Angelo Carusone speaks to Texas Public Radio about how the Dominion lawsuit may affect Fox's cable negotiations

Angelo Carusone speaks to Texas Public Radio about Dominion's lawsuit against Fox News

Audio file

Citation From the February 27. 2023. edition of Texas Public Radio's The Source

DAVID MARTIN DAVIES (HOST): We're going to continue our discussion about Fox News, the role that it plays in our media landscape. It is the most-watched cable channel. It is a place where Republican messaging is allowed to be undisturbed as it goes out to the American people. But what about that? And what about this Dominion lawsuit? Is this going to be a reckoning for them? And what can be done to have some accountability at Fox News? We're now joined by Media Matters for America President and CEO Angelo Carusone. Angelo, welcome to The Source.


DAVIES: So what's your overall take? You're – go over, give us the big picture that you see with what's happening with Fox News.

CARUSONE: So I think a couple of things, two things that I found to be really significant.

One was that came out of the filings but is sort of a little tangential to the lawsuit. And that was that there was a and one of the things that came out of the filings was this email that Rupert Murdoch had sent to Suzanne Scott, who's the president of Fox News, in which he instructs her to sort of like, you know, help out in Georgia as best as she can. And that should actually be the focus. And everything is on the line, essentially instructing the president of Fox News to basically help Republicans in Georgia as best she can.

And the part that I found surprising about that is that one of his proof, which we sort of knew. But the thing that was surprising was that it was so casual. You know, that's a pretty extraordinary thing, an instruction to give to to a news operation. The idea that they should very explicitly help with any party in an election. And it didn't seem extraordinary. It seemed pretty normal. You know, there was no follow-up. There was no wow, I can't believe he's saying this to me. It was totally normal. So that's the first takeaway.

The second takeaway is just from the litigation itself is that it's overwhelming. I mean, the evidence is overwhelming. Fox knew. And to me, the significance there is not just in that they'll likely lose the lawsuit one way or the other. It's what happens from that. And that's that they're in a place that does not have punitive damages, that does not have caps on punitive damages, which is in Delaware. So the award could be very significant at the end of this.

But beyond that, it opens them up to all sorts of subsequent litigation from shareholders for breach of fiduciary duty. So like, this could – basically my takeaway is that it has a cascade effect and that we're sort of right at the top before things start to unravel and pretty fast. And this is not a company that the Murdochs fully control. They have effective control and have maintained it well, but they only have about 30%. Part of the way they have control is because they always provide shareholder a return on investment. And I think that that that sort of arrangement starts to become increasingly less difficult, I mean less possible for them to sustain when they don't return the money.

DAVIES: Well, let's talk about how Fox News makes money. People see the advertising, but how many reverse mortgages or gutter cleaning type products out there can support a network because no major corporation is going to put their ads on Fox News. So is the way that Fox News really is able to, you know, cash the checks is through your cable subscription? I'm paying for Fox News even though I may not watch Fox News because it's part of my cable bill. Is that where it gets most of its money?

CARUSONE: That's exactly right. Fox is somewhat unusual, not in that they get paid by the cable companies, everybody does. If you're a cable channel, you get what's called a carriage fee. But Fox is different. Fox is pretty much the only commercial media company or channel that doesn't need a single commercial. If they had $0 in ad revenue, to your point, they would still operate with a 90% profit margin. That's how much money they get from these carriage contracts.

And they're the second most expensive channel on everybody's cable bill. ESPN is number one. Just to give you a sense of where they are in the rankings and people think that it's that these rates are set by ratings, but they're not. They're set by what's called the demand score. So it's about 90 million cable customers in the country. About 3 million of them watch Fox on average, but yet all 90 million pay for Fox News.

And usually the fee is considered nominal. So the cable company, what they do is they'll give a channel $0.10 to say, look, for every customer I have, I'll give you $0.10 if you have a hundred customers. Right, you give them $0.10, you give that new channel ten bucks a month and all your customers get access to that channel. That's the whole theory behind bundling.

And what Fox News did about 12 years ago, they said, why don't we use our audience that we typically use for political purposes and instead, let's start organizing them. Let's have them call their cable companies and start demanding FOX and attacking the cable companies. And they started running this very aggressive negotiations process that was mostly baked in misinformation, sort of convincing people that the cable companies are trying to take Fox News away. But that was not true at all. It's that the cable companies didn't want to keep escalating the rates. And that's what we have now, is they basically, over the last 12 years built an operation that is not tethered to producing a commercially viable product, but instead is so disproportionately reliant on this guaranteed revenue that they're going to get from every single cable customer in the country.

DAVIES: I imagine that must really burn the hide of millions and millions and millions of people in America who find Fox News not only repulsive but also destructive to the country. But, you know, if you're paying a cable bill, you are paying Fox News, you are keeping all these people on the air.

CARUSONE: That's right. And, you know, typically it's always these fights have always been very one-sided, Meaning, you know, most people ignore these fights. Fox News sort of whips up their audience into a frenzy. Their audience calls the cable companies. The cable companies during these negotiations pretty quickly capitulate to Fox just so that they don't lose their customers.

And Fox is what has really – has a really good playbook for winning these fights. But, you know, just a foot, just to give the flip side, a little bit of consumer advocacy here, it's actually quite potent. That's what drove One American News off of cable news, off of the cable carriers. You know, instead of overpaying for One American News, which is what they were doing, like DirecTV and AT&T, they basically said, our customers don't want to pay for you anymore.

And to be clear, you know, cable companies can still offer these things as an add-on the way you get HBO or Showtime. Right. But instead, when they make it part of their basic package, they force customers to pay for it. And usually, like I said, it's a nominal fee. It's usually very, very small, you know, $0.10, $0.15. So it's not that significant.

But Fox, it's such a very large number. Just to give an example of how much money that is for them by comparison to their peers, they could get half of what they're getting as a carriage fee. They would still be one of the most expensive channels on cable period, by far the most expensive news channel. But even if they were to cut their price in half, that would change everything on Fox because they would have to then appeal to advertisers a little bit more. And a lot of advertisers have already said this is too much for us. We're just not doing this. This is bad for our brand. So, you know, what they are right now is insulated from any of the typical, even very limited consumer pressures that exist. Because they have this guaranteed revenue and it doesn't take much. There's a lot more consumers that don't want to pay or overpay for Fox than there are that want Fox News.

DAVIES: So there is a little bit of irony here because we can talk about this process where we're bundling everyone's money and we're putting it into a pot and we're paying for something that I'm not directly benefiting from; it's benefiting someone else. That sounds like socialism to me. So basically, Fox News is benefiting from a sort of a socialist setup here.

CARUSONE: Yeah, basically it's sort of a secret socialism, which is typically the thing you hear about on Fox News because they don't really talk about it. They very rarely discuss the fact that they are, you know, very overleveraged. And, you know, but this has been – some of these things, these fights have been bubbling up for a little while. One of the things that Fox has done to win these fights, for example, is still threatened to turn off the Super Bowl, which they did back in right before COVID in 2020. They threatened to turn off the Super Bowl to one of these cable companies they were having a fight with. And it was, you know, a pretty intense dispute.

And, of course, that has nothing to do with Fox News, but they leveraged their sports properties in order to help increase the rates. One of the things that happened last year, though, is that the NFL, when they were renegotiating their deal with the broadcasters that carry their programs, they had – Roger Goodell had made this commitment that he wouldn't allow the NFL to be leveraged anymore during these fights. That's a game-changer in terms of Fox's leverage. And part of it was because Fox wasn't giving them a cut. And part of it was because they didn't want to be embroiled in the latest Fox News controversy and to be exploited that way to help pay for something that had been, you know, pretty relentlessly aggressive against them and their players.

So it's – the cracks have started to emerge. And I think the way the Dominion dispute intersects here is that these cracks have been playing out a little bit over the last couple of years. And now the revelations from this litigation are like a giant sledgehammer, because every bit on those cracks, because all the headwinds have been lining up against Fox. The cable companies don't want to pay Fox News any more money. Customers don't want to pay any more money for anything. Understandably so.

And here Fox News is coming to the table. And because they've lost so much advertising revenue, they don't just need to renew their contracts. They need to go from about $2.30 a person – everybody that has cable pays that to Fox News every month. They need to go from about $2.30 to about $3. So they're demanding really extreme increases, the biggest increases in the history of cable at a moment where everybody is cord-cutting. So they have a pretty steep hill to climb. And this Dominion lawsuit is really going to make it a lot harder for them to do that because it gives much more ammunition and buttresses the case of, you know, a lot of the consumer players that don't want to pay for it.

DAVIES: All right. When we come back, we continue talking about Fox News. I want to talk some more about cutting the cable and what that would mean as a way to maybe have some accountability. But we make it very hard to do that. And that doesn't seem fair at all. Why can't we just pay for the channels that we like to watch? Why am I paying for Fox News? I don't watch sports. Why am I paying for ESPN? But, you know, and also Fox News, why is it – are we going to see a changing of the way that these channels work where they profit by spreading lies?


DAVIES: We're talking about Fox News and some of the issues regarding its lawsuit against the lawsuit that Dominion filed against it and the revelations that we have seen. But in regards to servicing the big lie. But real quickly, I want to get back to this cutting cable issue and how if you're paying for cable, if you don't watch Fox News, you're still paying for Fox News. And so, Angelo, if you switched, you see, okay, I'm just going to cut off the cable. I'm going to cancel my cable subscription. But you switched to one of these, like YouTube Live or Hulu or Sony's other outfits. They're still paying Fox News or are you getting away from all that?

CARUSONE: They're still paying. They all still pay. And so, you know, it's almost unavoidable unless you you're really ad hoc it and sign up for a million services and try to do it little piecemeal. The most effective thing, though, and this is an area where consumers really do have power, is that during the actual contract negotiations, that if cable companies hear from customers, they respond. It's just true.

There's such an overwhelming amount of consumer base that is opposed to paying for Fox, especially at the rates that the cable companies would respond. In fact, Fox just lost their very, very first contract dispute right before Christmas. And so you know these things don't make massive headlines. So a lot of people don't know it, but they did. They lost you know, it was for the first time, they've never lost one of these fights. And they did. They didn't get any of the demands they were hoping to get. None of the increases they been pushing for. They tried every heavy-handed tactic. They did. But DirectTV customers in a large part of the country overwhelmingly called and said, Don't raise my bill to pay for Fox. And it worked.

And, you know, we saw this play out recently with One America News and now Newsmax. There's a you know, there is a little bit of a tide shift here. So you're right. There's no simple way to do it. That's probably why I think it hasn't been done yet. We've tried to simplify it. So I have a website UnFox My Cable Box. People can sign up, they tell their watch, they can identify which cable company they have. And when their cable company negotiation starts with Fox, we alert them and we give them a quick instruction on, hey, here's what you do, here's the number to call, the person to email. And we keep track. And I know it works. They use it. They use that data in real time in the negotiations.

And so far, it's proven to be a pretty effective model at sort of under unwinding this tactic that the right-wing media in particular, One American News and Newsmax, but Fox News that really pioneered it happened. It all started after Glenn Beck got fired, basically, when, you know, Beck got fired by Fox because of these advertiser pressure campaigns. Fox and in particular, Roger Ailes, who was running it back then, thought, well, you know, I can find a way I can leverage the audience to not just make more money here, but I can sort of build an apparatus that will be immune to the types of liberal advertiser pressures that force me to do this Glenn Beck thing. And, you know, obviously, now we have to unwind what they spent some time pioneering.

DAVIES: So to some of the issues about Fox News, Tucker Carlson was just handed over, you know, what is it, Thousands, hundreds of thousands of hours of tapes from the January 6th by Speaker Kevin McCarthy. It was just to him. I mean, what does that tell you?

CARUSONE: It tells you that, you know, when Rush Limbaugh passed away – for 25 years, he was the center of gravity in the right-wing echo chamber. And when he left his show and that's what he does, that created a void, a gap. And Tucker Carlson has really kind of been the clearest proxy for the role that Limbaugh used to provide. I mean, he is as close to a center of gravity as you'll get on the right-wing media.

And so what does that tell me? It tells me, one, that McCarthy and the right-wing are going to relitigate what happened on January 6th because of what Tucker Carlson did with a previous documentary that he put together about January 6th called Patriot Purge. We already sort of have a keyhole view about what it's going to look like, and it's basically going to make the case or he's going to try to make the case now with this new data that he has, all this new video footage, he's going to try to make the case that January 6th was a false flag, that it was that it didn't really happen, but that it is actually a setup perpetuated by the Democrats, Nancy Pelosi, the news media, in order to sort of entrap and set-up Republicans so that they could advance their agenda. And, you know, he'll basically selectively edit and manipulate videos to push that narrative.

And then the third thing that it tells us is that – and McCarthy confirmed this a little bit, you know, during the speaker fight, one of the concessions he made to parts of the Republicans in his base that were in his party that were opposing him was that he would release this footage. He didn't say to Tucker, but he said he promised that he would he would release the raw files and it was a concession. And that's because they were you know, they were sort of being an avatar for what had been a large part of the right-wing media narrative for a while. They'd been demanding this and they brought that to McCarthy. And he conceded. And part of the reason he did is because, you know, the way that the Republican Party works right now is that so fused with their right-wing echo chamber that you can't really separate out the two. And so I would say that it tells us as much about how we got here as to where we're going. And in a lot of ways the power very much lies with where the center of gravity is within the right-wing media and right now, it's Tucker. So that means that things are going to look a lot more white genocide-y. And, you know, and I think they're going to get a lot nastier as we move forward because it's going to be increasingly aligned with the types of things that he advocates for.

DAVIES: Got an email from Richard. I cut the cable. I bought a digital antenna. I get all the local stations, plus for PBS stations and many other stations. You probably save a lot of money too, Richard. So but to Tucker Carlson, he's huge in Russia. They love his show there. I mean, that's that's telling, isn't it?

CARUSONE: It is because he amplifies Russian propaganda. You know, And I get that so much of, you know, 2016 and 2017 and 2018, that was like there was such a constant refrain. I think sometimes people say, oh, or dismiss that when you bring that up.

But part of the reason it was such a refrain is because they basically helped push – Russia used information operations to build a beachhead in parts of our media landscape. And, Tucker, and part of the reason they love him so much, is because he takes Russian disinformation narratives and he launders them through his Fox News program and then doesn't just launder them. But then he advocates for them and pressures others within the media and within the political establishment to pick up those narratives.

And that's where, you know, I think it's the clearest around Ukraine and how much of Russian disinformation he pushes there. I think he really does make the argument that it's actually the United States that is the aggressor. He may – he pushes a ton of disinformation about Ukraine and Nazis. And, you know, it's all Russian disinformation that he actually helps push into the American information landscape. And in a way, it's not that he's doing their bidding or not. I can't speak to that.

But what I can say is that his actions are very much aligned with theirs. And that's to me, is all you need to know. I mean, we know he tried to interview Putin and didn't get it. And, you know, but he's been he's been an advocate for their ideology. That is true.

DAVIES: So loyal viewers of Fox News, they should be asking themselves a critical question. Are they getting the facts or are they just getting lies told to them because they think this is what Fox thinks that they want and also they want to tell the stories – pumped up the narratives of the Republican Party? How do you reach Fox News viewers when they're in this bubble and they're confronted with only these self-sealing truths? You can't tell them that what they're being told is wrong.

CARUSONE: I think that and this is the unfortunate thing, you can't. There's maybe a small sliver of audience members that are not, you know, trapped in the bubble as you've identified. But I watch this every day and see what the world looks like when you are trapped in this sort of right-wing echo chamber, you're lost and you don't want the facts.

You don't really want anything that counters your narrative. And Fox saw that firsthand. And they don't even care that the Fox hosts insult them. In fact, a lot of them think that's fake. A lot of them think the quotes in the deposition are fake to the extent that it penetrates any parts of the media, they think it's fake.

Even when somebody like Howard Kurtz, who is Fox News's own media critic, gets up there and complains that Fox will let him talk about the lawsuit, they still think it's fake. So, you know, a large part of this is that they are unreachable and that doesn't mean that they should be written off or I'm not making a value judgment about them.

But in terms of how to think about how to interact, to me, the biggest, most important thing is to make sure that that it is quarantined, that the disinformation, the misinformation, the false narratives that sort of spill out from that bubble don't poison and pollute the rest of the news land. And over time, hopefully, some of them can see it and come to terms on their own.

And it's possible, by the way. Now, Michael Fanone, who was one of the Capitol police officers, talks about this when he was in the military. He watched Fox. He was a loyal Fox viewer, in fact, and he believed that Fox News was the only patriotic channel that was out there. And that's what he watched. And then he was a Capitol Hill police officer. He was attacked on January 6th, and then he became an advocate, I guess, for what happened to him and his colleagues.

And Fox News attacked him with lies. And one of the things that he talks about is that in that moment, you know, he had already been souring on Fox because they seemed to not care about the country or the election, and that was bothering him. But when it became more direct and personal, what – everything else unraveled. I think the moment that he saw how easy it was for them to lie about something he experienced, it then opened up the door for him to see how much other things they lied to him about.

And I hope that some of the things that come out of this trial and I feel like some of those text messages are a start, is that at least it'll open the door for some of them to see it, to see the light.

DAVIES: Angelo Carusone is the president and CEO for Media Matters for America. And thank you so much for joining us today. Angelo, it was great hearing from you.