Last Updated Jul 15, 2011 5:17 PM EDT
[UPDATE: Dow Jones chairman and Wall Street Journal publisher Les Hinton has also resigned. Hinton ran News Corp.'s U.K. publishing unit while the phone hacking was taking place.]
The roiling phone hacking and bribery scandal that has engulfed News Corp. (NWS) has taken its first executive sacrificial lamb -- or scapegoat. Rupert Murdoch's protÃ©gÃ© Rebekah Brooks announced her resignation as CEO of News' U.K. newspaper division. That's just a week after Murdoch said that he backed her 100 percent. (Of course, in the meantime two U.K. inquiries and an FBI investigation have gotten underway.)
Big surprise. Murdoch is always loyal to his own interests first, and measures everyone in the degree to which they serve. As much as he wanted to keep Brooks under wraps and away from the welcoming arms of critics and prosecutors, someone's head had to roll. Murdoch has bigger interests. Brooks is just one step in his campaign to get the prize he wants.
Here today, gone tomorrow
Just last week, Brooks insisted that she would not resign. But outrage over the bribery and phone hacking allegations already caused Murdoch to drop his bid for satellite broadcaster BSkyB -- not to mention the enormous amount of free cash that it generates, which Murdoch wants to further build out his empire.
Brooks may have technically resigned, but understand that Murdoch calculated the effect and decided that she was expendable. It's part of his already obvious three-step campaign:
- Cast people like Brooks overboard as chum for the sharks.
- Attack critics to warn them what will happen if they don't back off.
- Create a cynically "sincere" apology campaign.
Not only is Brooks gone (and others in the organization will also go if necessary), but Murdoch's counter-attacks have begun. In his first interview since the scandal exploded, Murdoch said that News only made "minor mistakes," that former prime minister Gordon Brown's remarks about News being "part of a criminal underworld" were "lies," and that people will "get over it."
Consider that the warning shot to Parliament, where Murdoch and his son and second-in-command James are to testify in August. Murdoch has often thrown his weight around with politicians, particularly in the U.K., where he owns about 40 percent of the press outlets. Politicians who have crossed him have found News properties trying to bury them, often successfully. And, after all, the politicians will get to exorcise their hostilities by torturing Brooks.
It was all just a dream
To sway the public, or at least to try and placate it back into docility, Murdoch has decided to apologize to the public (in an offhand and pretty sorry PR attempt) and launch a national ad campaign:
"This weekend, News International will run advertisements in all national newspapers," Murdoch said. "We will apologise to the nation for what has happened. We will follow this up in the future with communications about the actions we have taken to address the wrongdoing that occurred."A slap for those with power to directly threaten and a pat on the head and a few crocodile tears for the public at large. What's the point when prying Murdoch out of his empire is virtually impossible? The same prize he's wanted: BSkyB. Saudi Prince Al-Waleed bin Talal Alsaud, who owns 7 percent of News, says that Murdoch is likely to make another bid for the 60 percent of the company.
Sadly, Murdoch is probably right. Things will die down and, once the heat is off a bit, politicians will remember that they fear him. And then Murdoch will be free to make his move on the cash cow he's coveted for so long.
- News Corp. Exec Rebekah Brooks Resigns: Behind Her Letter
- Murdoch Says "Bye-Bye, BSkyB" and Builds a News Corp. Firewall
- News You Can Use: Why Nothing in Murdoch's Empire Will Change
- Why Murdoch Wants BSkyB So Badly
- Murdoch's Dilemma: Save His Loyal Execs-- or His Company