July 7th, 2011
08:42 PM GMT
London (CNN) – As the grave is dug for the world’s most widely read English newspaper, News of the World, focus is turning to how much of a role financial pragmatism played in its demise.
While the headline was its closure in response to the avalanche of hacking allegations, including accessing the phones of murder and terror attack victims, politicians and celebrities, the move could also prove a financial win for its parent, News Corporation.
Observers point to Rupert Murdoch, the brains behind the empire, and the bid to take full control of satellite television broadcaster British Sky Broadcasting or BSkyB. His son James's influence is also being felt: As chairman of News International, he closed the paper.
As investors absorbed news of the tabloid’s demise, focus quickly turning to its impact on News Corp.’s pitch for the 61% of BSkyB it doesn’t already own.
Collins Stewart estimates the News of the World’s closure will hurt News Corp.’s valuation by $0.25 a share. The Nasdaq listed stock is currently priced at just under $18. Collins Stewart analysts said in a note the move is: “an important sacrifice in an effort to reduce additional delay to the (BSkyB deal) approval process.”
Finalizing the deal will extend News Corp.’s footprint into a more lucrative market than the troubled newspaper industry, Charles Bedouelle, media equity research analyst at Exane BNP Paribas, said. The decision would "take away the problem" hanging over the bid for BSkyB and is an "extreme but pragmatic decision to get the problem out of the way," Bedouelle said.
Murdoch propelled himself into the international media arena with the purchase of Fleet Street’s News of the World in 1969. News International also owns The Sun, the Times and the Sunday Times in Britain. News Corp. also encompasses Fox News, the Wall Street Journal, the New York Post and Harper Collins publishers.
According to Murdoch, writing in News Corp.’s annual report, pay-TV is “an incredibly important business for us - as evidenced in our support over the years of BSkyB.”
Steven Barnett, professor of communications at the University of Westminster, noted in an CNN opinion piece: "It's worth emphasizing just how lucrative this deal, should it be approved, will be. This year, BSkyB will make an operating profit of £1 billion, roughly $1.5 billion."
Any approval of the BSkyB deal is now expected to delayed as the decision makers deal with the deluge of objections which have been lodged since the phone hacking scandal shifted from one which involved only celebrities to one which allegedly preyed on those who were vulnerable.
Media lawyer Geoffrey Robertson said the paper’s closure was “a master stroke which took everyone by surprise." But the move shows an element of remorse which may assist in Murdoch's bid for BSkyB, he added.
And the country may yet see a replacement paper, with speculation centred on a Sunday Sun paper. Or, News of the World could return, Robertson said. "British people will miss it."
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