1:13 PM PDT 7/21/2016 by Marisa Guthrie
The news chief exits the network after a 20-year career building Fox News into a ratings titan and financial powherhouse for boss Rupert Murdoch. Ailes’ downfall began after former anchor Gretchen Carlson filed a lawsuit against him, and other anchors began to speak out about inappropriate behavior.
Roger Ailes, the television impresario who built Fox News into a financial and ratings juggernaut, will leave the network he spent 20 years building under a cloud of sexual harassment accusations.
The announcement that Ailes is resigning came Thursday (July 21) from 21st Century Fox, the network’s corporate parent, after weeks of uncertainly about Ailes future at the company. The announcement said he’ll step down immediately, with Rupert Murdoch assuming the role of chairman and acting CEO of Fox News Channel and Fox Business Network.
Terms of the exit agreement have not been released, but Gabriel Sherman, New York magazine’s Ailes chronicler, reports that the embattled executive may get a massive $60 million payout to walk away. That sum is considerably more than the $40 million that sources tell THR that the 76-year-old owed on his current contract that originally extended into 2018.
Ailes’ exit marks the end of an era at Fox News Channel, the cable news landscape overall and at 21st Century Fox, where the news chief has enjoyed a long and close relationship with Rupert Murdoch. It was Murdoch’s idea to start a conservative cable news network more than 20 years ago, tapping Ailes, who shared Murdoch’s conservative ideology, to execute it. But since the 85-year-old Murdoch last summer ceded day-to-day control of 21st Century Fox to his sons James and Lachlan, many observers have predicted that Ailes’ days were probably numbered.
The powerful Fox News chief never had a warm relationship with the Murdoch sons and it was often combative, according to insider accounts. He immediately chafed at reporting to them and after a public power struggle in the days after James was elevated to CEO and Lachlan to executive chairman, the company announced that Ailes would in fact report to all three Murdochs. Rupert Murdoch retains the title of executive co-chairman.
In an interview with THR last summer, Lachlan Murdoch praised Ailes’ business acumen: “The business he’s built, and the channels he’s built, are terrific. We have a huge regard for him, and he’s done a great job.”
And certainly the priority at 21st Century Fox is to keep the network running smoothly through the transition. Ailes has created a business that contributes almost 25 percent to the bottom line of 21st Century Fox, the single most profitable asset in the company’s portfolio. Fox News and Fox Business generated $900 million in ad revenue, $1.5 billion in affiliate revenue and $2.5 billion in total revenue last year, according to data from SNL Kagan. Their operating income before depreciation and amortization (OIBDA) totaled $1.6 billion. (In comparison, Time Warner’s CNN and HLN generated $600 million in ad revenue, $700 million in affiliate fee revenue and $1.4 billion overall, with around $500 million in OIBDA.)
The next task is to put a succession plan in place. And multiple internal candidates have emerged, top among them, New York Post publisher Jesse Angelo, who enjoys a close relationship with the Murdochs (he was the best man at James Murdoch’s wedding), as well as Bill Shine, a longtime Fox News executive who runs primetime programming and also oversees Fox Business Network and Jay Wallace, who in April was promoted to executive vp news and editorial. David Rhodes, a former Fox News staffer who is now president of CBS News, is the lone external name floated, but he is under contract at CBS for the foreseeable future. And sources have dismissed reports that the Murdochs would bring in someone from their British broadcaster Sky.
Whoever takes over will obviously have their hands full. Megyn Kelly is currently in contract talks and the rest of the Fox News primetime hosts - Bill O'Reilly, Sean Hannity and Greta van Susteren - all have clauses in their contracts that allow them to exit if Ailes does. It is an unusual wrinkle that has not gone unnoticed by Wall Street.
Pivotal Research Group analyst Brian Wieser wrote in a July 20 report that the strong political cycle gives Fox News a fortuitous “headwind” during the transition. But he also acknowledged that a “disruption of this nature may introduce some challenges. Reports that the unit’s CEO is set to depart in the wake of sexual harassment allegations introduce concerns for investors beyond the allegations themselves. Fox News is more heavily dependent on its CEO for its personality and operations than are most other networks. Because of this, the network has historically operated as an independent fief, and many of the network’s highest profile on-air commentators evidently prioritize loyalty to its current leader rather than to the parent company. These elements lead investors to question whether recent developments create new risks.”