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.
The scandal has even embarrassed Prime Minister David Cameron, who hired Coulson as his director of communications and was a personal friend of Brooks.
Asked for his reaction to Murdoch's latest resignation, Cameron said: "Well, it's obviously a matter for him, and a matter for the company, and of course its shareholders."
James Murdoch was chairman of News International when the company settled two big phone hacking claims. Murdoch said he was unaware that hacking was widespread at the News of the World, which at the time blamed the problem on a single rogue reporter.
His father shut down the tabloid in July. Another Murdoch tabloid, The Sun, has also been at the center of the hacking scandal.
News International has settled about 60 lawsuits by phone-hacking targets, at a cost of millions of dollars (pounds). Some 60 more claims are being prepared.
When James Murdoch was re-elected chairman of BSkyB in November, 81 percent of shareholders supported him, a strong mark of disquiet given the near-unanimous votes accorded to other corporate chairs. A month earlier, he was re-elected to the News Corp. board, though 35 percent of the votes went against him, another noticeable stirring of discontent.
Despite Tuesday's resignation, the younger Murdoch appeared to still have the support of his father, who controls News Corp. through a family trust that will one day come under the command of his four oldest children, including James.
In a statement, Rupert Murdoch and Chief Operating Officer Chase Carey said they were "grateful" for James Murdoch's leadership of BSkyB and looked forward to his "continued substantial contributions at News Corp."
Some said Tuesday's resignation was not a surprise.
"I had expected actually that he would have stepped down at the time it was announced he was returning to New York and it is perhaps surprising that it has taken this long," said John Whittingdale, the Culture, Media and Sport chairman.
Business Writer Ryan Nakashima in Los Angeles contributed to this report.