Murdoch tabloid folding amid hacking scandal

On Jan. 26, London's Metropolitan Police Service announced that it would further allegations that News of the World employees were hacking telephones of public figures, celebrities and the family of victims of tragedies like 9/11. The operation resulted in the arrest of News International chief executive Rebekah Brooks, former editor Andy Coulson and more than a dozen other editors and reporters associated with the newspaper. In July, parent company News Corp. shut down News of the World after nearly 168 years in print. 2011: Year in Review AP Photo/Matt Dunham

Updated at 2:30 p.m. ET

LONDON - The Murdoch media empire unexpectedly jettisoned the News of the World on Thursday, the best-selling tabloid at the center of an ugly phone hacking scandal.

The tabloid, long known for its dubious undercover reporting techniques, had gravely offended the British public by hacking into the cell phone voicemail of a missing teenage girl, possibly even interfering with the police investigation into her murder.

What was an acceptable, if illegal, tactic used to gather scoops on drug-using celebrities, philandering politicians or cheating film stars suddenly became completely unacceptable when missing children, the relatives of soldiers slain in Afghanistan or the families of victims of London's 2005 terror attacks were targeted.

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Rupert Murdoch's son, James Murdoch, who heads European operations for the paper's parent company, said the 168-year-old weekly newspaper would publish its last edition on Sunday, without ads. The closure was spurred in part by the decision by many large advertisers to withdraw their ads in protest of the paper's gross intrusions of privacy.

Murdoch said during an interview broadcast on British media that he's satisfied that embattled executive Rebekah Brooks had no knowledge of phone hacking while she was editor of the scandal-ridden News of the World.

But News International says shuttering the tabloid will cost about 200 tabloid staffers their jobs. Journalists at the paper had no advance word of the decision.

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However, some analysts said decision may make strategic business sense for Rupert Murdoch if it allows him to salvage a controversial bid to fully take over the broadcaster British Sky Broadcast in a deal estimated at 12 billion pounds ($19 billion). Murdoch might even be able to fill the gap left by the News of the World with one of his other media properties.

"News Corp. has taken a bold decision to stop printing the News of the World and close the title. Mr. Murdoch was clearly not willing to jeopardize his bid for BSkyB," said markets analyst Louise Cooper of BGC Partners in London. "Murdoch has shown what a brilliant operator he really is."

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She said the financial impact of the paper's closure will be small to parent company, far less than the value wiped off of News International's stock price by the hacking scandal.

News International spokeswoman Daisy Dunlop denied rumors that The Sun, the News of The World's sister paper that publishes Monday through Saturday, would become a seven-day operation to pick up the slack and restore Murdoch's financial position in the vital Sunday market.

"It's not true at the moment," she said.

On Twitter, at least one user posted that the online domain name TheSunOnSunday.co.uk was registered Tuesday.

Dunlop said employees laid off in the closure will be able to apply for other jobs within the sprawling media company.

The news of the shutdown and mass job loss sparked outrage at the paper's headquarters, especially because Brooks — the editor in charge at the time, now one of Murdoch's top lieutenants — is keeping her highly paid executive position as News International chief.

The abrupt decision to shut the newspaper follows an extraordinary three days in which multiple revelations about intrusive phone hacking cost the paper its advertising base and reader support. The tabloid was found to have hacked into the phone message of a teenage murder victim and was suspected of targeting the relatives of slain soldiers in its quest to produce attention-grabbing headlines.

Britons of all stripes said they were disgusted and revolted by the Rupert Murdoch-owned newspaper's tactics and British lawmakers held an emergency debate on Parliament on Wednesday in which many condemned the paper.

The tabloid's executives had already admitted the widespread hacking of cell phones used by celebrities, film stars, royal aides and politicians and reached cash settlements with prominent victims. But the intrusion into — and possible interference with — an ongoing murder investigation of a child proved to be the final straw in losing the public's trust.

Police are now examining 4,000 names of people who may have been targeted by the paper.

Murdoch said in a memo to staff that all revenue from the final issue, which will carry no ads, would go to "good causes."

The announcement took British media-watchers — and the newspaper's staff — by surprise.

The News of the World, which sells close to 3 million copies a week, has acknowledged that it hacked into the mobile phone voice mails of politicians, celebrities and royal aides. A reporter and a private investigator working for the paper were jailed for phone hacking in 2007.

But in recent days the allegations have expanded to take in the phones of missing children who were found slain, the relatives of terrorist victims and families of soldiers killed in Afghanistan.

James Murdoch said if the allegations were true, "it was inhuman and has no place in our company."

"Wrongdoers turned a good newsroom bad," he said, "and this was not fully understood or adequately pursued."

"While we may never be able to make up for distress that has been caused, the right thing to do is for every penny of the circulation revenue we receive this weekend to go to organizations — many of whom are long-term friends and partners — that improve life in Britain and are devoted to treating others with dignity," he said.

Shares in News Corp. were up 1.6 percent at $18.22 on the Nasdaq index in New York, though they have fallen from above $18.50 since Tuesday.

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