What does phone-hacking scandal mean for News Corp. in U.S.?

Joe Pompeo

It's been a week since News Corp. abruptly announced that it had decided to close down its top-selling British tabloid News of the World in a belated effort to contain the fast-spreading damage of the paper's phone-hacking scandal.

But if News Corp. chairman Rupert Murdoch was hoping that unloading the offending tabloid would calm the roiling controversy, the usually savvy mogul appears to have miscalculated, badly. He's already been forced to drop one of News Corp.'s high-profile takeover bids, announcing on Wednesday that he was suspending his company's effort to buy up control of British Sky Broadcasting.

And now, it appears, the ongoing fallout from the scandal is poised to inflict further damage on Murdoch's U.S.-based operations, with speculation building among media observers on what may lie in store for some of the company's most powerful media properties in publishing (the Wall Street Journal, the New York Post) and television (Fox News Channel).

"What signs should we be watching for that fallout from the scandal may be spreading here to the U.S.?" NPR's Mary Louise Kelly asked New Yorker writer and veteran News Corp. chronicler Ken Auletta on "Morning Edition" Thursday.

"If [Murdoch's] sense of invulnerability is gone, people who regulate his holdings in the United States may look with more jaundiced eye on what he's doing here," said Auletta, whose bona fides include a 16-year-old grudge the Australian mogul holds against him over a 1995 New Yorker profile.

"And also," Auletta continued, "you have to think, if in fact the News of the World, or The Sun, or some of these newspapers were hacking into the voicemail and maybe the email of celebrities in England, might they have done it here, too?"

Howard Kurtz floated similar speculation in The Daily Beast Wednesday. Murdoch's beloved New York Post, after all, is the closet thing America has (in newsprint, at least) to the lurid British tabloid culture that enabled U.K. reporters to illegally spy on royals, politicians and even murder victims via their voice mailboxes and, reportedly, other private records.

The Post, of course, has had its own run of scandals, and Kurtz's piece duly ticks off several of the better-known ones. The most notorious was former Page Six reporter Jared Paul Stern's alleged attempts in 2006 to extort billionaire supermarket magnate and Democratic donor Ron Burkle to the tune of several hundred thousand dollars.

Stern (who claims he was set up) and fellow former Post gossip Ian Spiegelman (who went out blazing in 2004 with an expletive-laden homophobic email rant to magazine writer Doug Dechert) both described "questionable" newsroom practices such as the acceptance of freebies and Murdoch's alleged policy of using Post coverage alternately to reward friends and punish enemies.

None of these alleged misdeeds rank with the outright criminality that seems to have been the standard operating procedure for News of the World. But as Kurtz notes, the Post's tarnished past now "resonates a bit louder today in the wake of the Murdoch mess across the Atlantic." And even if News Corp.'s American reporters have never hacked into anyone's phones, U.S. citizens may have served as targets for News of the World hackers. This week, U.S. lawmakers have launched calls for an investigation into claims that journalists at the paper might have accessed the private phone data of victims of the 9/11 terrorist attacks. Should those claims bear out, the anti-News Corp. backlash in the United States would be just the beginning.

Still, there's at least one U.S. News Corp. figure who stands to benefit from the whole ordeal: Fox News chief Roger Ailes.

New York magazine's Gabe Sherman, who's at work on a book about the controversial cable news honcho, wrote Wednesday: "The scandal also makes Ailes all the more central to News Corp.'s business. Today's news that News Corp. will abandon efforts to acquire all of BSkyB makes Fox's nearly $1 billion in annual profits indispensable to the company's bottom line. Without a future BSkyB deal to juice profits, Rupert needs Ailes now more than ever."

A spokesman for News Corp. declined to comment for this post.