Rupert Murdoch’s News Corporation announced Wednesday that it was withdrawing its $12 billion bid to buy complete control of the satellite giant British Sky Broadcasting, a move intended to calm the torrent of derision directed at the company since journalists at its British newspapers were implicated in a widespread phone-hacking scheme.
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Rupert Murdoch, the embattled News Corporation chairman, in London on Wednesday.
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Whether or not the announcement will give the company any respite from the growing indignation and official investigations, it seems to have already altered not only the dynamics within one of the world’s most powerful and profitable media companies but also, possibly, the future of the newspaper business within the News Corporation.
The decision to withdraw the bid for BSkyB, as the satellite broadcaster is known, was made as a contentious family drama played out in recent days. James Murdoch, a leading contender to replace his father as chairman and the driving force behind the News Corporation’s bid to take over BSkyB, argued that the company should press for regulatory approval of the deal, said three people with knowledge of the discussions who declined to be identified because they were revealing confidential company deliberations.
But Rupert Murdoch and the News Corporation’s chief operating officer, Chase Carey, overruled the younger Mr. Murdoch, consulting him only after the decision was all but final.
The deal to buy the remaining 61 percent of BSkyB that it did not own was the single biggest ever attempted in the long history of the News Corporation, and the withdrawal is perhaps the most significant setback of Rupert Murdoch’s career. Yet Mr. Murdoch is said to remain hopeful that the transaction is salvageable. One person involved in the discussions said that the News Corporation chairman saw the withdrawal as a way to mollify his critics while waiting for the anger to die down.
“Rupert is thinking long term here, I don’t think he believes this deal is dead,” said this person, who did not want to be named while discussing confidential matters. “He’s just looking for ways to relieve pressure for the moment, to give this some breathing room. He fundamentally believes News Corp. can bounce back.”
In a statement released Wednesday, the News Corporation acknowledged that the mood in Britain had become too hostile to pursue the BSkyB purchase. “We believed that the proposed acquisition of BSkyB by News Corporation would benefit both companies, but it has become clear that it is too difficult to progress in this climate,” Mr. Carey said. But in its statement, the company said it reserved the right to make another bid.
The announcement is particularly fraught for James Murdoch, who ran BSkyB from 2003 to 2007. He has been the principal champion of the BSkyB purchase within the News Corporation, pressing both his father and the company’s board to go along with the deal. With BSkyB reporting to James, who runs the News Corporation’s European and Asian operations, the businesses in his portfolio would account for half of all the News Corporation’s revenue.
But the revelations of phone hacking in Britain have pulled James Murdoch in deeper by the day, with questions swirling in Parliament and the British press over his role in paying settlements to victims of the hacking.
Only a week ago, the News Corporation hoped to contain the damage by taking another dramatic and once unthinkable step: shutting down the 168-year-old News of the World, which Mr. Murdoch purchased in 1969 to form the foundation for his British media empire. But a series of disclosures badly damaged the newspaper, most notably its acknowledgment that it had illegally intercepted the voice mail of Milly Dowler, a 13-year-old girl abducted and murdered in 2002.
Since then, virtually every day has brought dizzying new disclosures and speculation, culminating in the News Corporation’s announcement on Wednesday. Allegations of hacking and other journalistic dirty tricks have spread to other Murdoch papers in Britain, including The Sun and The Sunday Times.
Rupert Murdoch, who had flown to London to deal with the crisis, arrived at the company’s offices around 11 a.m., looking grim. Mr. Carey was also seen entering the building.
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