The report says Mr. Murdoch and his son, News Corp. Deputy Chief Operating Officer James Murdoch, presided over a culture of “willful blindness” at News Corp. It also singles out James Murdoch for displaying a “lack of curiosity,” even “willful ignorance,” when handling fallout from the phone-hacking scandal as the manager overseeing News Corp.’s British newspaper unit, News International, from late 2007 to 2012.

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The News Corp. deputy chief operating officer’s testimony comes a day before his father, News Corp. Chief Executive Rupert Murdoch, is scheduled to appear at the inquiry, which is preparing recommendations for the U.K. government on how to regulate the press.

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Here’s the full statement the company (which also owns this Web site) just released:

“We are grateful for James Murdoch’s successful leadership of BSkyB. He has played a major role in propelling the company into the market-leading position it enjoys today — and in the process has been instrumental in creating substantial value for News Corporation shareholders. We look forward to BSkyB’s continued growth under the leadership of Nicholas Ferguson and Jeremy Darroch and to James’ continued substantial contributions at News Corporation.”

Murdoch is one of News Corp. CEO Rupert Murdoch’s sons and was, until recently, considered the likely candidate to run the company one day. But since the long-simmering phone-hacking scandal erupted last summer his reputation has been battered, and he has given up a series of leadership posts in the Murdoch empire. Last summer, he refused a $6 million bonus, citing the controversy, but kept the rest of his $11.3 million News Corp. pay package.

And here’s the BSkyB statement announcing Murdoch’s departure:

The Board of British Sky Broadcasting Group plc (‘BSkyB’ or ‘the Company’) today announced that James Murdoch has stepped down as Chairman and will continue to serve in his capacity as a Non-Executive Director of the Company.

Mr Murdoch is succeeded as Chairman of BSkyB by Nicholas Ferguson, who was appointed as a Director of the Company in June 2004 and previously served as Deputy Chairman and Senior Independent Non-Executive Director. Tom Mockridge, who joined the Board in February 2009, has been appointed as Deputy Chairman. Andrew Higginson, who has been a Director of BSkyB since September 2004, succeeds Nicholas Ferguson as Senior Independent Non-Executive Director.

In a letter to the Board setting out the reasons for his resignation, Mr Murdoch said: “I have been privileged to serve first as Chief Executive and then as Chairman of this outstanding company and I am proud of what we have achieved over this period.”

Mr Murdoch continued: “As attention continues to be paid to past events at News International, I am determined that the interests of BSkyB should not be undermined by matters outside the scope of this Company.” He added: “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 organisation.”

Mr Ferguson commented: “On behalf of the entire Board, I would like to thank James Murdoch for the outstanding contribution he has made both as CEO and Chairman of BSkyB. With his vision, drive and strategic insight, the Company has performed exceptionally and continues to transform itself to take advantage of a broader growth opportunity in home entertainment and communications.

“The Board’s support for James and belief in his integrity remain strong. We understand his decision to step aside at this time and we both welcome and look forward to his continued contribution as a non-executive director. The entire Board and management remain fully focused on maintaining BSkyB’s strong progress, delivering an outstanding service for customers and creating value for all shareholders.”

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The lawyer’s opinion, and other documents released Tuesday by Parliament’s Culture, Sport and Media Committee, add to already mounting pressure on top News Corp. executives, including Deputy Chief Operating Officer James Murdoch, who has insisted he was in the dark about the extent of illegal reporting tactics at the time.

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Mr. Murdoch and his two sons, Lachlan and James, were re-elected to the company’s board, along with other directors, despite what was expected to be a significant protest vote. The company said full voting tallies will be released next week.

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The questions involve Mr. Murdoch’s statements regarding his knowledge of a key phone-hacking lawsuit a U.K. unit of the company faced in 2008. Mr. Murdoch has testified that he was briefed on the status of the lawsuit just one time and wasn’t told about critical evidence indicating that the practice of phone-hacking was more widespread than the company had claimed.

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Youngest son James, 38 years old, has been groomed as heir apparent. But people close to the company say his future has been clouded by questions about his role in the scandal, which has shaken the media giant’s U.K. newspaper unit and led to the closure of the 168-year-old tabloid News of the World.

A U.K. parliamentary panel said Tuesday it has asked him to come back for a second round of testimony over events at News of the World, where voice mails were intercepted in the pursuit of scoops. His earlier appearance in July set off a crossfire of conflicting accounts over what he was told and when.

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Murdoch, who is Deputy Chief Operating Officer and until recently has been seen as the heir apparent to his father Rupert Murdoch, has also been one of the primary focal points during the scandal. He has been in charge of News Corp.’s British newspaper unit that has been accused of widespread, systemic phonetapping and other charges (News Corp. also owns this Web site).

Here’s his statement:

In light of the current controversy surrounding News of the World, I have declined the bonus that the company chose to award to me. While the financial and operating performance metrics on which the bonus decision was based are not associated with this matter, I feel that declining the bonus is the right thing to do.  I will consult with the Compensation Committee in the future about whether any bonus may be appropriate at a later date.

Murdoch is keeping the rest of his compensation, which includes a base salary of $3 million, $8.3 million in stock awards and other benefits including personal use of the company’s aircraft, which the filing values at $224,864 for the fiscal year.

In News Corp.’s annual proxy statement, filed with the Securities and Exchange Commission today, the company said it considered the following factors in awarding him his $6 million bonus:

“Mr. J.R. Murdoch played an important role during fiscal 2011 in developing the Company’s key businesses and investments in Europe, Asia and the Middle East, including the development of the Company’s content and distribution strategy. He led the success of STAR India, which delivers market-leading content, and he led the Company’s ongoing deployment of satellite television in Italy (with Sky Italia achieving its highest ever subscriber base), the UK, Germany and India, where we operate, or are key investors in, industry-leading pay television platforms. Under his leadership, the Company expanded its presence in the Middle East through a key strategic partnership and optimized its European asset portfolio through the disposition of News Outdoor. Mr. J.R. Murdoch also successfully transitioned into his new role as Deputy Chief Operating Officer and Chairman and CEO, International, expanding his responsibilities.”

The U.K. Parliament’s Culture, Media and Sport Select Committee released written statements from Mr. Murdoch, several former top executives and a law firm that was retained by the media company as it dealt with fallout from the scandal over allegations that the now-closed News of the World illegally intercepted voice-mail messages and bribed police to obtain information.

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This morning, News Corp. CEO and majordomo Rupert Murdoch, his son James (who is also a top company exec) — as well as former employee and full-time lightning rod Rebekah Brooks — march on down to the British Parliament to answer questions from a committee there about the ever-growing PhoneGate scandal.

For those living under a rock, News Corp. is embroiled in ever more serious controversy about who knew what and when (also where, why and how much) in the hacking of phones of a myriad of well-known people in the U.K. by its News of the World tabloid newspaper.

Besides celebrities and politicians, that has included the voicemails of a murdered girl, an appalling act that has galvanized public opinion and the weak spines of legislators into action in this inquiry.

It’s sordid, it’s ugly and it makes for what could be an explosive event, starring the man who brought you “Titanic,” Glenn Beck, “Glee” and, most recently, the sale of Myspace.

There’s no question, getting the 80-year-old Murdoch on the ropes will be the aim of the committee members holding the hearing, and how one of the world’s most famous and legendary media moguls performs — or does not — will be a big deal to both interested observers and News Corp. shareholders.

By way of full disclosure, that’s not me, but this site is owned by Dow Jones, which is owned by News Corp. In other words, somewhere up the corporate food chain, Murdoch is my boss.

In any case, that has never stopped me or AllThingsD.com from telling it like it is, so here is the liveblog of what is sure to be a doozy of a media event:

6:36 am PT:: It all starts for the Murdochs, as soon as the former Scotland Yard head John Yates has completed questioning about the police’s obvious bungling of the various investigations over the years.

Rupert Murdoch and his son, James Murdoch, are on, looking grave and dressed in grey.

Sitting behind them are Rupert Murdoch’s wife, Wendi Deng, and his top adviser at News Corp., Joel Klein, who is heading up the phone hacking scandal internally at the company.

The hearing — in a room that looks like a high school debate could take place there — starts off politely enough.

But the first question is directed toward James Murdoch about his clearly incomplete investigation when phone hacking allegations were first made many years ago. He begins with an apology.

“These actions do not live up to the standards of News Corp.,” says the younger Murdoch.

He is interrupted by his father, Rupert Murdoch, who notes rather dramatically: “This is the most humble day of my life.”

The questioner quickly asks the obvious query, after James Murdoch claims News Corp. was not in full possession of the facts when execs had told a previous committee there was no reason to believe there was more widespread hacking.

Were News Corp. execs lying?

James Murdoch continues to insist that the bulk of evidence came out — “real evidence” — in later civil trials. And also, that News Corp. is now investigating the situation fully.

He throws around words like “proactive action” and “transparency,” which is probably cold comfort now to those hacked when things were less clear to News Corp.’s senior management.

Now up, Rupert Murdoch, who is asked quickly about statements he made about not tolerating wrongdoing and who had lied to him at News Corp. about the phone hacking.

Apparently, he “didn’t know” a lot about the hacking that took place, while also defending the non-hacking employees of his company.

But the questioner is still on him about exactly what he did know about the situation, which seems to be — at least according to his testimony — a lot of I-don’t-knows.

6:53 am: It continues about what Rupert Murdoch knew and when he knew it and what he did. Or not.

As Rupert Murdoch keeps up with this tone of not being clued in to what have turned out to be critical events, James Murdoch wants to keep jumping in with the details, which he is eager to impart.

“At what point did you find out criminality was endemic at News of the World?” asks the questioner.

Rupert Murdoch does not like the word endemic, but stresses that he was “shocked, appalled and ashamed” by the case of the murdered girl, Milly Dowler.

The questioner seems frustrated by Rupert Murdoch’s answers, which are, for the typically razor-sharp media mogul, unusually slow.

Like a persistent terrier who wants to perform, James Murdoch is back again offering to serve up the deets.

7:04 am: Now, it is onto the closing down of News of the World: Was the tabloid shut down because of the criminality?

“We had broken our trust with our readers,” says Rupert Murdoch. “We felt ashamed for what had happened.”

A new questioner is on, with a bizarre query about why Rupert Murdoch came in the back door of the Prime Minister’s house at 10 Downing Street on a recent visit there.

It’s a cloddish effort to show him as a powerful puppetmaster to pols, but only serves as a punch line.

Back on track, with questions about whether there was hacking in the U.S., which Rupert Murdoch said he could not believe had happened.

More questions about how badly the company acted, which came down to the questions about whether he was “ultimately” responsible for the hacking.

“Nope,” says Rupert Murdoch, who keeps insisting he relied on others, some of whom apparently “misled” him.

It’s an astonishing admission and, really, excuse, given he has been chairman, CEO and a very strong leader of News Corp. for more than a half-century.

7:16 am: A new questioner, who asks who decided to close down News of the World. It was Murdoch himself, his son and other execs.

Next up, why did News Corp. pay off a victim of hacking, which James Murdoch did without informing his father or the News Corp. board.

James Murdoch essentially points out that it is typical to do this in companies of the global scale of News Corp.

These are apparently very busy, busy, busy people, who do not seem to have time to notice how such juicy and best-selling scoops might have been magically produced by News of the World.

Onto ethical conduct guidelines, which News Corp. has in a pamphlet form, says James Murdoch, but pages which some at the company have obviously never cracked.

Rupert Murdoch is asked again about his culpability in the case, which he continues to maintain he does not shoulder the blame.

James Murdoch does note that the company “will think more forcefully … about our journalism and ethics.”

Given the situation, in which every day brings a new revelation of bad acts by News Corp. employees, this promise of better behavior seems to be a case of much too little and very, very late.

Rupert Murdoch still uses the opportunity to stress the need for a free press, despite its excesses.

7:31 am: More about the payments to settle with phone hacking victims and how soon the company realized the problems were more widespread.

James Murdoch talks about how he might have acted differently had he known more then as he does now.

“If we knew now what we knew then,” says James Murdoch, “we would have taken more action and moved more aggressively.”

But what else is he going to say? It’s a could-have, would-have, should-have line of questioning that is eliciting very little in the way of true information.

Finally, a good point about “willful blindness,” which is a term from the Enron scandal about avoiding knowing about problems you really should have known about.

“Is that a question?,” asks James Murdoch. It is a statement, actually, and a decent enough one.

“We didn’t do that,” says Rupert Murdoch firmly this time.

Still, soon enough, Rupert Murdoch is insisting he was not as involved as people have imagined him to be with the management of his newspapers.

A new questioner is pressing this important point, but Rupert Murdoch is not biting on a query about his legendarily hands-on managing style.

“I’d say, ‘What’s doing?’” he explains about his conversations with editors, but adding he might not have been told about payoffs to phone hacking victims.

The questions are in the deep weeds here, but it’s still interesting that Rupert Murdoch continues to maintain that his life was too busy to wallow in the details, however controversial and important those details might be.

7:55 am: More and more don’t-knows pile up and up in a giant mountain of acts perpetrated by someone somewhere, but not the Murdochs.

“I can tell you I was surprised as you were,” says James Murdoch about certain payments to various hackers and those who were hacked.

Was it Les Hinton, who then ran News International and later Dow Jones, from which he recently resigned?

Could be! Maybe! Mistake were made! Who knows!

Well, someone does!

It moves onto Brooks, the tarnished News International exec and editor whom Rupert Murdoch does note he still trusts. Finally, some certainty!

Brooks is definitely one of the more compelling characters in this drama, although the media focus on her striking red hair color seems odd and vaguely sexist, as if she is some flame-haired she-devil from media hell. She might certainly be guilty in this mess, but her fabulous hair has nothing to do with it.

(Rupert’s mane is grey, by the way, and James’ is brown, if you really need to know.)

Fascinatingly, Murdoch’s backing of Brooks has been strong and consistent, despite intense criticism of her by many in this scandal.

The payment of legal fees of perpetrators and payments to the victims in the hacking seems to obsess one questioner, who wants News Corp. to stop doing it.

Murdoch says he’d like to if contracts did not preclude that, which essentially means News Corp. will keep up forking over the legal fees and payments.

8:12 am: The attention turns to how James Murdoch found out about the various emails that showed there was more evidence of hacking than was first thought about and what he felt about it.

He says very little, noting that the matter is under police investigation. It’s not don’t-know now, but can’t-say.

The hearing is beginning to feel a little rope-a-dope, with the Murdochs apologizing and taking blows, saying very little — either claiming lack of knowledge or lack of ability to comment about the ongoing police inquiry — and tiring out the questioners.

It is a classic tactic of the boxing champion Muhammad Ali and it works in the ring.

Whether that will be the case with PhoneGate remains to be seen, but it certainly has made what could have been a more explosive hearing much less so.

Instead, it seems to have turned into a what didn’t the Murdochs know and when didn’t they know it hearing.

On questioner gets this irony. “That’s frankly unsatisfactory,” he says about the Murdochs continuing shock and surprise at the thorny situation they find themselves in.

Maybe it seems a little hard to believe, but the persistent story from James Murdoch is that they were told by their lawyers, the police and others that nothing was awry once the initial phone hacking investigation was complete and only found out about the larger problem in later civil lawsuits.

But, asks the questioner to Rupert Murdoch, should his editors and managers at News of the World have known about it?

Of course, they should have.

But, once again, the legendary media baron, who made his fortune and fame in disseminating news and information across the world in newspapers, on television, on satellite and on the Web — at least for now — can’t say.

So, was he “kept in the dark” about the situation? Rupert Murdoch acknowledges he might have asked more questions, although he noted his British newspapers were only a small part of his massive empire.

But, he adds, “Anything that is seen as a crisis comes to me.”

Well, not the phone hacking crisis, it seems.

But, they’re sorry. So sorry. And, of course, humbled.

8:54 am: Suddenly, there is a disturbance, in which someone seems to have possibly attempted to accost the Murdochs.

But it is not clear what has happened, as the hearings are suspended for 10 minutes.

James Murdoch leaps up quickly to protect his father, which he has been doing in this hearing verbally already, where the strategy seems to be to let him largely do all the talking.

Even faster on her feet and with arms raised toward a man in a plaid shirt and carrying a pie plate with shaving cream is Rupert Murdoch’s wife, Wendi.

The man seems to have managed to get some of the foam on Rupert Murdoch, but Wendi Deng appears to have partially thwarted her husband from receiving a full pie in the face.

It’s the first striking visual of this hearing, protecting the patriarch and the king of the empire from harm, no matter what.

Here is a video of the incident:

According to Britain’s Channel 4: “As the man was being led away in handcuffs escorted by a single police officer, he refused to give his name, saying: ‘As Mr Murdoch himself said, I’m afraid I cannot comment on an ongoing police investigation.’”

9:09 am: The room is cleared, so it is only the Murdoch crew behind James and Rupert Murdoch, and now the committee is even more solicitous.

Rupert Murdoch is without his jacket and his wife is being commended for her most excellent left hook.

Still, it’s back to business and the questioner does zero in on a major disconnect over how two media execs as famously aggressive and involved as the Murdochs were so passive in this hacking situation.

It “was a terrible shock,” says James Murdoch.

The same is said about what would be even more disturbing and recent allegations of the hacking of the victims of the 9/11 bombings.

Both father and son say there is no evidence of this so far, but they were surely looking into it.

While it certainly did not come through in what have largely been feckless questions from the committee, the final questioner does correctly ask the pair if they might want to pay more attention.

The last question is for Rupert Murdoch and finally gets to the real query everyone wants to ask.

Noting Murdoch is “captain of the ship,” she asks if he has considered resigning.

“No,” answers Murdoch firmly.

“Why not?” she presses.

“People let me down and it’s for them to pay,” says Rupert Murdoch. “But I think, frankly, I am the best person do clean this up.”

He finishes up with a statement about being sorry, how he was also betrayed and how phone hacking and bribery is wrong.

“Saying sorry is not enough, things must be put right,” he says.

Finally, something we do know.

The News Corp. CEO, along with his son James and former employee Rebekah Brooks, head to British Parliament today to answer questions about the still-mushrooming PhoneGate scandal.

You’ll be able to watch the event, which begins at 9:30 am Eastern time, on just about any U.S. news channel you’d like: CNN, MSNBC, C-SPAN and the Current will be broadcasting the hearings. So will Fox News Channel, which — like this Web site — is owned by News Corp.

You should also have multiple opportunities to watch the event live via Web video. British broadcaster ITN, for instance, is offering up a live stream via its Facebook page. I believe, but haven’t confirmed, that C-SPAN will stream live, too.

And we’ll be liveblogging the event ourselves, courtesy of AllThingsD’s Kara Swisher. (I’m biased here, but I’m quite sure Kara will provide entertaining coverage — this is a woman who won an award for liveblogging Yahoo earnings calls.)

Meanwhile, some context. You can find plenty of news outlets telling you what’s at stake for the Murdoch men today, but Staci Kramer at paidContent does a concise job. A reminder: This isn’t a trial, and no matter what the men say, they’re not going to appease outraged Britons.

So in some ways, today’s event is most consequential for the way it plays out for News Corp. shareholders. Rupert Murdoch needs to show that his company would be better off if he remains chief executive; James needs to demonstrate that he’ll still have the ability to run the family company down the line.

A couple more thoughts before the show gets underway:

• Rupert Murdoch is used to performing in public, but under very different circumstances. Until recently, Murdoch has used his quarterly earnings calls as an extended public interview, taking questions from both investors and the press. That’s a rarity for public company CEOs, and has made for some very entertaining moments (at least by the standards of paint-drying earnings calls). But those questions were never really that pointed. And while Murdoch tended to answer the queries with imperial certitude, the stakes were always lowish — if need be, his investor relations or public relations could usually reel a stray answer in after the fact. Today he’ll face hostile questions, and will be operating without any kind of net at all.
• Rupert Murdoch’s great love for newspapers is now a liability. The corporate scandal playbook calls for an embattled chief executive to take responsibility for his company’s missteps, while explaining they’re the result of a few bad actors working in isolation. But Murdoch’s affection for his newspapers, and his hands-on approach to many of them, will make it much harder for him to do that. In the words of New York magazine’s Gabriel Sherman: “Rupert will have to demonstrate that, after a lifelong passion for the newsroom, he detached himself from his journalists’ activities. It will be a hard sell.”

The Murdochs initially declined to attend next Tuesday’s hearing, held by the Culture, Media and Sport Committee. On Thursday morning, James Murdoch, deputy chief operating officer of News Corp., had told the committee he was unavailable on the scheduled date, offering alternative dates in August. His father, Rupert, also had said he was unavailable, but that he would be prepared to give evidence in a coming public judge-led inquiry and after that he would be prepared to discuss how best to give evidence to the parliamentary committee.

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The company said this Sunday’s edition of News of the World will be the last for the 168-year-old paper.

James Murdoch, News Corp.’s deputy chief operating officer, said in a statement that the newspaper’s reputation has been “sullied by behavior that was wrong.”

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If that’s the only fallout, Rupert Murdoch will have dodged a bullet. [Update: It isn’t the only fallout. News Corp. just announced it is shutting down News of the World.)

Earlier this month the transaction, which would see News Corp. acquire the 61 percent of the British satellite TV company it doesn’t already own, looked like a done deal.

Now, as a string of new allegations in the three-year-old voice mail hacking affair at the company’s News of the World tabloid have surfaced, the BSkyB deal is going to take much longer to close. And there’s some speculation that the whole thing may be in jeopardy. (News Corp. also owns this Web site).

The Financial Times (registration required) says the deal won’t be approved until September at the earliest, citing an influx of public comments on the proposal. The British government, in response, says there isn’t an official timetable, but that’s more of a “definition of the word ‘is’” response than a denial.

In any case, hackergate is definitely going to cause more problems for Murdoch than the run-of-the-mill scandals that News Corp. is used to dealing with.

The New York Times has a concise synopsis of the new problems at the tabloid: Allegations “that its executives had paid police officers, lied to Parliament, hired investigators to intercept voice mail messages left on the cellphones of murdered children and terrorism victims, and, in one instance, tampered with a murder investigation in which the suspects were linked to The News of the World.”

So far most of the pressure from the scandal has been directed at Rebekah Brooks, who runs the News International group that oversees News of the World. Murdoch, in a statement, has backed Brooks. But it won’t be surprising to see her go, regardless. The big question is whether the scandal bubbles up to engulf Murdoch or his son James, his likely successor.

Yesterday investors weighed in and drove down News Corp. stock as much as 5 percent; this morning it’s ticking back up.

Murdoch, who runs Europe and Asia for his father Rupert’s company (which also owns this Web site), offered up the quasi-launch date during an onstage interview at the DLD conference in Munich.

As far as I can tell from the coverage, Murdoch didn’t reveal any other details that haven’t been reported–he confirmed that the service will cost 99 cents a week, etc.–but Staci Kramer at paidContent seems to have a good summary. You can watch the chat yourself here.

Meanwhile, I can offer up one tiny morsel of news about the Daily. And granted, it really is tiny. But: Here’s something you won’t see when the app launches, but will eventually–3-D video.

People familiar with the Daily tell me plans for future editions of the app include a gee-whiz feature that will allow correspondents to offer readers a 360-degree view of whatever they’re talking about.

It’s easier to show than to tell, and I can’t embed a sample here, but you can see one on this YouTube page. Most of the applications we’ve seen for 3-D Web video so far involve music videos set in party scenes. But you can imagine how much more interesting this might be if it involved someone reporting from, say, Tunisia.

Remember Rupert Murdoch’s plan to convince other media companies to join him behind a pay wall and offer their stuff only via subscription? It’s still around, in some form. We’ll hear more about it in “three to four weeks” Murdoch said today during News Corp.’s earnings call.

Just what Murdoch has in store isn’t entirely clear. Last year, he sent digital media head Jon Miller out to convince rival newspaper publishers to join News Corp.’s Wall Street Journal in the pay-to-play ring. But it appears that Murdoch may now be thinking of a subscription offering that extends beyond newspapers and into entertainment.

I’ve asked News Corp. if it has anything to add to Murdoch’s hazy comments this afternoon, but I’m not optimistic. I do think we’ll hear more about this before the press conference Murdoch plans for later this month, though.

Meanwhile, here’s some background on “Project Alesia,” the subscription/pay wall plan that may or may not be what Murdoch was talking about today.

Earlier

We’ve seen the numbers, so we know that News Corp. had a very nice quarter. Now let’s hear what Rupert Murdoch has to say about his company’s performance. I’m also interested to see how much ire Murdoch expresses for Google (GOOG) and how much ardor he has for Apple’s (AAPL) iPad, among other digital topics.

The following is a live paraphrase that includes my editorial notes; I’ll note direct quotes where appropriate.

Liveblog

Dave DeVoe going over numbers from the release.

Earnings include one-time items of three cents per share. [Should net that out of earlier reports when comparing to Wall Street expectations.]

Newspapers: Operating income up nearly five times. Higher advertising across nearly all markets. Forex helps, too.

“Other” (includes Myspace): Lower search and ad revenue, but costs are down.

Some balance-sheet talk: We’ve got a lot of cash on the books, and we know it. Some of it will get paid out to Jim Cameron and other participants in “Avatar.” But we’re working on ways to deploy the extra cash. We’ll get back to you on it by the next quarter.

Guidance: We’ve done better than anticipated in lots of our business for the last nine months, but our next quarter will be down. That’s because we expect the film business to be down $100 million, even including “Avatar” DVD releases (reason: We had very good quarter last year). Also, Fox Broadcast will be down. So we’re only bumping up guidance a bit.

Rupert Murdoch:

Exceptional results, “pretty much across the board.”

We’re psyched for five reasons:

1. Content. Really important, and we’re really good at it. Shout-outs for “Avatar,” Fox News Channel, newspapers, TV shows. “Fortune favors the bold,” etc. “We have the no. 1 national newspaper on all three continents.”

2. Technology: We’re good at that, too. The Apple iPad, “which I believe will lead a revolution in content consumption.” First month, 64,000 active users for The Wall Street Journal iPad app. “Unlike the Kindle, we keep 100 percent of the subscriber revenue from the iPad.” Innovative subscription model coming to deliver content to people whenever they want it (paging Jon Miller, James Murdoch).

[Apologies, lost the thread here. But Rupert is gung-ho about TV and other core businesses]

Q&A

Is there concern that you can’t keep growth in the next fiscal year? Can you?

Murdoch: Absolutely! Hedges on numbers. “We have a great slate of films coming up, but we don’t have an ‘Avatar’ in there.” If ad growth keeps up, “I think we can be very confident.”

COO Chase Carey: I agree! The ad market is actually picking up. Sports has been a little slower than other ad markets, and they’re now picking up. “Looks great.”

Question for Devoe: Please talk more about that big cash pile.

Murdoch: I can answer that! “We’re well aware that our balance sheet…is inefficient at the moment.” Increased dividends, stock buy backs, investing in our businesses, possibility of “opportunistic investments,” which we’ve been “nervous” about doing in past year but now we have some things we’re looking at. Cue M&A klaxons!

More color on the TV biz, please.

Carey: Strong recovery in most categories. Not just auto and telecom. Financial, insurance, all sorts of stuff. “It’s pretty broad.”

Murdoch: “We’re seeing pretty optimistic and expanded advertising budgets from the big advertisers.” Not sure when that money is coming, but would guess Q2, when they’re launching new cars. “There’s a lot of money out there on the boards.” And as free over-the-air audiences shrink–and ours is shrinking less–that money is finding its way to cable. So any show that can show any sort of advertising can attract money. “It feels good; that’s all I’m saying.”

Please talk about new retrans/carriage negotiations.

Carey: Fox News deals starting to come up. Will be staggered over a couple of years. “I think the Fox News network…is certainly–maybe with ESPN–second to none.” So pay up, cable guys! (And customers!)

Carey mounts a long defense of Sky Italia. I’ll refrain from transcribing.

Similarly, you’re probably not interested to read what he has to say about satellite TV in Europe.

Netflix is killing it. What does that mean for you guys? Good news because it says good thing about your library? Or maybe an opportunity for you to do more with your library?

Carey: Noncommittal answer. But: “There is a question whether the Netflix model is getting us fair value for our product.” So we’ll keep looking at windowing content and whether we’re getting paid enough for our stuff. “I think it’s a focus.”

Please talk about Fox Audience Network plans and MySpace/Google plans.

Carey: Google plan doesn’t affect FAN. Not going to comment on “rumors.” “I don’t think that’s productive.” But! The key is to build enough traffic to attract enough dollars. FAN has a done a good job.

Let me try to re-ask the same question regarding restructuring or spinoff of FAN.

Murdoch: Praises MySpace. In the past few years “we made some big mistakes,” but we have fine new management now. “Early indications, and they’re only indications, are that we’re getting new visitors, and they’re staying longer,” so ad dollars will follow.

[Sorry missed this question, but I believe it is about guidance.] Murdoch is not talking up the film slate, but indicates that he’s spending a bunch of money on movies, and the company will take hits on those initially before they see dollars come back.

Carey: The film business fluctuates from quarter to quarter. But our team is great, and we have great movies coming. “We couldn’t be more excited and positive about the film business.”

Murdoch: Our movie investors praise us.

Any film properties you’re interested in?

Murdoch: “We’d look if something real came onto the market,” but we don’t put MGM in that category, at least not at the price it’s asking. We prefer to invest in our own stuff, and that goes for TV shows as well. “Glee” is a big hit and we own it. Same goes for “Modern Family.”

More info on digital, please. What about MySpace profitability? What happens when Google deal ends w/MySpace?

Carey: “Clearly, MySpace is a work in progress.” [This is a familiar refrain.] But promising signs. Talking up “Glee” tryouts. Improved the platform, etc. By the end of 2010, we want a foundation installed that we can go forward with, and we want to have a cash positive business going into 2011. “The trends are better but they’re not what they need to be….A number of the key metrics are not going up, but they’re better than what they were.”

Are you getting retrans fees for Fox broadcast now?

Not yet.

Why isn’t TV station top-line growth showing up on overall segment results?

Has to do with way we present results. [Confusing and confused discussion about bookkeeping ensues.]

[Still going!]

Press Q&A! (Usually much more entertaining)

Question about Australian news story about…mining?

Murdoch: “Nothing to do with media.”

Same guy has a question about Australian football (?). Rupert professes shock about whatever the scandal was.

Eighty-one advertisers bailed on Glenn Beck. Now it seems as if the only ads are in-house and for gold. When will you stop subsidizing the show and require it to carry its own weight?

Rupert says the 81 number is wrong and that Glenn Beck show doing great.

More color on that subscription model, please.

Rupert: Press conference coming in three-to-four weeks.

But: We’re getting about $4 a week for The Wall Street Journal… [voice trails off].

So this would be about entertainment as well?

Oh, you bet. Everyone’s been talking about negotiating with Apple.

[Both Rupert and FT's Ken Li seem confused. Me too.]

How much did you invest in Wall Street Journal New York edition?

Rupert. “Happy to tell you. We invested nothing.” Maybe $1 million in it. But ti already covers its costs. The notion that we’re spending $30 million on it is “BS.”

[Sorry, missed next two questions.]

Soon to-be Murdoch employee Claire Atkinson has questions about TV ads and online video ads.

Murdoch: WSJ.com is up 11 percent. $100 million in digital revenue at Dow Jones. At Fox news.com, “absolutely thriving.” [If he answered TV question, I didn't hear it, but I think he passed on that one.]

That’s all, folks.

I’m told that Philips has a new job lined up and that he informed Murdoch of his plans in early January. But when I reached him this afternoon, he declined to comment. PaidContent first reported the move.

Philips is a behind-the-scenes guy (though very easy to find at New York media events) who weighed in on much of Murdoch’s digital mergers-and-acquisitions work, as well as big-picture strategy like pay walls, etc. I’d been told repeatedly that he had the ability to launch his own projects within News Corp., though if he did so, I was not aware of it. A recurring rumor mill item had him working on a fabled “LinkedIn-killer” for the company.

News Corp. folks want us to know that Philips was not forced out. But there’s definitely a changing of the guard at the company, occasioned by the ascension of Rupert’s son, James Murdoch.

News Corp. (NWS) owns Dow Jones, which owns this Web site.

Statement attributed to Murdoch:

Jeremy is a very talented executive and I value his strategic contributions to our digital initiatives over the past six years. I fully understand his desire to focus on new entrepreneurial ventures and I wish him all the best in this next step in what will continue to be an exceptional career.

While Internet companies such as Google use baked goods as names for their key strategic initiatives–recent ones related to its Android mobile operating system were called Donut and Eclair, for example–aggressive media giant News Corp. is definitely not going for sweetness in its unusual selection of a code name for its high-profile digital content effort.

That would be Project Alesia, a moniker that comes from a vicious siege from ancient times widely considered to be one of the more decisive battles in history.

And that is apparently what top News Corp. (NWS) execs think is the best way to describe their plans for stopping the decimation of premium content in the digital age and transforming their business to take advantage of new means of distribution, according to numerous sources BoomTown spoke to this week about the unusual name.

“It takes a lot of determination to succeed in what is one of the biggest challenges newspaper and all media has ever faced,” explained one source. “So, the real path to success will require ingenuity and staying on course over time…which was critical to that military victory.”

Interestingly, said several sources, the Project Alesia name was picked by James Murdoch, chairman and CEO of Europe and Asia for News Corp.

Widely considered the heir apparent to his father, News Corp. Chairman and CEO Rupert Murdoch, James Murdoch is apparently a dedicated reader and student of Roman history.

But it has actually been the elder Murdoch who has been cast as the obvious general so far, conducting a recent series of public verbal attacks on Internet targets, especially Google (GOOG).

He has accused the search giant of “stealing” content, for example, while other News Corp. execs have echoed his gibes in various high-profile forums.

But James Murdoch has been a key player behind the scenes in the digital strategy, several sources said, an effort that also includes News Corp. Chief Digital Officer Jon Miller and Dow Jones CEO Les Hinton.

(Full disclosure: News Corp. unit Dow Jones owns this site.)

Of this top group, it is James Murdoch–who has slowly been emerging as a more high-profile player, especially internationally–who found inspiration in the past.

To understand why, you’ll first need a short and truncated history lesson, which I culled from a variety of sources online and off:

Taking place in September 52 BC in what is now France, the Siege of Alesia (also referred to as the Battle of Alesia) pitted Rome’s famed leader, Julius Caesar, against the Gallic tribes under the unified command of Vercingétorix of Averni.

More important–besides being cited as one of the best uses of siege warfare and “circumvallation” (see more about this below)–the battle of Alesia is considered a turning point in the bitter wars conducted by the Roman Republic to tame the Gauls, who had finally united as a single force in opposition to the Roman invasion.

The hard-fought win–in a battle where the Roman army was outnumbered five-to-one, outside a hilltop fort in Alesia–is often credited with reinvigorating Rome’s power over Gaul. After the loss, Gaul became a province of the Roman empire and was pretty much subdued for the next 500 years.

Alesia is often cited as one of Caesar’s greatest military victories and the fallout from it later led to his ascension to ultimate power in Rome (which was soon followed by his infamous assassination).

That’s not the ultimate end News Corp. is envisioning, of course, sticking with Alesia’s main themes of “perseverance” and innovation, said several people with knowledge of the digital content efforts.

And, no surprise, in the digital battles between traditional media and interlopers from the Web, guess who has been cast as noble Caesar and who plays the role of marauding heathens?

You know, the ones who even cast their women and children out of the fort into the middle of the siege when food started to run out? That would apparently be the Googlers of Silicon Valley, although if it were them, the food would be organic!

Not all comparisons are the same, said a source. For example, consider circumvallation, which is essentially the building of a series of encircling fortified walls around the enemy. Contravallation is also also part of the strategy, to protect from attacks by enemy reinforcements attacking from the outside.

One could easily imagine that this means creating pay walls around premium content or de-indexing it from search sites like Google, both of which News Corp. has publicly talked about doing.

Not so!

“Traditional media companies are interested in investing in innovation too, so the idea of just putting up walls around content is a red herring,” said the source. “The idea is to find new ways of distributing media that also makes money, because why should journalism in [digital] ones and zeros be any different?”

Of course, with new stats showing sites like Google News and Yahoo (YHOO) News as the place consumers are going to get more and more of their news, that is a big issue in a longer fight, which will grind on for a very long time and well before any side can ever declare victory.

And here is a clip from a 2001 movie, “Vercingétorix,” about the Siege of Alesia, not made by News Corp.’s 20th Century Fox Hollywood studio, starring that actor dude from “Highlander” (aka my fave movie of all time). It does not end well for Google, oops, the Gauls:

[The 1899 painting at the top is by Lionel-Noël Royer.]

Alas, the Foursquare conference, hosted by the Quadrangle PE fund, is an invitation-only affair. And the event, which kicks off tomorrow, is closed to the press except for reporters onstage to interview the stars. And those conversations don’t get released to the public.

That’s a particular bummer this time. Because the Quadrangle guys–who have had a rough year–had the foresight to get a lineup that includes GE (GE) CEO Jeff Immelt, who appears to be in the final stages of selling NBC Universal to Comcast (CMCSA) CEO Brian Roberts, who will also be onstage. Sure would be nice to hear what they say.

Another panel that piques my interest, if only because of the title: “Are Popularity and Profitability Correlated?” It features Twitter’s Stone, LinkedIn founder Reid Hoffman and YouTube co-founder Chad Hurley. And would-be moguls are represented by a start-up pitch panel that includes Dennis Crowley of Foursquare, the superbuzzy mobile service whose name has nothing to do with Quadrangle’s conference.

So once again, here’s the complete list of those you won’t be hearing from this week as they gather at the Plaza in Manhattan. Unless, perhaps, one of my more ambitious colleagues sneaks in–I’m thinking of you, Bobby MacMillan–and gets us a first-hand account.

2009 SPEAKERS
EMILIO AZCÁRRAGA President, Board of Directors and CEO, Grupo Televisa
DENNIS CROWLEY Co-Founder, foursquare
BARRY DILLER Chairman and CEO, IAC; Chairman, Expedia, Inc. and Ticketmaster Entertainment, Inc.
BRIAN DUNN CEO, Best Buy
CHARLES FORMAN Founder, OMGPOP
REED HASTINGS Founder, Chairman and CEO, Netflix
REID HOFFMAN Executive Chairman and Founder, LinkedIn Corporation
CHAD HURLEY CEO and Co-Founder, YouTube
JEFF IMMELT Chairman and CEO, GE
PAUL JACOBS Chairman and CEO, Qualcomm Incorporated
OLLI-PEKKA KALLASVUO President and CEO, Nokia
JASON KILAR CEO, Hulu
LESLIE MOONVES President and CEO, CBS Corporation
ANNE MULCAHY Chairman, Xerox Corporation
JAMES MURDOCH Chairman and Chief Executive, Europe & Asia, News Corporation
BRIAN PHILLIPS CEO and Co-Founder, Thread
DAN PORTER CEO, OMGPOP
BRIAN ROBERTS Chairman and CEO, Comcast Corporation
PAUL SAGAN President and CEO, Akamai
ERIC SCHMIDT Chairman and CEO, Google
IVAN SEIDENBERG Chairman and CEO, Verizon Communications
BIZ STONE Co-Founder, Twitter
HOWARD STRINGER Chairman, CEO and President, Sony Corporation
BEN VERWAAYEN CEO, Alcatel-Lucent
DAVID ZASLAV President and CEO, Discovery Communications

MODERATORS
MARC ANDREESSEN General Partner, Andreessen Horowitz
KEN AULETTA Author and Writer, “Annals of Communications”, The New Yorker
MARIA BARTIROMO Anchor, Closing Bell; Host & Managing Editor, Wall Street Journal Report, CNBC
JAMES CITRIN Co-Leader, Board & CEO Practice, North America, Spencer Stuart
DAVID FABER Anchor, Reporter, CNBC
MICHAEL HUBER Co-President and Managing Principal, Quadrangle Group
BECKY QUICK Co-Anchor, Squawk Box, CNBC
GEOFFREY SANDS Director & Leader, Global Media, Entertainment & Information Practice, McKinsey & Co.
JOSHUA L. STEINER Co-President and Managing Principal, Quadrangle Group
GEORGE STEPHANOPOULOS Anchor, This Week; Chief Washington Correspondent, ABC News