Media outlets love media stories, but reader beware — the News of the World phone-hacking scandal is about much more than the lack of scruples in Britain's gutter press.

To the Guardian, which outed its competitor, the scandal "is what major corruption looks like." And, indeed, it is about power and accountability in a democracy. Even placid happy-face Canada should listen up.

The weekly News of the World, which perished Sunday after a roller-coaster 168-year history, was Britain's biggest "news" paper.

Circulation was waning but it still made money in a fiercely competitive environment where the public is used to papers that are, as The Economist put it, "rude, excessive and unreliable."

Most of its content wasn't hard news, but gossip about celebrity sex and breast enhancements, mixed with crime, xenophobic patriotism and sentimental drivel.

While it broke the odd corruption scandal, including a big one over cricket-score fixing in Pakistan, its technique of sting journalism also broke careers of critics in other media and created fear in the corridors of power.

The irony is that its downfall came from the revelation of its own corruption, including bribing police for information.

Murdoch mattered

Owned by the giant News Corporation, News of the World and its sister media became immensely powerful, to the point that former Labour prime ministers Tony Blair and Gordon Brown toadied to its principal owner, the Australian-born tycoon Rupert Murdoch.

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News Corp head Rupert Murdoch at the The Times CEO summit at in London in June 2011 just before the current scandal broke. (Ben Gurr/Reuters)

One No. 10 insider from the Blair era said it was like having a "24th member of cabinet," one more powerful than the rest, around the table.

Did it matter to anything important? You bet it did. When I lived in London, the manipulated run-up to the invasion of Iraq was fuelled by the drumbeat of Murdoch's news outlets.

While Blair's rationale for the disastrous war was based on smarmy, false morality and disinformation about weapons of mass destruction, Murdoch was at least straightforward about the need to invade Iraq to bring down the price of oil.

The News of the World was Murdoch's first U.K. acquisition in 1969 when he came out of Australia after inheriting a modest newspaper chain there.

Over the next decade, he enlarged his holdings massively, buying The Times, The Sunday Times, and the tabloid Sun, shifting them downmarket brain-wise and to the right politically.

His business empire climbed to another level when he clambered onto the ground floor of British cable TV. His Sky TV soon had replicas in Italy, Germany, Mexico, and Brazil.

On to America

Murdoch's trans-Atlantic leap was equally ambitious. In time, he bought the New York Post, and more recently, the heavyweight Wall Street Journal.

He added publisher Harper Collins and then movie- and TV-maker Twentieth Century Fox, whose brand spawned Fox News, the cable TV programmer that perversely claims to be "fair and balanced" when it is anything but.

Fox is a platform exclusive to Republican commentators, some of whom, such as Mike Huckabee and Sarah Palin, have seemingly exchanged their political ambitions for Murdoch's very lucrative right-wing soapbox.

His vast multinational media empire is now the second largest in the world (after Disney), with $32 billion in revenues in 2009.

Murdoch controls it with 29 per cent ownership and he hopes to pass it on to his children, one of whom, 38-year-old James, the head of the U.K. operation that has run afoul of the law, is very much under the gun.

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Rebekah Brooks, CEO of News International, and BSkyB Chairman James Murdoch, leave the Stafford Hotel in central London July 10, 2011 in the midst of the phone-hacking scandal. Rupert Murdoch is said to want to shield both from the repercussions. (Olivia Harris/Reuters)

Is there anything wrong with being openly partisan? Once, over-the-air TV broadcasters had to be fair and balanced themselves to be licenced to use the public resource of radio spectrum.

But in the U.S., at least, the courts and Republican regulators decided that the First Amendment right to freedom of speech empowers cable programmers to say pretty much anything they like.

The real problem, however, is political influence behind the scenes, because the ability of a news organization to say anything it likes can be enormously intimidating when one organization controls as much of the press and TV as Murdoch does in Britain, and where the political culture became too cowed to investigate clearly questionable news-gathering techniques.

Blair and Brown will undoubtedly say they courted Murdoch as part of the political reality of the day and, in Blair's case, it was rewarded.

Isn't that the point of Conservative Prime Minister David Cameron's statement last week that "We're all in this together"?

He went on: "Because party leaders were so keen win support of newspapers, we turned a blind eye to the need to get on top of bad practices."

A toxic asset

Cameron, whose judgement is now in question after employing former News of the World editor Andy Coulson as his chief of communications, and for being so chummy with the cynical Rebekah Brooks, the current boss of News International in the U.K., is clearly scrambling for higher ground here.

But there may not be any. The extent of the potential illegalities here is only now becoming clear.

Initially, the British public was unperturbed over revelations of phone hacking that produced gossipy stuff about celebrities and fringe royals.

Dilatory police and official enquiries minimized the scope of the problem when it first reared up in 2007, permitting a News Corp spokesman to say with a straight face that it involved only "one rogue reporter," who went to jail.

In fact, it was systemic, extending to cellphones of murder victims, including kidnapped teenager Milly Dowler, as well as distraught family conversations over children missing in the London Underground bombing, or people killed in Iraq.

In some cases, reporters or their agents allegedly hacked into phones, like Dowler's when a police investigation was underway, and deleted certain messages, lest their media rivals stumble on them as well.

In the process, cops were bribed to get confidential information and records, and police are now defending against charges of cover-up.

The Sky is falling

As public disgust turned on Murdoch, undermining his role as political kingmaker, he shut down the News of the World abruptly this week, his acolytes referring to it as a "toxic asset." It sounded like Egypt's Mubarak firing his cabinet.

But the unctuous declaration by Murdoch that the paper's actions were "deplorable and unacceptable" came simultaneously with reports about the company positioning its six-day-a-week Sun to fill the vacated Sunday slot.

Still business damage is deepening. Shares in News Corp are down and, more importantly, the proposed $12 billion deal to take over the remaining 61 per cent of the cable giant B Sky B — a huge generator of News Corp revenue — is now up in the air.

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The 'toxic asset' that was the News of the World, Britain's largest circulation weekly. (Reuters)

The Cameron government and the British regulator were poised to approve the deal, but it now looks as if it will be put on ice, maybe forever.

Rupert Murdoch is 80 now and looks even older. He's not a crook, but he's an aggressive, bullying manipulator whose political reach ignored the most basic notions of transparency and broke the codes essential to democracy.

It took two to tango, of course, and the British political class is now dancing away from the discredited news monarch they had so long feared.

North American news outlets soothingly deny such journalistic malpractice could happen in our blander news world, where the profession knows that "rules apply."

But U.S. politicians do play the tabloid game of vending untruths (like Barack Obama's supposedly non-U.S. birth) and Canada is not immune to similar attack-ad shenanigans.

Will behaviour change? Public repugnance in Britain might do the trick there. Here, it may depend on whether we consumers of news wake from sleep-walking and take a hard look around.