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News Corp. in Crisis: Rebekah Brooks Resigns, Rivals Seize Opportunity (Updated)

Posted by Sheila Shayon on July 15, 2011 11:30 AM

Following a week of speculation, News International CEO Rebekah Brooks stepped down today (joined later in the day by Dow Jones CEO Les Hinton) as the beleaguered Murdoch family battles to defend its media interests.

News Corp. didn't include her resignation statement in the press release announcing that Sky Italia CEO Tom Mockridge would move over within News Corp. to take over her role, although the Guardian posted her memo to employees.

“As chief executive of the company, I feel a deep sense of responsibility for the people we have hurt and I want to reiterate how sorry I am for what we now know to have taken place," Brooks told staffers.

"I have believed that the right and responsible action has been to lead us through the heat of the crisis," she continued. "However my desire to remain on the bridge has made me a focal point of the debate. This is now detracting attention from all our honest endeavours to fix the problems of the past. Therefore I have given Rupert and James Murdoch my resignation. While it has been a subject of discussion, this time my resignation has been accepted.”

At the very end, Brooks added, “My resignation makes it possible for me to have the freedom and the time to give my full cooperation to all the current and future inquiries, the police investigations and the CMS appearance.”

The Guardian interpreted this last statement to read that the move clears “her to concentrate on the defence strategy. It presumably means that she stays on the company's payroll. She confirms that she will still be appearing before the Select Committee next Tuesday."

News Corp. did release James Murdoch's memo to employees today, which spells out how the company is responding to the phone hacking scandal in the UK and the attacks on its reputation:

I am writing to update you on the actions we have been taking as a Company to solve the problems at News International relating to the News of the World, in addition to continuing to cooperate fully and actively with the police and settling civil claims.

* Earlier today, Rebekah Brooks resigned from her position as CEO. I understand her decision and I want to thank her for her 22 years of service to the Company. She has been one of the outstanding editors of her generation and she can be proud of many accomplishments as an executive. We support her as she takes this step to clear her name;

* We have created an independent Management & Standards Committee and I want to emphasise its importance. The Committee has direct governance and oversight from News Corporation Board members and is codifying standards that will be clear and enforced; * We made the difficult and necessary decision to close the News of the World;

* A number of other executives have now left the Company;

* News Corporation also withdrew its proposal to acquire the shares in BSkyB it does not own. This is a strong signal that our top priority in the UK is to address the issues facing News International.

Looking to the future, I am also pleased to tell you that Tom Mockridge will become CEO of News International. Tom is in London today and will start right away. Tom is a highly respected and accomplished media executive who has served as CEO of Sky Italia since its launch in 2003. Tom, who has also been in charge of our European Television business, started his career as a newspaper journalist in New Zealand and he has held a range of top roles in the newspaper industry. The creation of TG-24, Italy’s only truly independent 24 hours news channel, is a credit to Tom’s leadership and integrity.

This weekend, News International will run advertisements in all national newspapers. 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. We are also sending letters to our commercial partners with an update on the actions we are taking.

Next week, my father and I will appear before the CMS Select Committee and will speak to them directly about our determination to put things right. The Company has made mistakes. It is not only receiving appropriate scrutiny, but is also responding to unfair attacks by setting the record straight.

I would like to conclude by saying thank you. Throughout this time, you have gotten out great papers every day and have stayed focused. I am deeply grateful for that. 

In addition to the print apology, James Murdoch has personally apologized to the family of Milly Dowling, the murdered schoolgirl.

Labour’s Chris Bryant, a leading critic of the Murdoch empire’s role in the phone-hacking scandal told Sky News: “I think it is right that she goes. I think she should have gone a very long time ago. Frankly, she should have gone when she said she had paid police officers for information back in 2003. I thought it was disgraceful when the newspaper last week was closed as a way of trying to protect Rebekah Brooks and then Mr [Rupert] Murdoch saying that she was his priority. It felt like those in the boiler room were carrying the can for those who were really at the helm of the ship.”

Opposition Labour Party leader Ed Miliband said: "It is right that Rebekah Brooks has resigned. No one should exercise power without responsibility."

The avalanche gathers momentum as it was alleged that News Corp. donated $1m to the U.S. Chamber of Commerce last summer, as the pro-business lobby prepared its plans to change anti-bribery laws which would have penalized News Corp. over the phone-hacking scandal about to break.

Called the Foreign Corrupt Practices Act, or FCPA, responsible for action against U.S. firms who bribe foreign officials, Ilyse Hogue of Media Matters said: “Time and again we've seen News Corporation use their massive power and influence to change laws that don't suit them.” 

The Chamber of Commerce has denied any link, calling the assumption “completely false, preposterous,” while adding: “Our efforts to modernise an outdated act have been ongoing for nearly a year.”

In the U.S., where Reuters is red-faced over a News Corp. tax story it has since retracted, the Wall Street Journal is struggling with how to cover its corporate parent's woes. There is increasing demand in America for News Corp to face an FCPA investigation itself, even as the FBI begins its own investigation. 

The winner in all this, if there are any winners given the knock that their profession has taken: other British newspapers now rushing to take advantage of, and fill the marketplace gap left by, the demise of NOTW.

The Daily Mail — which has been gleefully covering the downfall of its rival, such as reporting that Elisabeth Murdoch told friends that Brooks had "f----- the company" — is rumored to be preparing a mass-market Sunday tabloid, with names under consideration include the Sunday and the Sunday Lite, according to Reuters. The Daily Mail, the U.K.’s #2 paper with an average net circulation of 2,068,632 copies as of May, is increasing the weekday cover price from 50 pence to 55 pence starting next week, according to Bloomberg.

Richard Desmond's Daily Star Sunday will increase its print run by 1.2m and launch a new magazine titled OK! Extra. And not to be excluded, News International itself is rumored to be launching a Sunday edition of The Sun to replace the News of the World, and is already talking to advertisers and media buyers about a launch as soon as next month.

The beat(ing) goes on.

Update: Dow Jones CEO Les Hinton also tendered his resignation today, calling it a "deeply, deeply sad day" and stating in his letter to Rupert Murdoch:

I have watched with sorrow from New York as the News of the World story has unfolded. I have seen hundreds of news reports of both actual and alleged misconduct during the time I was executive chairman of News International and responsible for the company. The pain caused to innocent people is unimaginable. That I was ignorant of what apparently happened is irrelevant and in the circumstances I feel it is proper for me to resign from News Corp, and apologize to those hurt by the actions of the News of the World.

Adweek editor (and Rupert Murdoch biographer) Michael Wolff tweeted in response to the news, "James Murdoch is next," followed by, "Les Hinton certainly doesn't sound like he wanted to go."

Rupert Murdoch, according to the Wall Street Journal, stated in a staff memo announcing Hinton's resignation:

"Let me emphasize one point — News Corporation is not Rupert Murdoch. It is the collective creativity and effort of many thousands of people around the world, and few individuals have given more to this company than Les Hinton."

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