By JILL LAWLESS and ROBERT BARR, Associated Press
LONDON (AP) — Once his father's heir apparent, James Murdoch stepped down Tuesday as chairman of British Sky Broadcasting, surrendering one of the biggest jobs in the Murdoch media empire in a bid to distance the broadcaster from a deepening phone hacking scandal.
James Murdoch's credibility and competence have come under severe questioning because of the phone hacking crisis and alleged bribery by British newspapers while he was in charge, and he faces further questioning in the scandal.
"I am aware that my role as chairman could become a lightning rod for BSkyB and I believe that my resignation will help to ensure that there is no false conflation with events at a separate organization," the 39-year-old Murdoch said.
Tuesday's announcement was just the latest in a string of setbacks for James Murdoch, who has been shedding titles since the scandal heated up.
At the end of February, he quit as chairman of News International, the company's troubled British newspaper subsidiary, a move cast as allowing Rupert Murdoch's younger son to focus on News Corp.'s extensive TV holdings. He has also stepped down from the boards of auctioneer Sotheby's and pharmaceutical firm GlaxoSmithKline PLC.
Nicholas Ferguson, formerly deputy chairman, moved up to replace the younger Murdoch as chairman at BSkyB. Tom Mockridge, who recently replaced James Murdoch at the helm of News International, gained a new title of deputy chairman of BSkyB.
James Murdoch retains his roles as deputy chief operating officer of News Corp. and chairman and CEO of the company's international division. He also remains on the BSkyB board as a non-executive member.
"James Murdoch is a very good TV man. I think people there will regret his passing," said Paul Connew, a media consultant and former tabloid editor. "The bigger question it raises is, where does this leave News Corp. in relation to BSkyB?"
The phone hacking scandal has already effectively killed a bid by News Corp. to take full control of BSkyB and raised questions about the Murdoch empire's fitness to control the satellite broadcaster through the 39 percent share it already holds.
The junior Murdoch's resignation comes a month after Britain's communications regulator, Ofcom, said it was monitoring the hacking and bribery investigation to be sure that BSkyB was "fit and proper" to hold a broadcasting license.
The "fit and proper" test looks at the conduct of individuals who control and manage the company.
James Murdoch's resignation could either pave the way for News Corp. to divest BSkyB or take another run at taking full control of it, said Todd Juenger, a New York-based media company analyst with Sanford C. Bernstein & Co.
But because there would likely be an uproar of opposition in Britain to the latter, the more likely reason was simply to remove the shadow cast by the younger Murdoch's troubles and allow the company to operate free from distractions.
"Because of some baggage attached to Mr. (James) Murdoch, that was harder to do with him in that role," Juenger said.
BSkyB shares were down as much as 1 percent Tuesday at 675.5 pence after its news channel, Sky News, was first to report Murdoch's departure. In New York, News Corp. shares were down 3 cents at $19.89 in late afternoon trading.
More embarrassment could come later this month when the House of Commons Committee on Culture, Media and Sport is expected to publish its report on the phone hacking scandal. Both Murdochs are also likely to face a further appearance before a judge-led inquiry into phone hacking and journalism practices in general.
"How the mighty have fallen," said Chris Bryant, a British legislator who is among dozens of phone hacking victims who have won financial settlements from the Murdoch empire.
"Two years ago the Murdochs were courted by all and sundry, and now James Murdoch is running away with his tail between his legs."
At least 25 past and present employees of News International have been arrested in the police investigations of phone hacking, bribery and computer hacking. They include Rebekah Brooks, former chief executive of News International, and Andy Coulson, former editor of the now-defunct Sunday tabloid, News of the World.