Scandal will be a Lehman Brothers moment for media

 
Allister Heath
IN many ways, the disgusting scandal that has so stunningly and abruptly destroyed Rupert Murdoch’s News of the World (NotW) could prove to be a mini-Lehman Brothers moment for the media industry. As the dominos tumble, there will be more, as yet unknown, corporate victims. Seismic, uncontrolled changes are now afoot, at a time when technological innovation was already revolutionising the market; some of these shifts will be good, others will be destructive.

It is not just the media (and its consumers) that will be affected: the police is being engulfed by what could be the biggest corruption scandal since the 1970s; and Westminster is in turmoil. Business, finance, politics and the media: this is an astonishing story, involving some of the world’s most powerful, larger than life characters, and one which will dominate the agenda in Britain for years to come.

I am proud to edit City A.M., an independently-owned newspaper which would never even dream of breaking the law. We have no interest in celebrity tittle-tattle and are revolted by what has been going on.

But it is a tragic day for those NotW journalists who are losing their jobs, through no fault of their own (the bad eggs from the old regime had already left). The actions of a small minority of amoral, hypocritical and arrogant ex-staff at the NotW (and some other newspapers, as will eventually become clear) have helped bring the entire journalistic profession into disrepute. Fortunately, the public has always made a distinction between good and bad hacks, but all journalists – like all bankers and politicians as a result of the credit crunch and expenses scandals – have been damaged. The situation will become even worse (and the final outcome even more unpredictable) if other serious scandals emerge elsewhere in the industry.

It is also a bad time for the freedom of the press: by despicably abusing their privileges, a small number of rogues have encouraged some politicians and others who hate being held to account by the media to crack down on a free press. There is talk of a new regulatory quango and other new laws – but what is really needed is to punish severely anybody who breaks existing laws, of which there are plenty. It is pathetic to see Labour politicians – under whose watch this scandal developed – now attacking those media executives they sucked up to in return for their support from 1997. But the fallout is even worse for David Cameron: his former communications boss Andy Coulson is about to be arrested. The NotW and the News International titles all now back the Tories – and they have always preached a small-c conservative view on crime, law and order, the EU, tax and regulation. Their decline will be bad for the Tory party.

Paid-for newspaper readership will fall even faster, regardless of whether Murdoch launches a Sun on Sunday to replace the NotW (if he moves too fast, he will forfeit the moral advantage gained from shutting the NotW). While Trinity Mirror, the Daily Mail and General Trust and Northern and Shell will gain market share, this trend will nevertheless be bad for established media firms, all of which are still losing money on their digital operations. But it will be good for free newspapers as they are growing their readership and will account for an even larger share of the print market.

Murdoch is a master chess-player who has very rarely lost a gamble. His main aim is to rescue his bid for BSkyB and to make sure that his lifelong work building News Corp into the world’s most powerful media company doesn’t end in scandal for his family. His assessment was that the paper’s brand was so tainted as to have become not only worthless but a disastrous liability; and that he needed to do something really drastic. Murdoch also needed to convince his shareholders that he was taking radical action to stabilise the company’s share price.

His problem is that the scandal is not over yet: only when all the executives responsible have been punished – and all those whose phones have been hacked are compensated – will a line finally be drawn. A proper, independent inquiry is vital. Until then, Murdoch’s ambition – to win BSkyB, and build an integrated, cross-platform, multimedia organisation strong enough to take on digital giants – will remain just a dream.

allister.heath@cityam.com
Follow me on Twitter: @allisterheath