Compounding the pain at News International, the phone hacking scandal has led to an inevitable backlash among advertisers. Marketers often flee scandal to avoid tarnishing their own brand image. The first to cut ties in this case was Ford Motor Co., followed on Wednesday by Lloyds Banking Group PLC, Cadbury PLC and a host of others. The largest advertiser to back away so far is the Vauxhall car brand owned by General Motors Co. It spent £534,000, or $825,000, in advertising with News of the World in the first five months of this year. The scandal also caused some investors to pull back. News Corp.’s shares slid 3.6 per cent on Wednesday amid the news, closing at $17.47 (U.S.) – making it the fourth-worst performing stock on the S&P 500 Index.
The business deal in jeopardy
But it wasn’t just advertising troubles that had investors spooked. As with most media companies around the world, TV is far bigger business than newspapers, and the possibility that this scandal could scuttle News Corp.’s planned takeover of British satellite broadcaster BSkyB was a source of concern. BSkyB’s shares also fell on Wednesday. News Corp. already owns 39 per cent of BSkyB and launched a bid for a full takeover a year ago. The deal, which values the broadcaster at £12.3-billion (roughly $19-billion), has undergone a prolonged regulatory review. The phone hacking scandal has now led to calls in the British parliament for the deal to be delayed even further and referred to the Competition Commission.
Susan Krashinsky
