DEAN OBEIDALLAH (HOST): Everyone goes, "Why don't we do boycotts of advertisers?" And I'm like, "Why don't we do it?" And you explain to me that there's a reason why advertiser boycotts don't work on Fox News, so if you really want to affect their bottom line to affect the content, at least theoretically, you can't do advertiser boycotts. That's not it.
Just remind people briefly, we've talked about it before, but briefly so that they understand the next way to try to approach Fox News.
ANGELO CARUSONE: Yeah, so the way cable works is that, you know, every cable company pays the channels what they call a fee for carrier, for carriage fee, a subscriber fee. And it's usually pretty small. It's nominal. It's not meant to be a major thing.
So, you know, and the way it works is if you're a cable company, so you know, Dean's cable company, you have 100 customers, for every -- if you want to carry my channel, you give me two cents for every customer you have. OK, so give me two bucks a month. That's how it works.
It's nominal, and that means that you get to carry my channel and I get some a little bit of money and your customers get access to it if they want. But even if they never watch it, you still pay me.
Well, what Fox decided to do after the waves of advertiser attacks that they dealt with a decade ago and Roger Ailes' brainchild said let's make ourselves immune to that. Let's get more money and get the ability to ignore market forces.
So, what they started to do about 12 years ago was begin a series of hard-edge negotiations and tactics so that they could make themselves the second most expensive channel on everybody's cable bill. So, ESPN is number one and then Fox News.
They're about two dollars -- everyone in the country that has cable is paying Fox News two dollars and 50 cents. And in reality, they should be about, let's be generous, 60 cents, so they're basically getting five, four or five times more than what they really should be getting. And what that means is that even if they have zero dollars in advertising, they would still have a 90 percent profit margin. So, that's how much money they're making just in their cable fees.
And that means that they don't have to care about -- you know, part of the thing about commercials, right, is that you have to get advertisers to be willing to advertise on your program, right?
No, there's a reason why certain programing like HBO, for instance, or things that have bad language tend to have to be premium channels that don't rely on advertisers. There's a reason why HBO is five or six bucks a month, because that -- they need enough money to not have to worry about advertising.
Well, Fox has managed to figure out how to do both, how to squeeze a little off the top of advertising, while at the same time making themselves sort of a quasi premium channel that everybody else doesn't really think about how much they're paying them.
And when you add it up, it gives them not just the money, but the ability then to not even have to be accountable to their shareholders, because they can always put out these big announcements. "Revenue up, revenue up." Well, of course it's up, but it is not a reflection of your advertising.
It's actually a reflection of the fact that you worked the system. And that's how, why it feels like Fox is so unaccountable -- because they actually have created a condition where they're picking all of our pockets.