabeth’s production company, Shine, for £415 million ($673 million), Murdoch also arranged for his son James, who had been running British Sky Broadcasting (BSkyB), to move to New York—apparently securing family control over the company for the next generation. In London the government of David Cameron, elected with the backing of Murdoch’s newspapers, was expected to wave through a deal that would let the 80-year-old tycoon buy the 61 percent of BSkyB he doesn’t already own, giving him even greater influence over British politics. A week later, the deal was off.
The House of Murdoch has been shaken to its foundations. The political firestorm began with a report in the Guardian that journalists from the News of the World, Murdoch’s Sunday tabloid, had hacked into the mobile phone messages of Milly Dowler, a murdered 13-year-old girl, setting off a wave of public revulsion that in turn sparked an advertising boycott. Prime Minister Cameron condemned the hacking as “dreadful”; Labour Party leader Ed Miliband called for Rebekah Brooks, a Murdoch executive who’d been editor of the News of the World when the hacking occurred, to resign. When it emerged that the paper had also hacked into the voicemail accounts of British soldiers killed in Afghanistan and Iraq, the Royal British Legion, the country’s largest veterans’ organization, announced it was cutting its ties with the paper. Just when it seemed the paper’s reputation could sink no lower, it was reported that victims of the July 7, 2005, London bombing had also had their voicemail accounts hacked. Even Rupert Murdoch described the mounting scandal as “deplorable and unacceptable.”
In a desperate attempt to limit the damage James Murdoch announced that the 168-year-old tabloid would be shut down. Miliband, who’d made an obligatory appearance at a Murdoch garden party in June, suddenly seemed to discover his backbone (or another portion of his anatomy starting with “b”), moving to force Parliament to debate the BSkyB merger. As the Labour motion opposing the merger gathered support from across the political spectrum, Culture Secretary Jeremy Hunt announced that he was referring the bid to the Competition Commission as well as the media regulator Ofcom, delaying a decision for at least three months. Speculators who had bought BSkyB shares in anticipation of the merger began to bail out—which, in turn, knocked a whopping 15 percent ($7 billion) off the value of News Corporation. Then on July 13, in a stunning reversal, James and Rupert Murdoch withdrew their bid, saying “it is too difficult to progress in this climate.” Long accustomed to making the political weather, the Murdochs were battered by the storm.
Both Murdochs had been “invited” to appear before a parliamentary select committee—an offer their surprise move may have been designed to refuse. But the family firm’s troubles are far from over. Some shareholders, aggrieved at the way Rupert Murdoch “habitually uses News Corp to enrich himself and his family members at the Company’s…expense,” filed a lawsuit challenging the acquisition of Shine—but really aimed at the way the whole corporation has been run for the past four decades. (For connoisseurs of irony, one of the lead plaintiffs in the suit is Amalgamated, the union bank.) There is even a chance Murdoch or his lieutenants could face prosecution in the United States under the Foreign Corrupt Practices Act.