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The splitting of Rupert Murdoch’s holdings into two companies — News Corporation and 21st Century Fox — has been well received on Wall Street. Credit Justin Tallis/Agence France-Presse — Getty Images
Less than three years ago, a phone-hacking scandal at Rupert Murdoch’s British newspapers was seen by some as the beginning of the end of his media empire.
But the acquittal last week of Rebekah Brooks, the most senior News Corporation executive charged in the hacking case, is the latest development in an apparent recovery.
After initial stumbles, the company has emerged largely unscathed. Mr. Murdoch’s son James, once at the center of the scandal, has been promoted. And the splitting of Mr. Murdoch’s holdings into two companies — News Corporation and 21st Century Fox — has been well received on Wall Street.
Some dark clouds still loom, however. Andy Coulson, a former editor of The News of the World, was convicted last week of conspiring to intercept voice mail messages. He is to be sentenced on Friday, part of a group of six former journalists and investigators potentially facing prison.
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Additional criminal trials, mostly connected to claims that News Corporation journalists paid public officials for information, are scheduled to begin this summer. And when those criminal trials are done, a public inquiry in Britain, led by a judge, will hold more hearings.
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The costs of settlements in civilian claims, as well as the legal fees covered for former employees like Rebekah Brooks, could exceed $1 billion. Credit Niklas Halle'N/Agence France-Presse — Getty Images
Perhaps the biggest threats to News Corporation are the continuing investigations into the company’s conduct on both sides of the Atlantic.
In Britain, Scotland Yard began building a case against News Corporation in late 2012. Any resulting prosecution could name News Corporation as its subject, and would probably focus on whether negligence or collusion at its highest levels fostered criminality within newsrooms.
Scotland Yard’s inquiry, though, does not seem to have progressed from its initial stages. It was in that period that officers first sought to interview Mr. Murdoch and his son James. The company also turned over emails to the Federal Bureau of Investigation in the United States that were subsequently passed to British authorities.
In 2011, at the height of the scandal, the Justice Department opened an investigation into whether hacking had occurred in the United States. It is unclear where that investigation stands.
News Corporation officials and the Metropolitan Police in London declined to comment on the investigations.
Other challenges linger. The company has settled nearly 650 civil claims related to phone hacking, according to a News Corporation document from April obtained by The New York Times. That number has since risen to 718, according to figures provided by the company.
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James Murdoch, one of Rupert Murdoch's sons, was once at the center of the phone hacking scandal but has since been promoted. Credit Adrees Latif/Reuters
Those that have settled — a group that includes numerous prominent Britons — received assurances that they would not face harassment in future. Before writing about any of them, journalists at the company’s British papers must “consult a member of the in-house legal team,†the News Corporation document said.
The costs of such settlements, as well as the legal fees covered for former employees like Ms. Brooks, could exceed $1 billion. The far larger and more profitable of Mr. Murdoch’s two companies, 21st Century Fox, is paying some of those fees.
“Clearly that is a lot of money,†said Alan Gould, an analyst at Evercore Partners. “But Fox has a $76 billion market cap, and News Corp. has a $10 billion market cap. This is not make or break for them.â€
Mr. Gould added, “The key thing is that there was no contagion from the scandal.â€
The company faced other financial setbacks. It shut down the profitable News of the World, and the scandal resulted in News Corporation’s dropping its multibillion-dollar bid to take full control of the satellite broadcaster British Sky Broadcasting.
But a move hastened by the hacking scandal — the division of News Corporation into two companies — has been a major boon for Mr. Murdoch and his shareholders. The combined stock market value of the two companies has increased by tens of billions of dollars since the spinoff.
Investors in 21st Century Fox — a collection of lucrative film and television assets — had been much less interested in the less profitable print holdings. The rump News Corporation, which houses the newspaper and book publishing businesses, was infused with more than $2 billion in cash, and though those businesses face headwinds, analysts say they are well managed.
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