James Murdoch's belated acknowledgment that he had become a liability to satellite broadcaster BSkyB was a rare admission of defeat by the combative 39-year-old executive known for his self-belief and decisiveness.

Murdoch resigned on Tuesday as chairman of BSkyB, saying he did not want to damage the company any further by the intense scrutiny surrounding his role in a phone-hacking scandal that has convulsed his father's media empire.

That it took him so long to come to what many had long thought a logical conclusion was a measure not only of his self-assurance and behind-the-scenes calculations but also of his attachment to the British broadcaster.

He will be bitterly disappointed, one executive who has worked alongside Murdoch at Sky told Reuters. He has a strong emotional attachment to that company.

Murdoch first proved his mettle independently of the family name at BSkyB, first as the youngest chief executive in London's blue-chip FTSE 100 and then as chairman.

I am proud of what we have achieved, he wrote in a brief resignation letter.

People who have reported directly to James say he is decisive and leaves colleagues in no doubt about what he expects. He likes to work with a small group of people whom he keeps close and trusts.

That confidence inspires fear among many of those who work for him. He used to keep a model of the Star Wars villain Darth Vader outside his London office.

When James was in the building, you could almost hear the Darth Vader music, said a former senior staff member at News International, the UK newspaper publishing division of the Murdoch empire that became the focus of the hacking scandal. He's a scary man around the office.

But his stewardship of BSkyB won high marks from investors and media professionals. Roy Greenslade, media commentator, journalism professor and a former senior editor at Murdoch's Sun tabloid said James Murdoch did not put a foot wrong at BSkyB.

Most people would say that he's been an effective chairman, a period of growing share price, and the irony of all this is that it's got nothing to do with BSkyB.

DOWNFALL

Murdoch's appointment at the age of 30 as chief executive of BSkyB, a business his father Rupert had been instrumental in founding, sparked accusations of nepotism.

He arrived fresh from turning around News Corp's ailing Star TV business in Asia but his previous business experience was mostly limited to the music industry, where he had had little financial success.

However, in his four years as CEO he turned BSkyB into a powerhouse of British broadcasting, and transformed a national media debate that had been dominated by a small elite centering around public-service broadcaster the BBC.

Later, as chairman, James seemed to relish controversy, following in the footsteps of Rupert - whom he called Pa - with a series of sometimes blistering attacks on the BBC, which he accused of distorting competition.

The executive who worked alongside James Murdoch, who asked not to be identified while discussing his style, said Sky showed the Murdoch ethos of feeling that 'everyone is out to get you'. The firm behaved like a scrappy challenger company that under a harsher light could be said to have a chip on its shoulder.

You can't attribute that ethos to James, it came before, but it certainly reflected his own approach, he said.

James's problems began when he stepped down as BSkyB CEO in 2007 and took on News Corp's operations in Europe, the Middle East and Asia - including the British newspaper business, News International.

Executives at the UK publisher were at the time reeling from the arrest and imprisonment of Clive Goodman, the royal reporter on its best-selling Sunday tabloid the News of the World.

Within months of arriving, James was called upon to authorize a large settlement to a hacking victim, soccer union boss Gordon Taylor. That proved to be James's undoing.

When News International was forced last year by the weight of evidence to drop its contention that phone-hacking was the work of a lone, rogue reporter and admit that the practice was widespread, questions focused on how much Murdoch knew.

In parliamentary hearings, lawmakers seized on the payment to Taylor, calling it evidence of a coverup.

Unlike his father, James was no sentimentalist about the newspaper business, and with pay-TV operations from Hong Kong to New Delhi to Italy closer to his heart, he says he asked few questions before agreeing to the payment. But the two senior managers who arranged the payoff insist they had made Murdoch aware there was a wider problem at the company.

They even provided an email trail that ended at Murdoch. Murdoch, normally known for his swift grasp of detail, said he had probably read the emails on his BlackBerry, as they had been sent at the weekend, and had not scrolled all the way down.

Murdoch's role is now under scrutiny by multiple bodies including the police, a parliamentary committee, a judge-led inquiry and the British broadcasting regulator.

Under intense questioning in Britain's parliament together with his father, the bespectacled James came across as businesslike but arrogant, sometimes appearing pained at the slowness of lawmakers to grasp his points.

The executive who asked not to be identified said this approach had been part of the plan, to talk like a business student to take the sting out of what were very hostile questions. He could hardly go in there swinging, he said.

With journalists, he is normally friendly but can quickly become short-tempered when the conversation turns in a direction he does not like.

As James Murdoch tries to focus on his new role as News Corp's deputy chief operating officer, many are wondering whether his withdrawal from Britain and the newspapers will be enough to insulate him from further trouble.

The power of sacrifice has been lost by the qualified nature by which it has been made, says public-relations guru Richard Levick, who has advised crisis-hit organizations from the Catholic church to Arab governments. Rather than cut off an arm, they've been cutting off finger nails.

Levick believes Murdoch could do best by taking a break from News Corp and going it alone, at least for a while. I think he's got lots of choices and I think he's a very wise businessman. He doesn't need his dad's empire to succeed.

(Writing by Georgina Prodhan; Editing by Peter Graff)

Hacking