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Copies of Britain's News of the World newspaper are pictured in London, on July 7, 2011. The tabloid will print its last ever edition on Sun., July 10, 2011. - 

Tess Vigeland: Rupert Murdoch's media empire dropped a bombshell today, a piece of news akin to space aliens landing on earth.

The company announced it's shutting down a tabloid: its most profitable British newspaper, the News of the World. The paper is 168 years old, but will publish its final edition on Sunday. The decision follows days of damaging allegations against the paper and its newsgathering methods.

From the European Desk in London, Marketplace's Stephen Beard reports.

Stephen Beard: The News of the World was accused of illegally hacking into thousands of peoples' cell phones. The targets: not only celebrities and politicians, but even the victims of crime and the bereaved families of soldiers killed in action.

James Murdoch -- son of Rupert -- and chairman of his British subsidiary said today a great British newspaper had been fatally damaged.

James Murdoch: Actions taken a number of years ago by certain individuals in what had been a good newsroom have breached the trust that the News of the World has with its readers.

Analysts say the Murdochs decided to kill off the title for one reason. Andrew Neil, a former Murdoch editor, says the family is terrified that the growing backlash might hamper their bid to take total ownership of the hugely profitable satellite TV station BSkyB.

Andrew Neil: That is worth a lot of money to them. It is worth a lot more than the News of the World. So I think any piece of red meat that could be thrown to the wolves, if it saves BSkyB, is certainly going to be given.

Veteran business reporter Tom Bower says Murdoch's move is brilliant.

Tom Bower: You should always cut off the diseased limb. He just sees no benefit in keeping it, and he's been very bold and clever in doing what he's done. We'll see whether it works.

The death of the News of the World certainly won't end the scandal. The government has promised a full public inquiry. And Scotland Yard is investigating claims that the newspaper bribed police officers. The Murdochs are likely to be making even more headlines in the months ahead.

In London, I'm Stephen Beard for Marketplace.