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Quest Means Business
Murdoch Shuts Down "News Of The World" To Save BSkyB Deal, News Corp Brand
Aired July 07, 2011 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: Stop the presses, James Murdoch has shut down the "News Of The World".
Trichet is tightening the ECB's raised rates.
No deal on debt. Obama says the two sides are still far apart.
A very busy hour. I'm Richard Quest. Of course, I mean business.
Good evening.
It is very simple. It is the end of the "News Of The World". James Murdoch who runs News International in Europe and Asia says this weekend's edition will be the last. Advertisers have abandoned the newspaper. The final edition will carry no paid ads at all. Consumers were planning a mass boycott. The paper says that any revenue and sales of this week's paper will go to good causes.
Tonight, on this program, if this was necessary to save the News International and Rupert Murdoch brands by closing the one of their top titles, their "News Of The World". This is how the day played out, particularly the statement that was released by James Murdoch. It was a dramatic statement that brought to an end Britain's best-selling newspaper had been "sullied", he said. "Behavior that was wrong," they said. He goes on to say that if the allegations are true then the behavior was inhuman. James Murdoch admits that tabloid and News International failed to get to the bottom of what they called repeated wrong-doing. And that occurred, what they say, it occurred without conscience or legitimate purpose. Finally, he says, those who acted wrongly will have to face the consequences.
Now pulling the plug on the scandal has not had-has had-well, come and look at the price of the share. What we know about News Corp shares so far, over the last couple of days, both BSkyB, which they were intending to take over, and we'll get to in a moment, and News Corp, the stock is up by more than 1.4 percent. It had fallen by 3 or 4 percent over in recent days. But now somewhat of a bounce back by News Corp. Now, Wednesday's was a different sort of day. If you look at this, you'll see. This is the way in which the price fell. The stock slid more than 3 percent. That was the dramatic fall there, as advertisers raced for the exit.
The eavesdropping, hacking scandal was the center of heated debate in Britain's parliament. So what we had seen to a large extent, you had seen the share price being fairly solid, and then you get this dramatically sharp fall off, which as you can see, just to point it out there. And yet, if we look at Thursday's price. You start to see the recovery there, which show how things are. The markets can be so very fickle. Still, of course, still of course, got some way to go before we reach that particular point of the market.
Let's go to Jim Boulden, who is at the News Corp headquarters, or News International headquarters at Wapping. Several 100 employees work for "News Of The World", I believe. The company says that they will be redundant.
JIM BOULDEN, CNN FINANCIAL CORRESPONDENT: That's right, Richard. These 200 or so employees who work here at Wapping have lost their jobs and they are free to reapply within News International, is what the company is saying. Let me show you the names of these famous newspapers, here at News International. You see, over there, "The Sun", of course, "The London Times", very famous paper, "The Sunday Times" and below there, on the right-hand side the red "News Of The World". That sign, of course, will be coming down along with those 200 jobs. We were hearing some of the employees speaking as they were leaving today.
And one of them said, you know, this was done by previous employees and they were sickened to the core as well, the people who worked here at this newspaper, by what happened under old management. But they feel now that they are being caught up, that they are also victims of all this, the current employees. They said that this was a clean outfit, that those who were involved would have left some five years ago. And that those who are here the 200 knew nothing about what was going on back in 2002.
QUEST: All right, Jim.
BOULDEN: About 2005, back then.
QUEST: The roar, I mean, the lynch mob mentality, which I hear we will hear about later. Rebekah Brooks, nay-weighed (ph), the very woman who was the editor of the "News Of The World", the workers loose their jobs, but she keeps hers. Explain?
BOULDEN: You know, I think in any situation, if this was in a different situation, if Rupert Murdoch wasn't the boss. If this was a politician, if this was somebody much higher in the limelight, worldwide, I think she would have gone, and would have gone yesterday. Of course, Mr. Murdoch came out with a statement that said that he supported her, as the head of the News International, here, these foreign newspapers in London. I think a lot of people think that eventually she will have to go, especially, when it was announced that she would be investigating this phone hacking allegation. The allegations of phone hacking that would have happened on her watch.
QUEST: All right.
BOULDEN: So it is hard to see how she can survive.
QUEST: Jim Boulden, who is at Wapping, the headquarters of News International.
Max Moseley is the former president of Formula One's governing body, the FIA. Now, Max Moseley sued the "News Of The World" for invasion of privacy in 2008, over allegations it made about his private life. Successfully sued them. Max Moseley joins me now on the line from Monaco.
Mr. Moseley, you sued-I'm wondering, you must be welcoming, to some extent, that this newspaper has got what you might believe its just desserts?
(AUDIO GAP)
MAX MOSELEY, FMR. PRESIDENT, FIA: Well, so that has to be pleasing, but of course the suggestion that it is a whole new group in there, a whole lot of new journalists, and all the old guard are gone, just nonsense. The chief reporter who was involved in my case has been there since the `90s and he's still there. And all the senior management are still there. So, there may be some new people who loose their jobs, and that would very unfortunate, because this is not their fault. But it is absolute nonsense to say the whole (AUDIO GAP) have changed.
QUEST: Right. You see, reading James Murdoch's statement, today. And you have probably seen it yourself. He talks about the failures of News International and the "News Of The World" to investigate, even when they knew. Do you think that is their biggest calamity here?
MOSELEY: The thing is they did investigate. They told parliament they had investigated very thoroughly. They said they had left no stone unturned. You have Mr. Cutler (ph) in there saying that. You had the man- I can't remember his name-but one senior executive after another, saying we have investigated all of this, and there is no truth in it. Saying this to our parliament, to a select committee-completely outrageous. They must have known that wasn't true.
QUEST: If this is the way this is going, do you believe that- frankly, I mean, you know, we're men of the world. Do you believe this is all about-it is nothing to do with remorse, contrition, or whatever? It is about saving the brand. It is about living to fight another day.
MOSELEY: It is about getting caught, and trying to minimize the damage. I mean, they obviously hope the whole thing would be kept secret. They had paid a fortune to that man, Gordon Taylor (ph), the football man, to try and suppress the-stop his case coming into the public domain, the same thing with Max Clifford (ph). I mean, it has only been a whole succession of private individuals who brought actions against them that finally this has come up. But they have done their utmost to suppress it.
QUEST: Max, let's just explore that avenue. Because Hugh Grant was telling me on this program last night that what worried him was not just the "News Of The World", but the insidious nature of collusion, if you like, through government, and through the police, and all these tentacles of the establishment, that frankly, were in cahoots. Now, I know your situation is slightly different, but can you see certain worrying tentacles in that way?
MOSELEY: Well, indeed. I mean, the thing is the exposure of individuals and treating individuals very badly. It is obviously very reprehensible, very. But the really worrying thing is the way in which they have supported the great institutions of the United Kingdom, I'm speaking of parliament and the government, who are frightened of them. That has been openly admitted. They threatened people and the intimidated people. But then even more worrying, the police, who are supposed to be fearless, simply didn't investigate. And until very recently, they were forced to, helping to suppress it. And there is this feeling that they had control over the police, control over parliament and the government, and that is a very-that is a denial of democracy. It is really sinister. And all of this by somebody who is not even a U.K. citizen, doesn't even pay tax here, lives in New York, and seems to be the most powerful person in Great Britain.
QUEST: Max Moseley, on the line from Monaco. We thank you very much, indeed.
Now, James Murdoch, is the son of Rupert Murdoch, and the man who closed the "News Of The World" today. He is the head of-the vice chairman. He has been speaking about the days' events. James Murdoch was speaking to ITM's Tom Bradley.
(BEGIN VIDEOTAPE)
JAMES MURDOCH, CEO, NEWS CORP. EUROPE AND ASIA: Fundamentally, actions taken, a number of years ago, by certain individuals, in what had been a good newsroom, have breached the trust that the "News Of The World" has with its readers. We felt that under the circumstances and given the work, the thorough work, and the process that we have undertaken over the last year and a half, to come to this point, and that realization was something that was inescapable. And we took the decision to close down the paper to cease publication after this Sunday, really because of that.
TOM BRADLEY, ITM NEWS: So, you are just going to replace it with "The Sunday Sun", or are you just going to replace it with something else? What are your plans for it?
MURDOCH: I think right now the focus very much is putting out the last edition of the "News Of The World" and the journalists of the "News Of The World" are working already very hard on that. And any decisions about the future are really for next week, or the week after, to think about how we go forward from there.
BRADLEY: Now, you have presided over a newspaper in which people that you pay have been hacking into the phones of missing girls, of people who have lost their loved ones. I just want to know, how do you feel about that? How does your father feel about it, does he feel ashamed? What is your feeling about it?
MURDOCH: I feel regret. Clearly, practices of certain individuals did not live up to the standards and quality of journalism that we believe in, and that I believe in, and that this company believes in. This company has been a great investor in journalism. A greater investor in media, in general, and it is something that we believe very strongly in. And clearly, certain activities did not live up to those standards. And that is a matter of great regret. For me, personally, and for the company.
BRADLEY: And your father? Have you gotten to talk to him about this? Is he personally ashamed of what has happened?
MURDOCH: I think he was very clear in a comment made yesterday, actually, that you know, these allegations are shocking and hugely regrettable. And you know, this is the way that we all feel inside the company. Not least of which, the many, many journalists around the world, who work at News Corporation, who really, really believe in what they do. And work very, very hard to do a good job for their readers.
BRADLEY: When it started, I heard rumors that phone hacking was rife. Rebekah Brooks was a journalist who came through the bowels of your organization. She was the editor of the "News Of The World" while this was going on. She was paying out large sums of money, or the newspaper was to the people who were conducting some of these activities. Is it really even vague conceivable that she, and many others, didn't know what was going on, that this hacking was rife everywhere.
MURDOCH: Rebekah and I are absolutely committed, and this company is absolutely committed to doing the right thing. And what that means is about cooperating and working fully with the police investigations into those alleged practices and into those activities. It is also about making sure that we are putting in place the processes, that we understand what happened, and we have processes in place, and a process to actually make the thing not to have-to make sure that these things don't happen again.
BRADLEY: Yes, but my question was, is it really conceivable-you are asking people, you are looking people in the eye and saying, look, she and others in her position did not know we were paying out enormous sums of money to these people and what I am saying, is that really conceivable?
MURDOCH: I am satisfied that Rebekah, her leadership in this business, and her standard of ethics and her standard of conduct throughout her career, are very good. And I think what she has shown, and what we have shown with our actions, around transparently and proactively working with the police. Recall, it is the process of information discovery that we went through, proactively, and voluntarily, that actually started these investigations, to be opened again by the police earlier this year. It is the proactive and transparent handing over of information to police to aid them in their inquiries around payment to police, and things like that, that actually she has led, and this company has led.
And I'm very confident that those actions show that we are doing the right thing. And we are committed to doing the right thing.
(END VIDEOTAPE)
QUEST: That is James Murdoch, the head of News International, and senior executive, of course, Rupert Murdoch's son, talking on the scandal today.
In a moment, 50/50, John Boehner, says those are the odds of reaching a debt ceiling deal. We'll take you through the sticking points. Bearing in mind the president says they are far apart.
(COMMERCIAL BREAK)
QUEST: The single, most-pressing issue on Capitol Hill right now, and according to the Republicans, it is essentially a coin flip. John Boehner says only a 50/50 chance of reaching a deal to raise the U.S. debt ceiling before August the 2nd deadline. With the warring sides locked in talks, Boehner is refusing to back down.
Excuse me.
That he wants it all to be no tax hikes, all spending cuts. If you join me in the library, you'll see exactly the state of play.
President Obama, lightening rod for criticism, whether it is Obama care, the stimulus package, the jobs, you name it, he wants he believes $4 trillion in cuts over a long period of time, it would involve cuts to Medicare, Defense, Medicaid, all the usual things. An hour ago he confirmed, he said that the talks were constructive, but he did admit the two sides were far apart.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I want to emphasize that nothing is agreed to until everything is agreed to. And the parties are still far apart on a wide range of issues. But, again, I thought that all the leaders here, came in a spirit of compromise, and a spirit of wanting to solve problems on behalf of the American people.
(END VIDEO CLIP)
QUEST: This is John Everything-On-The-Table Boehner; that is, except tax increases. Now, for him it is an article of faith for Republicans. He says they are not going to raise taxes on the very people that they expect to reinvest in the economy. So, he wants it all done by spending cuts.
Harry Reid, for the other side, these two men go back to back and head to head all of the time. Harry Reid, balance must be struck between spending and revenues. Trying to keep Medicare and Medicaid and social cuts off the table.
Now, this is the scenario. You've got Harry and John, and they have been beating the bejeebies out of each other for the last few weeks and months. And then you got, of course, finally, Barack Obama, having to get involved. And this is what he has wanted all along, is the president.
It is a bit of a mess. Maggie Lake is in New York with that August the 2nd deadline.
All right, look, we haven't moved. Boehner won't have any tax hikes. The Democrats won't do it only on spending cuts.
MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: It is incredible, Richard. And you wonder why so many Americans are frustrated. This is Washington politics at its worst. Only in this kind of negotiation do you have the president come out and say that it was constructive, that everyone came in the spirit of compromise, and then in the same breath say the two sides are still far apart.
It is incredible. He made a mention that Sunday they are going to meet again, and that by then everyone should know, really where their bottom line is. They have been in constant negotiations about this, you think they would have ironed it out. What we think was the point of all of that was to sort of indicate that they are serious about getting a deal.
QUEST: OK.
LAKE: They know it has to be done. And to give some kind of indication that some progress is happening. But hard to see with the rhetoric that is still coming out, what exactly that progress was.
QUEST: Right, so we have this deadline of August the 2nd, but I think we need to make it clear. August the 2nd is a deadline when the U.S. government has to decide which bills to pay and to start juggling the money.
LAKE: Right.
QUEST: Now, paying bond holders would obviously be the number one priority?
LAKE: Yes, that deadline, when they have to decide what to withhold, what to cut, what to pay, but a lot of people are saying that it is actually before that, because if they are going to get a deal they are going to need time for the legislation to be put in place, to make that deadline. So, you do have a sense of urgency over the weekend; meaning, coming out, having a press conference, or meeting again on Sunday. So, they are building the expectation, Richard, that they are moving forward.
QUEST: Right.
LAKE: If they fail to do that, you are going to start to unnerve the markets, and which, of course, are trading higher today. So they are building up and expectation. One would hope they are going to be able to deliver on that.
QUEST: Maggie Lake is in New York, counting the pennies, and the hours, as we get closer to that deadline.
Maggie, many thanks. The stage is set, I'm not talking about for debt ceiling talks. Better, still, the Space Shuttle Atlantis has one final trip. What it all worth it. What makes it all, that is the "Q&A", up next.
(COMMERCIAL BREAK)
ALI VELSHI, CNN ANCHOR, CNN NEWSROOM: QUEST MEANS BUSINESS and so do I. We are here together in the CNN NEWSROOM around the world.
Hello, Richard.
QUEST: Hello, Ali. Today we are more than around the world, we are out of this world. Each Thursday Ali and I come in to talk business, travel, innovation. And today it is travel with a difference; all the way into space.
VELSHI: That's right, Richard with the space shuttle program in the United States winding down, we are wondering about the investment. Billions of dollars, 100s of billions of dollars, go to space exploration, not just in the United States, but around the world. Should governments continue to spend on space exploration?
Richard, I'll let you go first. You have 60 seconds.
(DESK BELL CHIMES)
QUEST: Should governments continue to spend on space? Yes, yes, and a resounding yes. There are few occasions in the history of man where we have actually gone backwards in scientific development. When Concord disappeared Supersonic travel was no longer-the first time in aviation we had gone backwards. And now we are about to make a similar misstep with the ending of the shuttle program.
How different it is from the 1960s and Kennedy. We must land a man on the moon, and bring him safely back to Earth. That had vision, it had imagination. It even gave rise to great horizons for the future, and incidentally, one of the most famous split infinitives, of all, "To boldly go" from "Star Trek".
No, the future is very small minded when we start thinking about the dollars it costs, and the money we spend. Because we go to these places, we go there because we can.
(BUZZER SOUNDS)
QUEST: And after this, we won't.
VELSHI: Richard, I have to say, we don't compare our notes, but unfortunately we are on exactly the same side on this one. Give me my 60 seconds.
(BELL DINGS)
Governments have got to make decisions today about things that you say may not see fruition or bring value for decades. And the space programs are those things. There remains a critical role for governments to play in space exploration, but the focus need to change, as it is. Governments should do the things that are not economically viable, or safe enough for the private sector. Like, for instance, Richard, going deeper into space. This business of sending astronauts and cargo to spaces like, to places like the space station. That is being handed over to private players, and around the world there is this temptation to forego, or to scale back on space programs, because of these tight budgets. But the gains, as you have said, to technology and humanity, have and will continue to outstrip the costs. Governments should remain committed to these visionary, long-term goals, that don't yet justify private investment. Governments can take the risks that companies won't, the private sector can and will get in, when it makes sense, but only governments, Richard, can truly push the boundaries-
(BUZZER SOUNDS)
-of the final frontier.
We agreed.
QUEST: This is very worrisome. Very worrying, when we are both in agreement.
VELSHI: Yes
QUEST: And not only that, we are in agreement with "The Economist", which I find even more worrying.
VELSHI: I'll tell you, Richard, there are differences between us, and they will become abundantly clear, right now. Thanks to The Voice.
Hello, Voice.
UNIDENTIFIED MALE: Good afternoon, gentlemen, let's get this thing off the launch pad.
Here is question No. 1: How many vehicles were launched into space last year? Is it, A., 28; B., 45; C., 59; D., 70?
(BELL DINGS)
UNIDENTIFIED MALE: Ali?
VELSHI: 58 (sic), C.
(BUZZER SOUNDS) UNIDENTIFIED MALE: Incorrect. Richard?
QUEST: 45
(BUZZER SOUNDS)
UNIDENTIFIED MALE: Try again, Mr. Velshi.
VELSHI: A., 28.
(BUZZER SOUNDS)
UNIDENTIFIED MALE: Incorrect, yet again. OK, Richard?
QUEST: I was going to-you know, this was actually the one I was going to go for the first time, because of space vehicles, 70.
(BELL CLANGS)
UNIDENTIFIED MALE: That is correct. There were 70 vehicles successfully launched into space in 2010. There were also four launches that failed. Russia led the way with 30 successful missions. The U.S. and China each had 15.
On to question No. 2: The Soviet space agency also built a reusable shuttle for space travel. How many flights did it make? Is it, A., 0; B., 1; C., 3; D., 7?
(BELL SOUNDS)
UNIDENTIFIED MALE: Richard?
QUEST: I think it made zero.
(BUZZER SOUNDS)
UNIDENTIFIED MALE: Incorrect. Ali?
VELSHI: I'm going for three, because it is reusable.
(BUZZER SOUNDS)
VELSHI: So you would have to have more than one to prove that it worked.
UNIDENTIFIED MALE: Incorrect. Richard?
QUEST: Then it made-this is the other one, it made one flight.
(BELL CLANGS)
UNIDENTIFIED MALE: That is correct, Richard. It made one successful flight. It was unmanned and made a successful remote landing after two orbits and 206 minutes in space. The program ran out of money shortly after and the shuttle that flew was later damaged in a roof collapse at the launch site.
VELSHI: Wow.
UNIDENTIFIED MALE: On to question No. 3:
VELSHI: I guess it wasn't all that reusable.
(LAUGHTER)
UNIDENTIFIED MALE: According to NASA, how high do you have to go before you reach space? Is it A., 60 miles; B., 70 miles; C., 75 miles; D., 100 miles?
(BELL SOUNDS)
UNIDENTIFIED MALE: Richard?
QUEST: 70 miles.
(BUZZER SOUNDS)
UNIDENTIFIED MALE: Incorrect. Ali?
VELSHI: 75 miles.
(BELL CLANGS)
UNIDENTIFIED MALE: That is correct. NASA says 75 miles.
VELSHI: I'm on the board.
UNIDENTIFIED MALE: Or what 122 kilometers. That is their reentry altitude. Others do say 100 kilometers, or 62 miles is the boundary of space, but according to NASA, it is 75.
And unfortunately for you, Mr. Velshi, you are out of orbit because Richard wins today's round.
VELSHI: Richard, how does it feel? Is there a difference between winning because you get the right answer, and winning because all of the other incorrect answers have been eliminated?
QUEST: Absolutely not. A win, is a win, is a win, is a win. That will do it for this week. Remember, we are here each Thursday. QUEST MEANS BUSINESS, which is at 1800 GMT.
VELSHI: And the CNN NEWSROOM, 2 p.m. Eastern. Keep the topics coming on our blogs, CNN.com/QM B, and CNN.com/Ali. Tell us each week what you want to talk about next.
Richard, see you next week.
QUEST: See you next week.
I am shameless. Believe me, I don't care how the win happens as long as we come first. Well, most of the time.
When we come back the tabloid sensation. What the "News Of The World" was to the (AUDIO GAP) and why Rupert Murdoch decided to let it go.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS. This is CNN and on this network the news always come first, or the "News Of The World" news.
(NEWSBREAK)
QUEST: It may have been Britain's biggest selling Sunday newspaper. That certainly wasn't enough to save the "News Of The World", which will close after this Sunday's edition. John Defterios is with me to put all this into perspective.
DEFTERIOS: Yes, Richard, we know that the News Corp empire spans continents and it spans different platforms. But if you take a look at the U.K. newspaper business, surprisingly it doesn't represent a whole lot of the entire empire. The net worth of the U.K. newspaper business is said to be $1.2 billion, or 2.7 percent of the total market cap of News Corp, which is now $47 billion. But it did provide a black eye, no doubt. The $2 billion market hit yesterday to the market cap, it earned back half of that today.
Now, if you take a look at the overall politics of what is taking place here in the U.K., depending, the BSkyB deal muddies the waters. They have a $12 billion bid in for the nearly 61 percent of the company it does not own. This is the real cash earner for News Corp. This year alone profits are said to be $1.6 billion. It is 25 percent of News Corps' revenues. This has been bounced around in the U.K. parliament for 13 months. And this will delay the decision, we heard to day, from U.K. culture secretary, Jeremy Hunt. He says the decision will be at least six weeks away, so we are looking at least September.
But this has sparked a huge controversy linked to the newspaper and BSkyB. There is 135,000 messages, a day, of complaints, during the so- called consultation, while this is open. But the image is what is really the big question for the News International, the U.K. newspaper division. J. Sainesbury, as a division of Wal-Mart, Mitsubishi joined, Lloyd's Bank, Ford and the GM unit Vauxhall. But it is interesting to know, of the total revenues of News Corp, $32 billion, the advertising for "News Of The World" is just $56 million. And I think, Richard, this could explain why we see the stock bouncing back today.
So, the politics are pretty nasty. The distribution for "News Of The World" is quite strong in a very competitive Sunday market.
QUEST: Wait, this is fascinating.
DEFTERIOS: This is fascinating, but in the overall scheme of things does it really damage Rupert Murdoch going forward, is the big question. I don't think they want it to stand in the way of that deal. But I know you think a little bit differently.
QUEST: Well.
DEFTERIOS: Eyeballs are everything, right?
"News Of The World", this is the Sunday, competitive marketplace in the U.K. "News Of The World", 2.61 million readers. "The Mail" on Sunday comes in No. 2, at 1.94 million.
QUEST: Oh, that is a big difference.
DEFTERIOS: Yes, big difference. So, they are giving up a lot of eyeballs, if indeed they shut it down or don't fold it into another newspaper, which are some of rumors we are hearing tonight. The "Sunday Mirror" at No. 3, at 1.1.
QUEST: John?
DEFTERIOS: Yes.
QUEST: Go on?
DEFTERIOS: Yes?
QUEST: I say, even if he looses, that lot he still has the "Sunday Times" which of course, is 1 million, and it is the biggest selling quality paper.
DEFTERIOS: Yes, it is interesting. Now, today, I know this is a little bit anecdotal, but the news agent in my neighborhood, which is in West London, said they had five cancellations for the "Sunday Times" subscriptions, linked to the controversy of "News Of The World" and because they are so upset about all the debate around BSkyB. So, I know it is anecdotal but it is a fairly clear sign how passionate people are, right now, about all of this transpiring. So I think this is perhaps why they wanted to cut their losses.
QUEST: All right. Many thanks, John Defterios. We thank you.
Look, this is the number I think is interesting, 2.7 percent of the market. If you look at the amount involved, for News Corp, News International, and the British-the British part of the company; it begs the question, what is the broader investment picture for Rupert Murdoch's News Corp?
Porter Bibb joins me, the managing partner at Media Tech Capital Partners. His firm invest in media and technology companies. It is a fascinating dynamic that has take place tonight, isn't it? In the decision to lop off the cancerous limb of the beast?
PORTER BIBB, MANAGING PARTNER, MEDIATECH CAPITAL PARTNERS: Well, dynamic is another word for Rupert Murdoch. He thinks quickly on his feet. Even though he is at the Al-Non (ph) Company Sun Valley Media Mogul Fest, he sent Jamie right back to London yesterday to shut down "News Of The World" and take some precipitous action to try to stop this tide of really scandalous behavior throughout News Corp. and News International.
QUEST: But what do you think is behind the decision. I mean, you know, we can give the Murdochs, the benefit of the doubt and accept what they say. They've done it on conscientious grounds. They have done it because this was an egregious, horrific incident that took place. How far can we go down that road?
BIBB: I think what is really behind it is what you alluded to earlier in the show, and that is the whole situation with BSkyB. He owns 39 percent, he was trying to buy the other 60.1 percent and he looked like he was going to get clear approval from culture minister Jeremy Hunt tomorrow morning. That now has been pushed out, as was just reported to September, at its earliest. And with the furor that is building up in both the U.K. and slowly over here in North America, it is very problematic, whether that is going to go through. Even though, technically, the issues beyond BSkyB's monopoly position in U.K. news, is really the only decision factor that Mr. Hunt will decide on. Public opinion and political opinion is probably going to kill that deal.
QUEST: Oh, so you think it will actually. You think he is going to loose this deal?
BIBB: I think it will never happen. And I think it is a material blow to News Corp, because as was reported it is a significant part of News Corps' revenues, and operating income. It was the dream of Rupert to create this global broadcast octopus, covering the U.K. and Europe, covering with Star, Asia, and FOX News in the United States and North America.
QUEST: Finally, if we take this scandal, which is one newspaper, it has just got 2 million, all right, it has 7.5 million circulation all readers.
BIBB: Right.
QUEST: And put aside the revulsion of the allegations. But is this a significant scandal for News Corp, in its global entity?
BIBB: Richard, I think, the scandal part is problematic, the legal issues are much more serious. You do not get off easily paying policemen for cell phone numbers that you can hack. You do not get off lightly for obstructing justice and interfering with police investigations, which News Corp employees did. And those legal issues and the responsibility of senior management, which is probably going to become more and more significant as the days and weeks go on in this scandal. Those will crater the BSkyB deal.
QUEST: We are so grateful. Thank you, sir, for coming in and making such good sense and putting it into a global context for us. Porter Bibb joining me from New York.
The closure of the paper, it brings down the shutters on 168 years of tabloid history. The "News Of The World", love it, or hate it. It has been the backbone of the Sunday newspaper in the U.K., for decades. Atika Shubert now remembers.
(BEGIN VIDEOTAPE)
ATIKA SHUBERT, CNN INTERNATIONAL CORRESPONDENT: The first "News Of The World" rolled off the presses back in 1843. Priced at just 3 pence, it was the cheapest newspaper of its time. And it was aimed directly at the working classes. Before long the British paper had established itself as the most widely read Sunday paper, eventually reaching sales of about 2.5 million copies every Sunday.
Fast forward 19 years, 1969, to be exact, and the paper passed into the hands of Rupert Murdoch.
RUPERT MURDOCH, NEWS CORP: Hi, where have you been?
SHUBERT: Making this Murdoch's first Fleet Street edition. For the years that followed, the newspaper built a reputation on hard-hitting exclusives, often exposing the embarrassments of celebrities and politicians. Prince Harry, 16 at the time, was one of many to be exposed. Then there was David Beckham. He was exposed as a love cheat, as they uncovered the secret affair he was having with his personal assistant, Rebecca Lews (ph).
In 2005, the tabloid paper published a seemingly mundane story about Prince William injuring his knee. It was another exclusive for newspaper that had made its reputation on scoops. But this scoop was different. Royal officials realized that the newspaper could only have been sourced by the illegal interception of Prince William's mobile phone voice mail. And right there began a chain reaction of allegation and scandal, that enveloped members of the royal family, celebrities, and now, murder victims. Atika Shubert, CNN, London.
(END VIDEOTAPE)
QUEST: In just a moment, this man makes his own bid for the headlines. He is Jean-Claude Trichet is telling Europe why he is raising rates is good for you.
(COMMERCIAL BREAK)
QUEST: The Eurozone is on alert for further rate rises this year after Thursday's quarter point rise. This is how President Jean-Claude Trichet gave today's signal.
(BEGIN VIDEO CLIP)
JEAN-CLAUDE TRICHET, PRESIDENT, EUROPEAN CENTRAL BANK: While the underlying momentum of economic growth in the Euro area continues to be positive, uncertainty remains elevated. We will continue to monitor very closely all developments with respect obstacles (ph) to price stability.
(END VIDEO CLIP)
QUEST: Now, the phrase there that you might not have heard, or picked up on, "monitor very closely". Three words indicate rate rises in coming months. Probably not immediately because we didn't hear that phrase, "strong vigilance". Tied to monetary policy it might please the market. It does squeeze southern economies, the periphery countries that are in trouble, Greece, Portugal, certainly Ireland, all of whom are recipients, at the moment, of stability funds and worries, of course about Spain and other countries.
Trichet said the ECB makes policy for the whole Eurozone, all 17 economies, 331 million people. Keeping the lid on inflation is to everyone's benefit.
(BEGIN VIDEO CLIP)
TRICHET: All are benefitting from this, I would say, confidence and stability preserved by our own action, in line with our treaty mandate. In line with what the people of Europe is asking from us. And the fact that we have at the same time difficulties in some countries and so that there are risks (UNINTELLIGIBLE) has nothing to do with the fact that the solid soil on which all of the Euro area is functioning is essentially (ph) this soil of confidence that we are preserving.
(END VIDEO CLIP)
QUEST: Julian Callow is with me, chief European economists at Barclays Capital.
Good to see you.
JULIAN CALLOW, CHIEF EUROPEAN ECONOMIST, BARCLAYS CAPITAL: Yes.
QUEST: It looks very odd.
(LAUGHTER)
QUEST: To be raising rates for a second time, when you've got members of the Eurozone accepting bailout cash. What am I not seeing here?
CALLOW: OK, it does look a bit odd, doesn't it? The Bank of England is signaling it is going to be a long time before it raises rates. The Fed is clearly a long way off. Only, really, the Chinese are raising rates at the current time, as well as the ECB.
So, why is the ECB doing this? Well, it has been concerned about inflation risks in the Euro area, the German economy has obviously been performing more strongly. It feels that the current rate of interest is so low that it ought to start preempting and-
QUEST: But he's teasing the Eurozone.
CALLOW: Yeah.
QUEST: On the brink of collapse-and, the potential for worse. I mean, we are not out of the woods yet on Greece. There is a question about Portugal. You have to admit today that he'd take any ol' garbage report on Portugal debt. And there are rumors that they may all have to come back.
CALLOW: Yeah.
QUEST: So, I ask again, you know, what is he seeing that the rest of us don't?
CALLOW: Well, it is hard to defend. I mean, personally, I would not be doing this. I don't think the Fed would be doing this if the Fed was in the ECB's shoes. But what is the argument that the ECB is using? Well, it is simply that interest rates have been very low. The German economy has been performing strongly here, inflation expectations have edged up a bit. So the ECB needs to really send a signal that it is in charge of the inflation situation.
QUEST: OK, so we've got the ECB on interest rates?
CALLOW: Yeah?
QUEST: Saying that. Now, of course, he's getting himself into a real knot, or the ECB is, over the question of their definitive line on no selective default.
CALLOW: Yeah?
QUEST: It has all got to be voluntary. Let's pause for one second. Have a quick listen to the number of times Jean-Claude Trichet said no to selective default.
(BEGIN VIDEO CLIP)
TRICHET: Indeed the position of the government is that we are-we say no to selective default or credit default.
Nothing, but we say no to selective default.
No to default.
Again, it is clear that we say no to selective default.
We say no to selective default, full stop.
(END VIDEO CLIP)
QUEST: No to selective default, full stop. OK, look, the first plan wasn't going to of reprofiling, that is not going to fly. Now selective default of move it-rollover, is not going to fly according to ECB, how are they going to get out of this mess?
CALLOW: I think what the ECB I trying to do here is get the governments to get us out of this mess, OK? And for example, the EFSF, a new mechanism, that could be used perhaps to buy back debt or to issue guarantees in this situation. The Greek government has obviously come up now, finally, with a very large austerity package. I think what the ECB is saying, look, we aren't ready to provide additional support and to bend our rules any further. That is simply what it is about.
QUEST: But do I get the feeling from you-and please tell me that I'm way off mark, here, Julian. I know you'll be honest. Frankly, the market just doesn't believe all of this.
CALLOW: No, obviously. The market is of the view that the ECB is always going to be there to support the Greek banking sector. Look, the Greek banking sector, if you look at the Central Bank of Greece, data, it is actually borrowing over 90 billion euros, from the central bank. That is an extraordinary large amount in relation to the size of the economy. And no way can they cut that financing. They'll figure out other ways to offer other kinds of loans that the banks own, to obtain financing from the euro system here.
QUEST: Julian, many thanks, indeed.
CALLOW: Thanks for having me.
QUEST: The U.S. stock markets, there are some solid gains. This is the way the board looks. Investors are looking forward to two job reports on Friday. They got a taste before the bell, weekly unemployment claims came out lower than expected. Numbers from payroller ADP were good and as you can see.
Shareholders of the New York Stock Exchange have approved its sale to Deutsche Borse, and the share rose 2 percent. Wunder Bah! They will be saying in Frankfurt, I have no doubt.
More on the "News Of The World" shut down from an insider of the British newspaper industry. QUEST MEANS BUSINESS after the break.
(COMMERCIAL BREAK)
QUEST: In less than week it has gone from one of Britain's top tabloids to being gone. Phone hacking allegations brought down the "News Of The World". Earlier I spoke to Michael White, the assistant editor of "The Guardian" newspaper, the one that first reported this week's claims. I asked him if the dramatic developments had made closure inevitable?
(BEGIN VIDEOTAPE)
MICHAEL WHITE, ASSISTANT EDITOR, "THE GUARDIAN": (AUDIO GAP) inevitable about this, and I think "News Of The World"'s brand is a great deal stronger, at least in this country, and probably in many others, too, than News Corp, that is just a big corporation's holding company structure. "News Of The World" is very, as you know, Richard, very powerful, traditional figure and force in this country for the best part of 200 years, and to close it down as a commercial tactic to protect the Murdoch bid for BSkyB, the television, paid-TV channel, network in this country, surprising thing to do, quite a shocking thing to do.
We assume that the "News Of The World" will rise by another title, but it shows the Murdochs are pretty tough when they are cornered.
QUEST: You see, isn't that exactly the point. They are not going to-they may abandon the title with, even with its 160 year history, but they're not going to cede the market share, if they can, are they?
WHITE: Well, I imagine they'll lose market share. They certainly will this weekend. I had assumed that they will ride the storm. Public opinion is fickle, memories are short, in a few weeks time the loss of revenues from advertisers and from readers giving up would creep back, if they came up with a few wholesome, dramatic scoops. And the "News Of The World", on its good side, is very good at that. It is a Jekyll and Hyde newspaper. It does some awful things, but it does some brilliant things. Some viewers around the world will know that it exposed bribery corruption in the Pakistani cricket team, last winter. That is useful public service. Then there is the dark side, which we have heard about.
So, I think Rupert Murdoch, or James Murdoch, his son who runs the show in this country, has attempted to sacrifice the "News Of The World" in order to save the BSkyB bid.
QUEST: Right.
WHITE: And to save Rebekah Brooks, who is a Murdoch court favorite.
QUEST: Why?! Why?!
WHITE: She's the executive.
QUEST: Why Rebekah Brooks? Why shouldn't she be, you know, given a very healthy pay off, sent on her way, and rehabilitated in three or four years' time. The longer she has been allowed to stay, the harder that now becomes, doesn't it?
WHITE: It is a mystery to us all. But the chemistry of personal relations between people is a strange thing. Murdoch has always liked and admired Rebekah. She can be a formidably persuasive figure. She is a great schmoozer. She is a person friend of the current prime minister of Great Britain, David Cameron. She lives near him, in the country. And they have lunch together, and they spend time together at Christmas. Three or four meetings, we are told, this last Christmas. And David Cameron also hired her successor, as editor of the "News Of The World", Andy Coulson, to be his equivalent of the White House spokesman; went into Downing Street with him. Didn't do the front of camera stuff, but did the behind the scenes stuff, until he was forced out, yes, over this scandal a few months ago. Now, two days ago, the News Corp people appear to dump on Coulson, to deflect the blame onto him. That didn't work. Now they have sacrificed the paper.
QUEST: And-
WHITE: Extraordinary story.
QUEST: And-and-and, of course, the journalists who must be spitting feathers tonight, those who worked on the "News Of The World".
WHITE: Somebody working for another newspaper told me 10 minutes ago, that a lynch mob mood around the "News Of The World". The feeling, perhaps, that Mr. Murdoch should have closed Rebekah Brooks, and not closed the beloved newspaper. Because, as with all newspapers, we pretend to be hard and horrid and cynical, it is not just the jobs, it is a sentimental attachment to a newspaper. And far too many papers in the Western world, for commercial reasons, difficult times for our industry, have fallen by the wayside in recent years.
It is horrible to think of the "News Of The World" going out of business, even though it often drives me mad.
(END VIDEOTAPE)
QUEST: OK, now we'll be back with more of "Profitable Moment" after the break.
(COMMERCIAL BREAK)
QUEST: (AUDIO GAP) out of its investigative journalism, which has ultimately lead to its downfall. Now it was assumed that Rebekah Brooks, the chief executive of News International, and editor of the paper at the time, that she would carry the can. Instead, Rupert Murdoch decided she would stay and he has sacrificed the newspaper itself.
Rupert Murdoch has been in newspapers for nearly 50 years. He first took over the newspapers of his father when he was 22, in 1953. He knows "News Of The World" will continue to be referred to in connection with this scandal and the hacking of phones.
Hour after hour, more news revealing the extent of surveillance, heightened public revulsion. What this is about is limiting damage to the brand and its take over ambitions.
And that is QUEST MEANS BUSINESS for tonight. I'm Richard Quest. Whatever you are up to in the hours ahead.
(DESK BELL CHIMES)
I hope it is profitable. "WORLD ONE" next.
END
