News of the World – Will amputation save the patient (bid)

“Murdoch shutters the venerable ‘News of the Screws'” Was this an act of contrition for the phone tapping scandal or an act of desperation to secure regulatory (read political) approval for News Corporations bid for the outstanding shares in BSkyB? If so, will it work when the editor of the NoW at the time of these infractions remains in place at the top of the corporate pole, yet the rest are sacrificed?

As an attempt to draw a line under the phone hacking scandal, this rather radical action is unlikely to satisfy the ‘liberal’ media. Much of their real gripe had less to do with their sense of moral indignation of phone tapping, than their concern about Murdoch’s bid for the rest of BSkyB. However, this action tells us a lot about Murdoch’s determination to secure his real prize of BSkyB and this is unlikely to be missed by markets. Existing BSkyB shareholders meanwhile will no doubt have their resolve harden to hold out for a knockout price.

When Murdoch waves goodbye to the News of the World and 200 staff, will he really abandon its 7.5m readers, 2.6m of weekly sales and annual revenues approaching £200m (including approx £110m from copy sales)?   Rumours had already been circulating that News Intl was looking to move to a 7 days a week operation to offset the structural decay in readership and revenues.  In this case, keeping the captain while throwing the crew overboard makes a lot of sense.

If News Intl is really going to abandon the Sunday market, the main beneficiary would be Trinity Mirror, with its two ailing titles, the Sunday Mirror and People.  However, I suspect that the bounce in its share price on this expectation may be fairly muted as markets see through the ruse. In a sense, Murdoch may be trying to kill two birds with one stone here. Lance a story that was threatening his bid for BSkyB while accelerating a cost reduction plan for his newspapers.  200 angry journalists and hardened price expectations by BSkyB shareholders however might provide an offsetting price to pay.