The 39-year-old felt he needed to give up a position he loved to avoid the risk of being forced to quit should he be severely criticised by a forthcoming report from MPs into the scandal, or if he were to trip up or be reprimanded when he gives evidence to the Leveson inquiry into press standards this month.
Writing to the board of BSkyB, the man seen as the heir presumptive to his father Rupert until last summer's revelations about the hacking of Milly Dowler's phone, said: "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."
Although Murdoch will hang on to a non-executive directorship of BSkyB, the move caps a retreat by James to New York where he hopes to rebuild his career as News Corporation's number three, behind his father and Chase Carey. Without the position at BSkyB his responsibilities at News Corp for "international television" will be reduced to pay-TV businesses in Italy and across Asia. Allies said that by stepping aside now, it was hoped he would retain "options" over his future.
James Murdoch is almost certain to be criticised by MPs on the culture, media and sport committee for not being aware that phone hacking was more widespread at the News of the World than originally admitted. But the committee is split on party lines over whether to accuse him of misleading parliament over what he actually knew. Other senior colleagues of Murdoch's, including former chief executive Rebekah Brooks and former News of the World editor Colin Myler are expected to be criticised in the final report.
John Whittingdale, the chair of the committee, said Murdoch's departure would not affect the final wording in the report due at the end of April, but added: "I think his judgment was correct; as long as he was at Sky, the problems affecting News International would have a read across to Sky". He also said he was surprised Murdoch was remaining as a non-executive "because that does not sever the link between Sky and News International".
Murdoch appeared before the committee twice, once with his father last summer, and a second time to answer outstanding questions about what he knew at the time he authorised a £425,000 phone-hacking settlement to football boss Gordon Taylor in 2008. Paul Farrelly, a Labour MP on the committee, said the resignation was not a surprise because "there are issues that News Corporation and BSkyB has to confront, namely was there a cover-up of what happened on James Murdoch's watch at News International?".
By stepping down, it will mean that no Murdoch occupies a top position at the satellite broadcaster for the first time since 1999. James Murdoch, who had been appointed chief executive of BSkyB in 2003, aged 31, succeeded his father Rupert as chairman in 2007, in a business that was created in the early 1990s when Rupert Murdoch's Sky merged with rival BSB to leave News Corp as the largest single shareholder. James Murdoch served as BSkyB chairman at the same time as he was executive chairman of News International, during the period when the News of the World owner denied that it was behind widespread phone hacking when allegations surfaced in 2009.
James Murdoch's departure was greeted with an unprecedented joint statement from his father Rupert and Carey, the chief operating officer. The two said: "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."
The Labour leader Ed Miliband said that the allegations surrounding Murdoch-owned companies in the UK go "beyond one person" and News Corp needed to conduct a "clear-out of those people that did wrong". His deputy Harriet Harman used the latest resignation to harden up her party's position on media ownership.
Harman said: "Murdoch owns too many newspapers. Never again must we allow any individual or organisation to acquire such a concentration of power when it comes to media ownership."
James Murdoch will be replaced as chairman by private equity boss Nicholas Ferguson but, by remaining on the board, he continues to be a focus of a "fit and proper" test being conducted by Ofcom in response to the News of the World phone-hacking scandal.
Ofcom is examining whether Murdoch and News Corporation – a 39.1% shareholder in BSkyB – are suitable directors and owners in the wake of phone-hacking and other allegations of corrupt payments and pay-TV hacking made in recent weeks. News International chief executive Tom Mockridge also joined the board of BSkyB as deputy chairman.
