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Phone Scandal Poses Defining Test for a Murdoch Son

On Thursday afternoon, James Murdoch assembled senior executives in the top-floor boardroom in the News Corporation’s London headquarters and told them of a momentous decision: to shutter the 168-year-old tabloid at the center of a deepening phone-hacking scandal and the original heart of the Murdoch media empire in Britain.

James Murdoch, son of Rupert Murdoch and Chairman and Chief Executive of News Corporation, Europe and Asia.
Miguel Villagran | Getty Images
James Murdoch, son of Rupert Murdoch and Chairman and Chief Executive of News Corporation, Europe and Asia.

Hours earlier, he had prevailed on his father, Rupert, and his chief lieutenant, Chase Carey, in a phone call from London to Sun Valley, Idaho, where they were attending a conference, according to two people briefed on the matter. Under pressure to quell the scandal and preserve a lucrative deal for a pay-television company, James Murdoch argued that closing the newspaper was necessary to restore respect to the company, they said.

Now James Murdoch faces a new test as he jockeys to one day run his father’s company and salvage the biggest deal in the Murdochs’ history, a $12 billion takeover of British Sky Broadcasting, or BSkyB. With the scandal mushrooming as two former employees were arrested and new charges surfacedthat executives had tried to obstruct investigations, he could emerge as the company’s decisive new leader, or as the tainted son who mismanaged one of the greatest crises the family business has faced.

The struggle is both a generational shift and economic one: how best to respond to changes that face the news industry, and who at News Corporation is best equipped to decide.

Mr. Murdoch appeared to act quickly to close The News of the World, Britain’s largest-circulation Sunday paper, which his father has owned for more than four decades.

Yet the decision was nearly four months in the making, and was as much an effort to shed jobs and save money in a beleaguered industry and shift resources to broadcasting as it was a response to the outcry over the scandal’s new revelations, according to the two people briefed on the matter, who spoke on the condition of anonymity to discuss internal concerns. Some employees are expected to move eventually to the Murdochs’ other tabloid, The Sun, when it expands to publish on Sunday, they said.

James Murdoch has already faced renewed criticism for the way the company has managed the investigation since 2007, when he was given oversight of News International, the News Corporation’s British subsidiary. On his watch, the company blamed one “rogue reporter” for the scandal, and he approved payouts to some hacker victims.

He suddenly finds himself a target of the British political and business establishment that his father influenced by wielding the power of his newspapers to decide elections and tarnish — or burnish — reputations. When Prime Minister David Cameron was asked Friday if James Murdoch should be questioned by the police, he said anyone, “no matter how high or low,” was fair game for investigators.

The issues of dynasty and succession always surrounded the intermingling of scandal and commerce, as Mr. Murdoch, 38, sought to keep the slow-boil investigation from infecting the deal for BSkyB, where he served as chief executive from 2003 to 2007. (The News Corporation already owns a controlling 39.1 percent stake in the company.)

Over the past few years at its New York headquarters, the News Corporation has slowly purged executives, including Peter Chernin, the former president, and Gary Ginsberg, the top communications adviser, who were close to Rupert Murdoch and seen as stabilizing influences on him and a counterweight to his conservative politics. James Murdoch and a handful of executives close to him have sought to fill that power vacuum, with an abrasive style that has alienated many longtime associates of Rupert Murdoch.

“He has a very binary personality,” said Claire Enders, a prominent media analyst in London, earlier this year. “Love or hate.”

The closing of The News of the World carries the symbolic weight of transition from one generation of media mogul to the next. James Murdoch has never reveled in the tabloid culture his father adored; he is drawn to technology and pay television’s dependable revenue streams.

“This is a grand gesture,” said Emily Bell, a journalism professor at Columbia who used to cover the Murdochs as a reporter in London. “It’s trying to demonstrate that James is running a very different business — that things will change in the future.”

Even before the latest revelations, the crisis was seen as the first great test of James Murdoch’s career, approaching the magnitude of the great crises of his father’s career: breaking the newspaper unions in London in the 1980s, and a point in the early 1990s when he was almost driven to the brink of bankruptcy.

Rupert Murdoch, at 80, is still in charge at the News Corporation. He does not often speak publicly about succession, but he has made it clear he wants his children to run the company one day. He has told executives close to him that he would prefer three of his children — James, Lachlan and Elisabeth — to do it together.

But Lachlan Murdoch resigned in 2005 after chafing at the interference of his father and other executives. Elisabeth Murdoch worked for the company briefly before establishing her own television production company, Shine, which the News Corporation bought this year.

In January, Rupert Murdoch visited James in London and conferred on the phone scandal. One night, while leaving Rupert Murdoch’s apartment to dine out, father and son were accosted by a reporter for The Independent.

They said little, and Rupert Murdoch’s presence that week at headquarters reassured anxious journalists. “Rupert’s confidence resonated in the building that day,” Rebekah Brooks, the chief executive of News International, said in an interview at the time.

In the reassuring manner of a man who has faced many scandals, he appraised the company’s handling of the investigation by saying, according to Ms. Brooks’s account: “We know the facts. You guys are dealing with this as the cards are being dealt. The police have all the cards.”

Even now, all the cards have not been shown. What turns up could well determine succession at one of the world’s largest media empires.

Jeremy W. Peters contributed reporting.

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