In an astonishing response to a scandal engulfing his media empire, Rupert Murdoch shut down the News of the World on Thursday, Britain's biggest selling Sunday newspaper.

As allegations multiplied that its journalists hacked the voicemails of thousands of people, from child murder victims to the families of Britain's war dead, the tabloid haemorrhaged advertising, alienated millions of readers and posed a growing threat to Murdoch's hopes of buying broadcaster BSkyB .

A security guard stands at the entrance to News International offices in Wapping, London, July 7, 2011. Rupert Murdoch's News Corporation will close its tabloid News of the World after this Sunday's edition, as a result of an escalating phone hacking scandal, James Murdoch said on Thursday. [Photo/Agencies]?

Yet no one, least of all the paper's 200 staff, was prepared for the drama of a single sentence that will surely go down as one of the most startling turns in the 80-year-old Australian-born press baron's long and controversial career.

"News International today announces that this Sunday, 10 July 2011, will be the last issue of the News of the World," read the preamble to a statement from Murdoch's son James, who chairs the British newspaper arm of News Corp .

Staff gasped and some sobbed as they were told of the planned closure of the 168-year-old title, the profits of whose final edition will go to charity.

"No one had any inkling at all that this was going to happen," said Jules Stenson, features editor of News of the World, outside the News International offices.

It seemed a bold gamble, sacrificing a historic title that is suffering from the long-term decline of print newspapers to stave off a threat to plans to expand in television: "Talk about a nuclear option," said a "gobsmacked" Steven Barnett, professor of communications at Westminster University.

But some analysts predicted Murdoch would make The Sun, the tabloid daily that is Britain's best-selling newspaper, a seven-day operation and that the demise of the News of the World would ultimately benefit News International's bottom line.

Nevertheless, Murdoch still faces pressure to remove his close confidante and top British newspaper executive Rebekah Brooks, a friend of Prime Minister David Cameron. Her editorship of the News of the World a decade ago is at the heart of some of the gravest accusations.

Rebekah Brooks, chief executive of News International, and Rupert Murdoch, News Corp chief executive, attend The Cheltenham Festival horse racing meet in Gloucestershire, western England in this March 18, 2010 file photo. [Photo/Agencies]?

The scandal has tarnished Cameron, who picked as his communications director a former News of the World editor who resigned over the hacking affair. The Guardian newspaper reported on Thursday that the journalist, Andy Coulson, would be arrested on Friday. Police declined to comment.

Inhuman

Praising a fine muck-raking tradition at the paper, which his father bought in 1969, James Murdoch wrote in a statement to stunned staff that the explosion of a long-running scandal over phone hacking by journalists had made the paper unviable.

"The good things the News of the World does ... have been sullied by behaviour that was wrong. Indeed, if recent allegations are true, it was inhuman and has no place in our company. The News of the World is in the business of holding others to account. But it failed when it came to itself."

It was unclear whether the company would produce a replacement title for the lucrative Sunday market, in which, despite difficult times for newspaper circulations, the News of the World is still selling 2.6 million copies a week.

One option, analysts said, might be for its daily sister paper the Sun to extend its coverage to a seventh day - an option that some commentators said was already in train.

The website www.sunonsunday.co.uk was registered on Tuesday this week but the party who registered it opted to keep their identity secret.

Television takeover

Stephen Adams, a fund manager at Aegon asset management, which is one of the biggest shareholders in BSkyB, said he saw News Corp's move as "something to restore or remedy a tarnished reputation for the News Corp group.

"But we also critically see it as a reflection of News Corp's desire to progress the BSkyB bid and have full ownership of the company."

Cameron's right of center government had already given an informal blessing to the takeover, despite criticism on the left that it gave Murdoch too much media power.

The storm of outrage at the News of the World turned attention on Cameron's own links to the paper and to other News Corp executives, including Brooks, a regular guest of the Camerons.

Growing popular and political anger over the phone hacking saga had fostered concerns among investors that there could be snags in securing final approval for the $14-billion bid.