• by Erik Sass  @eriksass1, July 7, 2011

With public fury mounting over disclosures of illegal phone-hacking and bribes paid to law enforcement in the U.K., Rupert Murdoch's News Corp. announced Thursday that it is closing the 168-year-old News of the Worldtabloid with a circulation of 3.7 million.

According to News Corp. deputy chief operating officer James Murdoch, the paper's reputation had been "sullied by behavior that was wrong." Explaining the decision to close, which will affect 200 News of the World staffers, Murdoch stated: "The News of the World is in the business of holding others to account. But it failed when it came to itself."

The weekend tabloid will publish its last edition on Sunday.

Like other British tabloids, the News of the World was known for salacious reporting that pushed the boundaries of decency and journalistic propriety. However, over the last month, it become embroiled in virtually unprecedented controversy, due to revelations about its earlier use of tactics which have been widely condemned.

These include hiring a private investigator to hack into the mobile phone of a 13-year-old murder victim and then delete voicemail messages, giving her family false hope that she might still be alive. The tabloid also appears to have hacked into the phones of some of the victims of a July 2005 terrorist attack in London, which left 56 people dead.

This week, fresh allegations surfaced that the tabloid may have also hacked into phones owned by British troops killed overseas in Afghanistan and Iraq. The British Royal Legion, which represents veterans' causes, said it was severing all connections with the tabloid: "We can't with any conscience campaign alongside News of the World on behalf of Armed Forces families, while it stands accused of preying on these same families in the lowest depths of their misery. The hacking allegations have shocked us to the core."

Significantly, the BRL also threatened to pull advertising from other News Corp. properties, including The Times and The Sun.

Amid a flood of public outrage, the News of the World and its parent company faced withering attacks in Parliament, where it was roundly abused by MPs from the opposition Labour Party as well as the ruling Conservative and Liberal Democratic Parties. This was an unprecedented act, as British politicians have usually avoided criticizing the U.K.'s politically powerful newspaper industry. Prime Minister David Cameron is also a close friend of former News of the World editor Rebekah Brooks. The public outcry swung the political pendulum decisively against the News of the Worldand Rupert Murdoch himself. On Wednesday, Chris Bryant, a Labour MP, warned: "We have let one man have far too great a sway over our national life." Zac Goldsmith, a Conservative MP, scolded fellow legislators for giving Murdoch and News Corp. a pass: "Rupert Murdoch is clearly a very, very talented businessman -- he's possibly even a genius -- but his organization has grown too powerful and has abused that power. It has systematically corrupted the police, and in my view has gelded this Parliament, to our shame."

James Murdoch employed equally harsh language in announcing the closure: "If recent allegations are true, it was inhuman and has no place in our company." He also said the tabloid won't publish advertising this weekend and will donate its circulation revenue to charitable causes.

Of course, the advertising ban may have been something of a foregone conclusion, as advertisers large and small fled the embattled tabloid. By Wednesday evening, Ford Motor Company, Mitsubishi, Virgin, Vauxhall, NatWest, and Lloyds Bank, had pulled out of the News of the World, and companies like Coca-Cola, Tesco, and Procter & Gamble were also edging toward the door.

News Corp. is scrambling to control the PR catastrophe, in part, because Rupert Murdoch had hoped to buy the rest of satellite TV broadcaster BSkyB, News Corp. for $12 billion in the near future.

Just a few weeks ago, the BSkyB takeover was considered a done deal after clearing the last regulatory hurdles. But the disclosures of phone hacking and illicit payoffs to the police -- as well as the ensuing public outrage -- could well scuttle the deal.

On Wednesday, British media regulator Ofcom said it is monitoring "investigations by the relevant authorities into the alleged unlawful activities," implying the BSkyB acquisition might be in jeopardy.