The Murdoch media empire unexpectedly killed off the muckraking News of the World tabloid Thursday after a public backlash over the illegal guerrilla tactics it used to expose the rich, the famous and the royal and become Britain's best-selling Sunday newspaper.
The abrupt decision stunned the paper's staff of 200, shocked the world's most competitive news town and ignited speculation that Rupert Murdoch's News Corp. plans to rebrand the tabloid under a new name in a bid to prevent a phone-hacking scandal from wrecking its bid for a far more lucrative television deal.
"This Sunday will be the last issue of the News of the World," James Murdoch, son of the media magnate, announced in a memo to staff.
Mushrooming allegations of criminal behavior at the paper -- including bribing police officers for information and hacking into the voice mail messages of celebrities, politicians and the families of murder victims -- cast a dark cloud over the News Corp.'s multibillion-pound plan to take full ownership of British Sky Broadcasting, an operation far more valuable than all of Murdoch's British newspapers.
Faced with growing public outrage, political condemnation and fleeing advertisers, Murdoch stopped the presses on the 168-year-old newspaper, whose lurid scoops have ranged from Sarah Ferguson's claims she could provide access to ex-husband Prince Andrew to motor racing chief Max Mosley's penchant for sadomasochism.
James Murdoch said all revenue from the final issue, which will carry no ads, would go to "good causes." The paper had been hemorrhaging advertisers since the phone hacking scandal escalated this week, with companies including automakers Ford and Vauxhall, grocery chain J. Sainsbury and pharmacy chain Boots pulling ads from the paper.
The News of the World, which sells about 2.7 million copies a week, has been engulfed by accusations that it hacked into the cell phone messages of victims ranging from missing schoolgirls to grieving families, celebrities, royals and politicians in a quest for attention-grabbing headlines. Police say they are examining 4,000 names of people who may have been targeted.
The paper has acknowledged that it hacked into the mobile phone voice mails of politicians, celebrities and royal aides, but maintained for years that the transgressions were confided to a few rouge staff. A reporter and a private investigator working for the paper were jailed for phone hacking in 2007.
But in recent days the allegations have expanded to take in the phones of missing children who were found slain, the relatives of terror victims of London's 2005 transit bombings and the families of soldiers killed in Afghanistan.
James Murdoch said if the allegations were true, "it was inhuman and has no place in our company."
"Wrongdoers turned a good newsroom bad," he said, "and this was not fully understood or adequately pursued."
"While we may never be able to make up for distress that has been caused, the right thing to do is for every penny of the circulation revenue we receive this weekend to go to organizations -- many of whom are long-term friends and partners -- that improve life in Britain and are devoted to treating others with dignity," he said.
The announcement sent shockwaves across the British media establishment, and among News of the World staff. Features editor Jules Stenson said the news was met with gasps and some tears.
"There was no lynch mob mentality, there was just a very shocked acceptance of the decision," he told reporters outside the company's London headquarters. "No one had any inkling."
Some suspected shutting the paper was a ploy to salvage Murdoch's British media empire as well as the job of Rebekah Brooks, the trusted chief executive of his British news operation.
"News Corp. has taken a bold decision to stop printing the News of the World and close the title. Mr. Murdoch was clearly not willing to jeopardize his bid for BSkyB," said markets analyst Louise Cooper of BGC Partners in London. "Murdoch has shown what a brilliant operator he really is."
Graham Foulkes, whose 22-year-old son David was one of the 52 people killed in the 2005 London transit bombings -- and who suspects his phone may have been hacked -- said the paper's closure was "a cynical decision" by Murdoch.
"The only language (Rupert) Murdoch speaks is the dollar and this must have hit him hard," Foulkes said.
Brooks, editor of News of the World at the time of the eavesdropping allegations, has maintained she did not know about it. James Murdoch said he was "satisfied she neither had knowledge of nor directed" the phone hacking.
News International spokeswoman Daisy Dunlop denied rumors that The Sun, the News of The World's sister paper that publishes Monday through Saturday, would become a seven-day operation to pick up the slack. Still, she seemed to leave room for further developments.
"It's not true at the moment," she said.
According to online records, an unnamed U.K. individual on Tuesday bought up the rights to the domain name "sunonsunday.co.uk."
Former Deputy Prime Minister John Prescott, one of the tabloid's alleged hacking victims, said closing the paper would not resolve the problems at News International.
"Cutting off the arm doesn't mean to say you've solved it," he said. "There is still the body and the head and the same culture and that's why there has be a public inquiry into it. I cannot accept for a moment that at the top of the company, Mr. Murdoch -- certainly Rebekah Brooks -- didn't know what was going on."
But Charlie Beckett, director of the POLIS media institute at the London School of Economics, said it was a bold move aimed at resolving a situation that had got out of control.
"This is a fantastically brave move to try and cleanse everything and put a stop to it," Beckett said.
The long-running phone hacking saga exploded Monday with the revelation that the News of the World had hacked into the phone of Milly Dowler, a 13-year-old girl abducted and murdered in 2002. Worse, the family's lawyer said someone at the paper had deleted some voicemail messages, giving false hope that the girl was still alive.
Later, newspapers alleged the tabloid obtained private addresses and phone numbers of relatives of people killed in the July 7, 2005, terrorist attacks on London's transit system, as well as those tied to two more slain schoolgirls and the families of soldiers killed in Afghanistan.
What was an acceptable, if illegal, tactic used to gather scoops on drug-using celebrities, philandering politicians or cheating star athletes suddenly became completely unacceptable when missing children and grieving families were targeted.
There is so far no evidence those families' phones had been hacked or that the newspaper did anything illegal in obtaining their numbers. Nonetheless, a storm of outrage followed.
The scandal has come uncomfortably close to Prime Minister David Cameron, who, like predecessors Gordon Brown and Tony Blair, courted the powerful Murdoch press whose endorsement is considered capable of swinging elections.
Cameron is friendly with Brooks, and even appointed a former News of the World editor, Andy Coulson, to be his communications chief. Coulson resigned from the paper after its former royal editor Clive Goodman and private investigator Glenn Mulcaire were jailed for hacking into voicemail messages in 2007, but has always insisted he had not known about the eavesdropping.
In January, as the hacking allegations widened, Coulson resigned from 10 Downing St.
This week Cameron spoke out against the culture of hacking at the paper, calling for public inquiries into the News of the World's behavior as well as into the failure of the original London police inquiry to uncover the extent of the hacking.
"We are no longer talking here about politicians and celebrities, we are talking about murder victims, potentially terrorist victims, having their phones hacked into," Cameron said during an emergency debate Wednesday in the House of Commons.
The Metropolitan Police force is also facing an inquiry by the police watchdog over claims its officers took money from the News of the World in exchange for information. The original police investigation into phone hacking, shelved after Goodman and Mulcaire were jailed, was reopened earlier this year.
Metropolitan Police Commissioner Paul Stephenson said he was "determined" to see any officers who received bribes from journalists facing criminal conviction. Brian Paddick, a former senior police commander, told the BBC that one journalist said he had paid 30,000 pounds ($50,000) for police information, and others paid cash in envelopes handed over a a drive-thru fast food restaurant near the News International headquarters.
Some payoffs were "jeopardizing serious criminal investigations by giving out confidential information that could be useful to criminals," Paddick said.
Rupert Murdoch -- a global media titan with newspaper, television, movie and book publishing interests in the United States, Britain, Australia and elsewhere -- is seeking to buy full control of broadcaster BSkyB, in which he owns a 39 percent share. His British arm of News Corp. was within reach of gaining the British government's approval to make a bid for BSkyB when the scandal exploded, emboldening rivals and critics, who called on the government to block the takeover.
As the week went on, BSkyB's share price sank, reflecting market anxieties that there might be no takeover bid. On Thursday they were down 1.8 percent at 812 pence on the London Stock Exchange.
Shares in News Corp., however, were up 1.6 percent Thursday at $18.22 on the Nasdaq index in New York, although they have fallen from above $18.50 since Tuesday.
Cameron's Conservative-led government had insisted that the News of the World scandal had nothing to do with a pure competition decision, and News Corp. had offered to spin off Sky News as an independent company to allay concerns that it would have a too-dominant position in the British news market
Rupert Murdoch refused to discuss the situation Thursday.
"I'm not making any comments," he said when ambushed by reporters at a conference in Sun Valley, Idaho.
Gregory Katz, Raphael G. Satter, Cassandra Vinograd and Danica Kirka and Jonathan Shenfield in London contributed to this report.