How Much Will the News of the World Scandal Hurt Rupert Murdoch?

People in the U.S. mostly know media mogul Rupert Murdoch and his News Corp. as the owner of the Fox broadcasting and cable TV properties and newspapers such as the New York Post, and more recently the Wall Street Journal. We're learning more about his News of the World tabloid newspaper in London, which is being shut down in the wake of a phone hacking scandal.

This shutdown is a radical move, considering that the paper was founded in 1843 and is Great Britain's biggest selling Sunday paper, with more than two million readers. But it's clear that Murdoch, who is one of the 11 media people to watch in 2011, wants to protect his other media properties.

First, the News of the World was part of a newspaper unit that generated about $29 million in profits in 2010, according to Bloomberg. Compare that to News Corp.'s $2.54 billion in profit during the same period and closing the paper doesn't seem so drastic.

Murdoch is hoping to purchase the rest of British Sky Broadcasting (BSkyB), a satellite TV company. To do it, he needs the approval of the British government, which may be weighing this scandal as it considers the deal.

Back in the states, Murdoch doesn't want the taint of News of the World to hurt his broadcast, print and Internet companies. Even with his billions of dollars, he knows he can't buy his way out of a public relations or image crisis that would hurt the bottom line of his businesses.

What will be interesting to watch is what happens over in Britain with the more than two million former News of the World readers who won't have their Sunday paper. In a shrinking newspaper industry, it appears there's an opportunity for a start-up paper that has a built-in audience ready to subscribe.

Stay connected through Facebook, Twitter and the free newsletter.