Rupert Murdoch is in all-out retreat. News Corp’s decision to abandon its bid for British Sky Broadcasting reflects News’ realisation that the proposal – rightly or wrongly – had become so politicised that it could not possibly proceed. With the scandal beginning to reverberate in the US, however, the company needs to do more to calm the political firestorm engulfing his company.
Since the phone hacking scandal erupted again this month, News Corp has closed the News of the World, the UK tabloid newspaper at the centre of allegations of criminal behaviour, and abandoned the cornerstone of its growth plans – the BSkyB acquisition. These sacrifices were tactics to address specific events.
Now the board must acknowledge that the root of the problem is the rotten corporate culture that the scandal has exposed inside News International, its UK arm. Until this is addressed in a more comprehensive way, the likelihood that News Corp can ever revive its BSkyB bid is slim. That leaves BSkyB shareholders in limbo. After a brief swoon when the bid was withdrawn, its shares were barely changed, at their lowest earnings multiple since 2009. That price reflects the belief that the future of the broadcaster – still effectively controlled by News Corp, and chaired by James Murdoch – remains tied to the fate of News International.