Phone-hacking scandal cost Murdoch media £1bn - Press Gazette

News of the World closure ten years on: How hacking scandal cost Murdoch's UK tabloid business £1bn

Phone-hacking scandal

The phone-hacking scandal and subsequent legal issues have cost Rupert Murdoch’s UK publishing business more than £1bn ($1.4bn), an investigation by Press Gazette has found.

And, ten years on from the closure of the News of the World, News Group Newspapers (NGN) – the UK tabloid publishing arm of News Corp – is still enduring the financial fallout.

NGN racked up more hacking and related expenses in 2020 – around £80m – than in any year since 2014 thanks to ongoing legal cases. This is not evidence of an increase in claims – News Corp is hopeful it is approaching the “tail end of litigation” – but it does demonstrate that the expensive saga is ongoing.

The use of voicemail interception for tabloid story-gathering was laid bare by a long-running Guardian investigation that culminated in July 2011.

Ten years ago this week, as Rupert Murdoch’s News Corporation came under intense political pressure over hacking revelations, the company announced the closure of its Sunday tabloid, the News of the World. Its last edition was published that weekend, on Sunday 10 July.

News Corporation was also forced to abandon its takeover bid for British broadcaster BSkyB the following week. 

As well as closing the News of the World, News Corporation launched an internal investigation unit, the Management and Standards Committee (MSC), to root out further wrongdoing within the company.

Investigations by the MSC and Metropolitan Police led to criminal charges being brought against dozens of journalists and executives, both for phone-hacking and for payments to public sector sources.

In addition to expenses associated with the closure of the News of the World, the abandoned BSkyB deal, Management and Standards Committee costs, and legal fees, News Group Newspapers has also faced civil court claims from dozens of alleged hacking victims. In more recent years, hacking claims have extended beyond the News of the World to The Sun.

Reach, the owner of the Daily Mirror and Sunday Mirror, has also been embroiled in the hacking scandal and currently believes its costs could hit £106.5m.

Whether the Murdoch family and other News Corp shareholders have been left out of pocket long-term by the scandal is debatable.

Hacking litigation lawyer Mark Lewis told Press Gazette this week that Murdoch was the biggest beneficiary of hacking – because it led to the break-up of News Corp’s film and news businesses and the sale of 21st Century Fox to Disney for

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NGN hacking and related costs, 2011-2020

Below is a breakdown and explanation of how Press Gazette calculated hacking and related costs incurred by News Group Newspapers over the past ten years. Most of the figures are from News Group Newspapers accounts filed at Companies House in the UK.

Although News Group Newspapers is part of News UK, and therefore a subsidiary of News Corp, our £1bn figure does not reflect the total cost to News Corp. This is because News Corp has an indemnity agreement under which Fox Corporation (formerly 21st Century Fox, which was part of the old News Corporation company) covers part of the hacking costs. 

News Corp no longer reports to investors the total cost of “UK newspaper matters” arising from the hacking scandal. Instead, it reports the net cost to News Corp as a company after indemnity payments from Fox Corporation. 

News Corp’s net costs topped $500m in 2015 and, although it has not updated this figure, they appear to have edged up only slightly since then thanks to the indemnification.

2010-11: £24m

Source: News Group Newspapers

In accounts for the year to 3 July 2011, NGN revealed it had charged itself £23.7m for claimant legal fees and damages relating to phone-hacking. 

2011-12 cost: £467m

Sources: News Group Newspapers/News Corp

In accounts for the year to 1 July 2012, NGN reported that it had incurred £288.1m of one-off costs relating to the closure of the News of the World.

This figure included a new charge of £17.6m relating to hacking claimants’ legal fees and damages (in addition to the £23.7m from the previous year). The company wrote off the £160m value of the publishing rights of the News of the World. And it racked up costs of £63.9m that related to the Management and Standards Committee, which was set up to investigate internal law-breaking.

Separately, NGN also booked £34.2m of “exceptional restructuring costs” relating to the closure of the News of the World, including £22.2m of redundancy costs.

NGN also reported a £145m fall in revenue – from £653.6m in 2011 to £508.7m in 2012 – with the loss of News of the World sales identified as the “principal cause”. (Our conservative estimate for revenue losses here is £100m, but it is worth noting that the newspaper’s closure would also have led to cost savings.) News Corp launched a Sunday edition of the Sun in February 2012 to win back weekend sales.

The political backlash of the hacking scandal forced News Corp to abandon its proposed takeover of BSkyB. Accounts for News Corp show that the company had to pay a deal breakup fee of $63m (£45m) to BSkyB as a result.

2012-13 cost: £88m

Source: News Group Newspapers

For the year to 30 June 2013, NGN reported £87.6m of one-off costs relating to “UK newspaper matters”, which had grown to include legal issues relating to paying public officials for information. This included £10.3m for claimant legal fees and damages, its own legal fees and costs relating to the Management and Standards Committee (£25.9m).

2013-14 cost: £103m

Source: News Group Newspapers

In the year to 29 June 2014, NGN reported £102.7m of one-off costs relating to “UK newspaper matters”, including £7.3m for claimant fees and compensation. Wider company legal fees hit £78m and Management and Standards Committee costs were £16.1m.

2014-15 cost: £65m

Source: News Group Newspapers

In the year to 28 June 2015, “UK newspaper matters” costs amounted to £50.7m. Claimant legal fees and compensation totalled £4.3m. And Management and Standards Committee costs came to £10.2m.

2015-16 cost: £30m

Source: News Group Newspapers

Claimant legal fees and damages: £5.2m. UK newspaper matters: £19.1m. Management and Standards Committee: £6m.

2016-17 cost: £51m

Source: News Group Newspapers

Claimant legal fees and damages: £19.9m. UK newspaper matters costs: £27.5m. Management and Standards Committee: £3.6m.

2017-18 cost: £46m

Source: News Group Newspapers

Claimant legal fees and damages: £14.7m. UK newspaper matters costs: £30m. Management and Standards Committee: £1.6m.

2018-19 cost: £54m

Source: News Group Newspapers

Claimant legal fees and damages: £26.7m. UK newspaper matters costs: £25.7m. Management and Standards Committee: £1.6m.

2019-20 cost: £80m

Source: News Group Newspapers

Claimant legal fees and damages: £52.3m. UK newspaper matters costs: £26.4m. Management and Standards Committee: £1.3m.

Picture credit: Newscorp/Taint/ Reuters/Luke Macgregor

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