News Corp. Hacking Cost Hits $224 Million
On Aug. 8, News Corp. put a shocking number on the cost of its News of the World phone-hacking scandal: $224 million. That's what the Rupert Murdoch conglomerate spent during its fiscal year ending June 30, with the bulk of the money going toward legal fees, say insiders. And the saga is nowhere near over. News Corp. already has dished out about $6 million in settlements, according to reports, and more lawsuits are expected from the roughly 700 victims that include the likes of Brad Pitt, Angelina Jolie and Mick Jagger. The fallout for News also includes the shuttering of NOTW after 168 years, the abandonment (for now) of its quest to take over British Sky Broadcasting and a diminished role (and reputation) for James Murdoch, who had been expected to run the company once his father was out of the picture. With the negatives mounting, one might think it impossible to put a positive spin on the situation. But analysts believe the scandal could be a net positive for News because it prompted the June decision to split off its publishing assets. That will allow well-liked president and COO Chase Carey to focus on the more profitable TV and movie businesses rather than a unit responsible for a write-down that led to News' $1.55 billion loss in the fourth quarter. (Its stock was at $23.43 on Aug. 13, up from $16.50 a year ago.) "The print business is something investors want to forget," says Brian Wieser of Pivotal Research. "The hacking scandal has been a good thing in that it forced the company into doing something investors have wanted it to do for a long time."