Psychologists might find rich material if they were to analyze the relationship between Rupert Murdoch, the media mogul behind Twenty-First Century Fox and News Corp., and Rebekah Brooks, the new CEO of News UK, the British newspaper company that owns The Times, The Sunday Times, The Sun and The Sun on Sunday – she started on Monday.
He certainly respects her; he might be wild about her. Four years ago, when the paper she used to edit, the News of the World, fell victim to the phone-hacking scandal and closed, ensnaring Ms. Brooks in a massive criminal investigation, Mr. Murdoch was asked what his main priority was. He looked at Ms. Brooks, smiled at her and replied, "This one."
Last year, after Ms. Brooks, now 47, was cleared of phone-hacking charges, her return to the Murdoch fold was inevitable. The shocker was that she was reappointed as boss of the entire British newspaper spread even as the Crown Prosecution Service considers bringing corporate charges against News UK, formerly News International, over the industrial-scale phone-hacking of politicians, celebrities, members of the Royal family and victims of crime. The latter included Milly Dowler, the murdered English schoolgirl whose phone was hacked by News of the World reporters when she was reported missing.
Ms. Brooks's revival shocked some of the victims of the phone-hacking scandal. Evan Harris, joint executive director of Hacked Off ("The campaign for a free and accountable press"), compared her appointment to the equivalent of disgraced banker Fred Goodwin being rehired as CEO of Royal Bank or Scotland, or Andy Coulson, the former News of the World editor who went to prison for his role in the phone-hacking scandal, going back to his old job as Prime Minister David Cameron's chief spokesman.
The Coulson comparison is not really fair, because Ms. Brooks was convicted of nothing, defying some predictions that she would join Mr. Coulson in the clink. But getting cleared of criminal charges hardly makes her suitable for running one of the world's best-known media companies. If she did know about the phone hacking, she was in violation of the law. If she did not know, as she claimed in her defence, she was incompetent. The top executives of big companies are not expected to be aware of all the wrongdoings of their employees. But the phone-hacking campaign was so extensive, and went on for so long, that you would think that she would have suspected that something reeked in the Kingdom of Murdoch.
Mr. Murdoch and his sons Lachlan and James – all three of whom are News Corp. directors – seemed not to care one iota about the criticism hurled at them for plucking Ms. Brooks out of the wilderness. Labour MP Chris Bryant said Mr. Murdoch "stuck two fingers up to the British public and the thousands of people whose phones were hacked" when Ms. Brooks was rehired.
But indifference is the luxury, apparently, afforded to the bosses of family-controlled companies even if those companies are listed on a stock exchange. Mr. Murdoch controls News Corp. and Twenty-First Century Fox, which houses the television, cable and Hollywood studio bits of his empire, through multiple-voting shares. At last count, they controlled 39 per cent of the votes in each of the companies. Dilution has made their equity positions much smaller.
It is hard, even impossible, to imagine that a widely held company would have allowed the reappointment of Ms. Brooks, all the more so since News Corp., which trades on NADSAQ, has lost 27 per cent of its value in the past year, greatly underperforming both the media index and the S&P 500. Is an executive who was oblivious to the biggest scandal in postwar British newspaper history the right manager to make News Corp. a winning investment?
As a career newspaperman, and former employee of News UK (I worked at The Times in the 1990s), I wish Ms. Brooks every success in finding a business model that spits out steady profits for Mr. Murdoch's illustrious British titles. She faces a daunting task, for the steady fall in newspaper revenue and circulation has overwhelmed the rise in digital income. The Sun remains Britain's top-selling tabloid, but its digital strategy has been a dud. The paper's paywall, launched two years ago, has attracted only 225,000 subscribers. Circulation has fallen by an astounding one million, to about 1.8-million, in the past four years. In the year to the end of June, 2014, News UK reported an operating loss of £67-million ($102-million U.S.).
The only good news is that News UK will face diminishing legal bills related to the phone-hacking scandal. According to the Financial Times, legal costs sucked £50-million out of the company in the latest financial year.
Ms. Brooks's fix-it strategy is not known. With the newspapers themselves in apparently irreversible decline, she probably will have to diversify News UK's digital offerings. The sale of a couple of the newspaper titles is not out of the question. Pearson PLC recently sold the Financial Times to Japanese media group Nikkei for a rich price, proving that eager buyers can be found for brand-name titles even if their glory days are behind them.
Mr. Murdoch obviously likes Ms. Brooks a lot on a personal level and must think she has the business talent to turn News UK around. If she fails, the critics who said she was an incompetent leader in her previous incarnation at News UK, because she was unaware of the phone hacking, will not be surprised.