The 39-year-old, until recently seen as the Murdoch child most likely to replace Rupert at the top of News Corp, has until now hung on to his job by blaming those around him for the hacking scandal that has caused public outrage.

Criticism of James Murdoch initially focused on his poor handling of the affair but accusations by two of his former top lieutenants that he misled parliament in July turned the spotlight on his own involvement in a possible cover-up.

"It really became personal with the challenge by Crone and Myler," said a person close to Murdoch, referring to the News of the World's ex-legal chief and last editor who appeared at an inquiry this week.

The public opposition between Colin Myler and James Murdoch -- Myler was previously at the New York Post and was close to James's rather Rupert -- can only have increased tensions within the global media group and the family.

The drama had appeared to subside from a peak in July, when News Corp took the shocking damage-limitation decision to shut down the News of the World, and both Murdochs were dragged into Britain's parliament to answer questions about phone-hacking.

But the longer-lasting damage to Murdoch's reputation appears to have developed in the following months.

A government-ordered inquiry sits most days at London's High Court, poring over every detail of the culture, practices and ethics of the News of the World and its rivals.

In separate courtrooms around the city, the private investigator central to the hacking is suing the newspaper after it stopped paying his legal fees, some senior executives have launched legal claims and others are suing for unfair dismissal.

The result has been a drip feed of information that has kept the story on front pages and the pressure on Murdoch.

"We are now past the tipping point," said crisis PR expert Richard Levick, who has advised organisations in trouble including the Catholic church and Arab governments. "We can see the future, and for James Murdoch it's not good."

NIGHTMARE SCENARIO

Ex-legal chief Tom Crone and former editor Myler resurfaced this week at a judge-led inquiry ordered by Britain's prime minister at the height of the scandal, and, more dangerously, also turned up in a 2008 email chain sent to by Myler to James Murdoch and now made public, which he claims he did not read.

The emails talk about a "nightmare scenario" in relation to an attempt to settle with a hacking victim who planned to demonstrate that the practice was rife at the newspaper, not limited to a "rogue reporter" as the company had claimed.

The correspondence, discovered by lawyers hired by News Corp for an internal investigation, provides the strongest evidence yet that Murdoch may have known there was evidence of more widespread hacking, and back up Crone and Myler's word against his.

Murdoch said in response to the unearthing of the email this week that he probably received it on his BlackBerry mobile phone and did not scroll down to read the chain below, despite the fact that the top of the email says "it is as bad as we feared".

His so-called "BlackBerry defence" has been widely derided by critics.

"If he's telling the truth that he didn't read it then he is negligent and if he did read it then he's lying," said Roy Greenslade, a London professor of journalism who has worked for Rupert Murdoch and was editor of the Daily Mirror.

"It is hugely significant and I think a watershed moment for him," said Greenslade. "I believe his position is untenable."

Inside the company, a few supporters still believe it could be possible for James Murdoch to succeed his father as chief executive one day, but it will not be soon, and for the time being he will keep a relatively low profile internally.

Murdoch's move to the United States to work as deputy chief operating officer to Chase Carey has been delayed by the investigations in Britain, but he is spending more and more time in New York and planning to move there from London next year.

"The process seems to have taken a toll on him emotionally, but he is holding up better than one would expect under the circumstances... he is still taking meetings and making business plans for the new year," said one News Corp insider.

• A Permanent Economic Emergency