PR crisis threatens News Corp
The PR crisis engulfing Rupert Murdoch and News Corporation has come to a head in recent days as the Leveson Inquiry flexes its muscles. Latest developments reiterate the pervasive undercurrents of politics and reciprocity that are influential in this case, from the decisions that drove transgressions, to the execution of the inquiry.
The Leveson Inquiry is British Parliament’s investigation into the “culture, practices and ethics” of the media, read more: The Leveson Inquiry. As a result of phone-hacking revelations, the inquiry is investigating the relationship of the press with the public, police and politicians. Last week, British lawmakers handed down a damning judgement saying, “We conclude that Rupert Murdoch is not a fit person to exercise the stewardship of a major international company.”
In delivering its judgement, the committee was split down party lines with a Labor-Conservative 6-4 vote majority passing the judgement. The term “not a fit person” was rejected by the Conservative members of the committee, but upheld by the combined majority of the Labor and Liberal-Democrat members. This reflects Labor’s strong belief that the Prime Minister David Cameron, and his government, have been compromised by corrupt dealings with the Murdochs in both the last election and News Corp’s retracted bid for BSkyB.
News Corp owns a 39% minority controlling share in broadcaster BSkyB. The carefully-worded judgement will be considered by British media regulator Ofcom as it investigates whether BSkyB is a “fit and proper” owner of a broadcast license. Based on its findings, Ofcom may order News Corp to reduce its holding in BSkyB and other media assets in Britain to lessen its media market dominance. An order like this will seriously threaten News Corporation’s business in the UK where its business model of incessant acquisition would otherwise continue.
Rupert Murdoch’s immensely successful business model is based on market monopoly; the more you own, the less room for competition. And the less room for competition, the more valuable the dominant stake becomes. Of course, with this dominance in media comes the innate power to influence people. This power, in turn, invites attention from both politicians seeking campaign support, and regulators wary of anti-competitive practices.
The dynamic of this relationship between corporations and government is nothing new – it’s lobbying and government relations at heart – but the scale and scope of power in Murdoch’s media dominance, and its consequential value, is unique. Read Jack Shafer’s interesting take on this Who cares if Murdoch lobbied?
Rupert Murdoch has spent the last 50 years building News Corporation’s power-brand by acquiring media holdings across the globe from newspaper titles and magazines to television broadcasters and internet sites. By 2000 News Corp owned over 800 companies in more than 50 countries with a net worth of over $5 billion.
Under the News Corp umbrella, Murdoch has been a ruthless pioneer of brand-building and syndication in the news media business. He has monopolised the word ‘news’ in company names and organisational slogans and his UK interests are particularly close-knit under the News International brand. This keen focus on syndication is precisely why an individual threat to one of News Corp’s subsidiaries has such serious implications for its parent company.
When the News of the World phone-hacking scandal broke, Murdoch’s crisis management response was to immediately close the paper. It was a severe and decisive move to isolate and contain the PR crisis in an attempt to minimise the damage of association. Many were surprised by his decision, but Murdoch was acutely aware that brand integration and syndication would be working against News Corp and its other subsidiaries and increasing their exposure to a serious PR problem.
From a public relations perspective, the fallout from the phone-hacking scandal has undermined a suite of Murdoch brands. Failures in organisational integrity, ethics, and management at some of News Corp’s subsidiaries have caused a PR crisis that threatens News Corp’s wider business interests in the UK.
As the Leveson Inquiry continues further revelations will be made about the relationships between Britain’s Government and News Corp’s business dealings. The public perception of these revelations will have considerable sway in News Corp’s future. The regulator, Ofcom, and Labor opposition will, no doubt, refer to public discourse to support their stance on the future of Murdoch’s British business. If ever there is a time for News Corp’s public relations people to show their value to the company, it is now.
This case is a clear example that all brands, however powerful, become vulnerable when they fail to adhere to core values. At Briggs Communications we advocate a strong, ethical values foundation for building a brand, whether business or personal. We recognise that understanding company values becomes even more important during a crisis.
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