Steve Ladurantaye

Celebrity near-death experiences, smiling topless models and puns aplenty – Rupert Murdoch has a reason to wake up on Sundays again.

Less than a year ago, the News Corp. titan swiftly shuttered the world’s highest circulation Sunday paper, the News of the World, amid allegations of widespread phone hacking. But that was all so long ago (even if the 10 criminal cases, most relating to the payment of officials by journalists, will take years to resolve). And there are millions of readers without their Sunday News Corp. fix – some 2.7 million read the notorious News of the World.

Read the story in the Globe and Mail

But rather than dwell on the ethical breaches that were pervasive at the Sun’s sister paper, Mr. Murdoch has simply added an extra day of publication at the Sun to make up for the hole left in his UK publishing schedule.

And don’t worry about all that ethical stuff about hacking and bribing: the paper vowed in its introductory note on its website that it’s totally not going to break any laws.

“News International closed our sister paper the News of the World over the phone hacking scandal. Since then some of our own journalists have been arrested, though not charged, over allegations of payments to public officials for stories. We believe those individuals are innocent until proven guilty. It has been a sobering experience for our entire industry. But it is vital to remember that The Sun has been responsible for some truly outstanding, award-winning investigative and campaigning public interest journalism.”

See? Everyone has been sobered, so read on. And the note is being pretty modest – it didn’t even mention the thousands of Page 3 girls who have graced its pages wearing nothing but a smile (sometimes pants, too).

Here’s what else you would find if the paper landed on your doorstep today.

The scoop

When the first pictures of the front cover began to leak on Twitter, rumours instantly began to circulate that the image was a fake. As interesting as Amanda Holden may be – and I have no idea if she is or not since she’s a judge on Britain’s Got Talent and has never been on my television – pundits were confused about why the “inside story” of the difficult birth of her daughter would merit a cover and five pages of inside coverage of the most anticipated newspaper launch in decades. Great headline, though since she’s alive to tell the story it loses a little oomph: “My heart stopped for 40 seconds.”

Most British story

Brits Fail Test of Britishness: Majority of Brits failed questions on the new citizenship exam, a survey reveals.

First flash of skin

The Sun is famous for its smiling Page 3 girl, although she’s better known for her toplessness than her smile. The Sun on Sunday is apparently targeted toward women, so the paper toned it down. Sunday, the photo is of X Factor star and former Destiny’s Child singer Kelly Rowland. She’s naked, sure, but her arms are crossed over her chest.

First celebrity grandmother story

Adele’s Brit pain over nan: Adele bravely battled through the Brits after her doting gran was rushed to hospital following a heart attack.

First headline pun

“Someone likes cue” runs above the page three story about how Adele has THREE (caps theirs) snooker tables in her house.

First funny but confusing headline

“Mandelly Belly: Anti-apartheid hero Nelson has stomach surgery”

First use of giant, red EXCLUSIVE tag

Britain has a plan to invade Iran, the paper reports. Under a red headline that says “Army, subs and jets ready,” the story outlines that the army, subs and jets are indeed ready (according to anonymous sources).

Guest columnist with most to prove

Katie Price is one of the paper’s most famous Page 3 girls, and she said in a story Saturday that her new column will be a chance to prove she’s about more than “fake tans and boobs.” Her debut column tackles the question of “why are people always blaming failing schools for failing kids.” A full size body shot appears next to the column, but she’s clothed. The photo appears above a column outlining her thoughts about Whitney Houston’s death: “I know I’ve lived my life in front of the cameras,” she writes for some reason. “But death is different.”

First Canadian scoop

Ok, not really. But on Page 24, there’s a little ad for a Drake concert. It’s on July 7, by the way.

First ironic advertisement

Cellphone provider Three takes out a full page to advertise its new data plans. The ad comes a few pages after the editorial, which is titled “A new Sun rises today.” In it, the paper points out it had to point out the hacking scandal was “sobering.” But it vowed to obey the law, and added the paper has “always been a force for good.” So go ahead, get the extra-large voicemail inbox.

Parting thoughts

Here are a few other things the world now knows thanks to a Sunday publishing schedule at the Sun: David Beckham gives his daughter piggyback rides, Holly Willoughby “ditches her smart TV reporting clothes and turned herself into “a leather clad biker babe,” and an Arthur Dent-like tenant refused to “quit his flat overlooking the Olympics stadium,” which sits on the site of the future BBC broadcasting centre.

Rupert Murdoch has been denounced, humbled and forced to abandon a multibillion-dollar business deal because of the phone-hacking affair that has enraged the British public. But even a scandal of this magnitude is unlikely to loosen his iron grip on the media empire he has ruled for the past three decades.

Read the story in the Globe and Mail

Amid reports that the board ofNews Corp.(NWSA-Q16.270.271.69%) was considering replacing the 80-year-old chief executive officer with the company’s president, Mr. Murdoch defended the company before a hearing of British politicians and received a strongly worded endorsement from a long-time director.

 

“I can assure you there has been no discussion at the board level in connection with this current scandal about making any changes,” said Thomas Perkins, a U.S. venture capitalist who has been on News Corp.’s board since 1996. “The board supports top management totally. The board has been misled, as has management, by very bad people at a very low level in the organization.”

 

The company has been ensnared in scandal for three weeks, since the news broke that its News of the World tabloid had hacked the voice-mail of a 13-year-old murder victim in their search for story leads. The scandal has reached the top levels of politics and the police in Britain, and has some calling for Mr. Murdoch to step down.

 

But while political pressure can occasionally force change in corner offices, few companies are structured like News Corp. Most of its shareholders have no voting rights; Mr. Murdoch and his family control about 40 per cent of the voting shares, meaning that even if he steps aside to a lesser role, he will still be firmly in control of what happens in the boardroom.

 

Still, the scandal has caused some to speculate that Chase Carey, News Corp.’s president, deputy chairman and chief operating officer, could be installed as CEO to help distance the company from the affair and keep it from affecting holdings in the United States.

 

Lazard Capital analyst Barton Crockett said investors would welcome such a change because of Mr. Carey’s reputation as a manager who prefers to give cash back to shareholders rather than invest in new initiatives and takeovers. Under Mr. Murdoch, the shares have done very little in the past decade, as he has deployed cash in a series of questionable or expensive acquisitions – such as a $5.1-billion (U.S.) deal for Dow Jones – rather than give it back to investors as dividends.

 

The company’s shares also trade at a discount to industry peers, partly because of the dual-share structure that ensures Mr. Murdoch can control his own destiny, whether his board of directors wants him to stick around or not. After the Murdoch family, the next largest shareholder is Prince al-Waleed bin Talal, at 7 per cent of the voting shares, according to Bloomberg data. No other shareholder has more than 2 per cent.

 

“It is very unlikely that any of those smaller holders could get together in the numbers needed to effect change,” said Thomas Eagan, managing director at Collins Stewart LLC in New York.

 

Even if Mr. Murdoch were to accept a lesser role to alleviate the pressure, he could eventually place himself back in charge, or hand things over to his son James – who runs News Corp.’s European operations.

 

“The unique thing about this situation is usually you have the traditional mechanism of shareholders coming in and buying up shares to take some control,” said Walter Todd, who manages $1-billion in assets for Greenwood Capital Associates in South Carolina. “That’s not available in this case. He also controls the board with his shares, so the remedies you may see in other situations aren’t available here.”

 

Mr. Rupert’s best protection may come from the analysts who follow the company. Although he has been sharply criticized for some of his purchases, they have maintained bullish stances throughout the crisis because of the strength of the company’s core holdings.

 

Indeed, even an unlikely breakup of the company has been interpreted as good news by the analysts, because it would put more money in the pockets of the investors who have watched their shares fall as much as 17 per cent since early July. Fourteen of the 22 analysts who follow the company have “buy” ratings on the stock.

 

“Investors continue to sell News Corp. because of the headline risk,” said Jason Bazinet, an analyst at Citigroup Global Markets who rates the shares a buy. “Some investors are selling because they fear one or more assets within the stable will be sold … we don’t think things scenarios are apt to unfold. But even if they do, our analysis suggests it’s bullish for equity holders.”

 

Trouble in the boardroom

 

It’s not easy for shareholders to force the ouster of a controlling shareholder who is running a public company, but sometimes it happens:

 

Rupert Murdoch

 

The problem:

 

The CEO of media giant News Corp. has shut down News of the World and accepted the resignations of top lieutenants, but the moves have failed to stem a widening scandal involving illegal phone hacking and police bribery.

 

The potential outcome:

 

Mr. Murdoch is facing calls to step down as CEO to restore faith with new leadership, but it is unclear whether the pressure will have an impact while his family trust continues to wield 40-per-cent control through Class B voting shares.

 

Conrad Black

 

The problem:

 

The media baron was controlling shareholder of Hollinger International Inc. when allegations emerged that he had improperly taken company funds and disguised them as non-competition payments for tax purposes.

 

The outcome:

 

Lord Black was convicted of fraud and obstruction of justice in 2007 and is scheduled to return to jail in September after a series of appeals. The Hollinger empire collapsed in bankruptcy and he lost control of the companies.

 

Jim Shaw

 

The problem:

 

The son of Shaw Communications founder JR Shaw was promoted to the CEO job in 1998, but was dogged by rumours of health problems and a hard-partying lifestyle.

 

The outcome:

 

Mr. Shaw resigned as CEO last November after he was criticized for his behaviour at a company luncheon for investors where he appeared inebriated. He was replaced as CEO by his brother Bradley. JR continues to control 79 per cent of the voting shares.

 

Frank Stronach

 

The problem:

 

The founder of Magna International faced investor complaints about his record-setting annual compensation packages and the voting control he wielded while owning just a tiny piece of auto parts maker’s shares.

 

The outcome:

 

Mr. Stronach agreed to give up his dual-class shares in Magna in a controversial deal last year that saw him paid almost $1-billion for his stake, an 1,800 per cent premium to their market value.

 

 

 

Rupert Murdoch’s empire was built on newsprint, but as a phone-hacking scandal engulfs his multimedia corporation, pressure is growing for the company to give up on the printing press altogether and focus on its hugely profitable cable and television businesses.

The prospect of Mr. Murdoch selling or shutting papers in England and the United States was unthinkable only two weeks ago, but as the News of the World scandal threatens to taint his profitable movie and television holdings, there are signs the media baron might be forced to abandon the print journalism business altogether.

Read the story in the Globe and Mail

He has already shut down the 168-year-old tabloid at the heart of the scandal, after news broke that its reporters had hacked into the phone of a murdered teenager and erased messages, even as police were investigating her death.

While some of the papers are among the highest-profile holdings in theNews Corp. (NWSA-Q16.280.281.75%) portfolio – The Wall Street Journal, Times of London and New York Post among them – they account for only a fraction of the company’s profits.

Analysts expect the newspaper division to contribute about $500-million (U.S.) to News Corp.’s operating income this year, a small slice of the total $4.9-billion it will generate. The cable news networks, by comparison, are expected account for $2.8-billion.

The papers are practically worthless as long as News Corp. owns them, analysts say, because nobody really knows how deep the scandal will go. There is a danger that advertisers will pull their ads across all of the papers – whether they are implicated directly or not – if there are more embarrassing or criminal revelations. The crisis showed no signs of abating on Monday, as two top officers at Scotland Yard resigned and a former News of the World reporter who blew the whistle on managers at the paper was found dead in his apartment.

Industry watchers do believe the papers could prosper again under new owners untainted by the scandal, however, even if they are unsure how much the papers could fetch.

But one thing is certain: News Corp. would get less than it paid for any of its newspaper holdings. When Mr. Murdoch bought Dow Jones in 2007 – and with it The Wall Street Journal – he paid $5.1-billion. Just two years later, the company took a $2.8-billion writedown on the purchase.

“We are not saying that if News Corp. decided to sell or spin off these assets that they are worthless,” said Michael Nathanson, an analyst at Nomura Securities. “Rather, we believe that under News Corp. they will be given little value.”

But for Mr. Murdoch, the papers represent more than profit centres – they are a reminder of the company’s humble beginnings as publisher of the Adelaide News in Australia and the cornerstone of the vast stable of holdings he would build in the next 32 years.

And with each fresh headline, says Mr. Nathanson, they are worth less – and are threatening to hit other core News Corp. holdings such as Fox News and its movie division. He called all of the papers “toxic assets” that will fetch very little on the market, but should be sold.

Wedbush Securities analyst James Dixon said that the company is left with few options as it tries to distance itself from the scandal and protect its U.S. holdings: It has already closed News of the World and discarded its bid for a majority stake in British satellite TV firm BSkyB, leaving its newspapers as the logical sacrifice.

“The hunger for political accountability may crave more meat,” Mr. Dixon said.

British politicians will grill Mr. Murdoch and other company executives on Tuesday in a hearing to investigate the extent of the hacking, which could spread to thousands of mobile phone users. Allegations extend beyond members of the Royal Family and celebrities, and now include the families of British soldiers killed in Afghanistan, crime victims and possibly the families of those killed in the 9/11 terrorist attacks.

Each revelation puts more pressure on the company to make amends – Mr. Murdoch has taken out full page ads in the British press, and made a tearful visit to the family of 13-year-old murder victim Milly Dowler.

“When you find one roach, you know there’s a good chance you’re going to find yourself a whole bunch more if you keep looking,” said Walter Todd, who manages about $1-billion in assets for Greenwood Capital Associates in South Carolina.

If politicians don’t force the company to act, the market might – investors have already shaved $6-billion from News Corp.’s market valuation in the last three weeks.

At $41-billion, the company now sells for less versus earnings than any of its closest rivals, Bloomberg data show. If each business unit were priced separately, according to Barclays PLC, the company would be worth up to $79-billion, almost twice as much as Monday’s closing price would suggest.

The share slide has Australian investors demanding Mr. Murdoch step down, although a unique ownership structure puts control of the board squarely in his hands.

In the United States, a group of institutional investors who had already filed a lawsuit against the company, alleging nepotism in the purchase of a studio, amended its documents to include the hacking scandal.

“These revelations should not have taken years to uncover and stop,” states the lawsuit, which was filed in Delaware Chancery Court. “These revelations show a culture run amuck within News Corp. and a Board that provides no effective review or oversight.”

The bribery and phone-hacking scandal at News of the World has led to two criminal investigations in Britain, and an FBI probe in the United States.

The scandal has also provoked the resignations of two of Mr. Murdoch’s top executives: Rebekah Brooks, who ran News International (News Corp.’s British unit) and was previously editor at News of the World when the initial hacking occurred between 2000 and 2003; and Wall Street Journal publisher Les Hinton, who ran News International before Ms. Brooks took over.

Ms. Brooks has also been arrested. Scotland Yard alleges the newspaper paid bribes to police in exchange for information.

“It really does seem there’s something new happening every few minutes,” Greenwood Capital’s Mr. Todd said. “But we’re in a unique situation because shareholders can’t just rise up, because of the company’s structure. Forget divestitures, what’s needed is a clear break with Mr. Murdoch, who should step aside before this gets any worse.”

Rupert Murdoch was in full damage-control mode on Friday as he accepted the resignation of two of his top lieutenants and made a tearful apology to the family of Milly Dowler, the murdered schoolgirl whose phone was hacked by reporters of one of his newspapers.

Under intense pressure from British politicians to step down over the scandal, News International editor and long-time protégée Rebekah Brooks tendered her resignation – a move Mr. Murdoch has steadfastly rejected since the scandal broke two weeks ago. And less than 12 hours later, the media baron lost another key executive when Les Hinton, who has worked for Mr. Murdoch for more than 50 years, announced he will step down as chief executive officer of Dow Jones and publisher of The Wall Street Journal.

Read the story in the Globe and Mail

What started as a scandal at one tabloid in a vast media empire has grown into a global public-relations crisis that has raised questions over what News Corp. will look like when the storm has subsided. Mr. Murdoch has already been forced to close the profitable 168-year-old News of the World and abandon his bid for a controlling stake of the lucrative British Sky Broadcasting company.

 

Now, with his company facing police investigations in Britain and an FBI probe in the United States, Mr. Murdoch is attempting to prevent the scandal from threatening the rest of his media empire, which includes the Fox television network and several newspapers, including the New York Post.

 

For decades, Mr. Murdoch has been a kingmaker – the object of courtship among British celebrities, prime ministers and politicians hoping to dodge the menacing glare of his newspapers. The 80-year-old built his empire by being ruthless, iron-fisted and unapologetic, characteristics he clung to even as a phone-hacking scandal spurred outrage and knocked billions of dollars off the value of News Corp.

 

The world is now getting a glimpse of a very different Rupert Murdoch – humble, apologetic, and rushing to repair his image in advance of an appearance before British politicians next week.

 

In addition to his apology to the Dowler family, Mr. Murdoch is taking out full-page ads in Britain’s biggest newspapers expressing contrition to the nation. But many are wondering whether it’s come soon enough.

Ms. Brooks had tried to step aside in the early days of the scandal, but Mr. Murdoch was reluctant to give up on the 43-year-old, who ascended to the top job at News Corp.’s British operations after stints as editor at both the News of the World and the Sun tabloid. Only a day earlier, Mr. Murdoch told The Wall Street Journal that the company was handling the crisis “extremely well” and made only “minor mistakes” as it responded to allegations.

But the landscape has changed dramatically in just a few short weeks.

“I have believed that the right and responsible action has been to lead us through the heat of the crisis. However my desire to remain on the bridge has made me a focal point of the debate,” Ms. Brooks wrote in her resignation letter. “This is now detracting from all our honest endeavours to fix the problems of the past. … while it has been a subject of discussion, this time my resignation has been accepted.”

The company has already paid a high price on the stock market, with investors shaving more than $5-billion from News Corp.’s market cap, forcing the company to initiate a massive share buyback in a bold show of confidence in its ability to bounce back from the scandal.

“There are at least two factors making this investigation anything but usual,” said James Dix, an analyst at Wedbush Securities in Los Angeles. “There’s the political sensitivity of the potential targets of the hacking and the albatross the police carry from allegations of coziness or even corruption with the U.K. press.”

Mr. Murdoch’s British media holdings – which include the Sun and a minority stake in BSkyB – account for about 30 per cent of the company’s revenues. The bulk of its revenue comes from the Fox News television empire and its stable of newspapers in the United States.

The scandal arrived in the U.S. late last week, as the FBI said it would open a probe to investigate claims that News of the World reporters also targeted the cellphones of 9/11 victims as they searched for sensational scoops to help sell copies of the hugely popular Sunday newspaper.

While the company has been quick to shutter the paper and give up its bid for the television network, that has left Mr. Murdoch little to offer British politicians next week ahead of several political and legal investigations into the paper’s activity.

“In a typical situation, News International would have had no BSkyB deal to sacrifice,” Mr. Dix said. “A different owner might have had to consider other political pacifiers from closing the paper. At some point, News International may have to consider other options itself.”

The cost of forgiveness could be steep, he said. Possibilities include the sale of the 39 per cent stake it owns in BSkyB, the sale of remaining U.K. newspapers and/or cash payouts for “compensation or punitive purposes.”

He said the “early acts of contrition” may buy some goodwill from the British government, but the chance of the British operations prospering under Mr. Murdoch seems less likely by the day as politicians and police executives search for answers.

News International appointed a new chief executive yesterday that has been with the company a long time but doesn’t have any ties to the British operations. Tom Mockridge, who has been in charge of Sky Italia since 2003, will try to shift the focus away from the past and move the company forward even as investigations probe deeply into the company’s past behaviour.

Ms. Brooks said in her letter of resignation that any hope of salvaging the chain’s reputation lies in full disclosure of past wrongdoing, and that she needs to dedicate her time to setting the record straight. She was editor of the paper from 2000 to 2003, when much of the hacking is alleged to have taken place.

“As you can imagine recent times have been tough. I now need to concentrate on correcting the distortions and rebutting the allegations about my record as a journalist, an editor and executive,” she said. “My resignation makes it possible for me to have the freedom and the time to give my full co-operation to all the current and future inquiries, the police investigations and the CMS appearance.”