The New York Times reported that Rupert Murdoch has secretly hired a conservative operative and two former conservative bloggers to fight back against the work of Media Matters and advertiser education campaigners Sleeping Giants.
Quietly, Mr. Murdoch and his main deputy Viet Dinh, a former Bush administration official, have begun taking a more aggressive approach. Last summer, they hired Raj Shah, a former Trump White House official who led opposition research against Hillary Clinton at the Republican National Committee. And this year, I recently learned, Mr. Shah has begun to build a secret operation, hiring two former reporters for the conservative Washington Free Beacon, Elliott Schwartz and Alex Griswold. (Mr. Schwartz had also run Jeb Bush’s campaign “war room.”) Their job is to defend Fox from criticism from progressive outlets like Media Matters and Sleeping Giants on social media, protect advertising dollars and discredit critics, three people familiar with the work said. (The two former reporters have conspicuously omitted Fox from their Twitter bios.)
The team has also pushed the narrative that the rest of the media played down the threat of coronavirus as egregiously as Fox did, two journalists who have spoken to them said. A Fox spokeswoman, Megan Klein, declined to comment on the new operation. Mr. Griswold said “no comment” and hung up on me before I could ask him a question, and Mr. Schwartz didn’t respond to a request for comment. A spokeswoman for Fox News, Irena Briganti, said the chief executive, Suzanne Scott, wouldn’t be available for an interview.
From a business perspective, Murdoch has cause for concern.
Fox News is actually suffering quite severely on the advertising front (due in large part to the efforts of Media Matters, Sleeping Giants, advocacy organizations, and online activists). Over the past few years, the network has actually lost hundreds of millions of dollars in advertising revenue.
To illustrate the kinds of advertising issues that Fox News is experiencing, here’s a snapshot showing the average number of paid commercials per show for host Tucker Carlson over a 22-month period. The number of paid commercials dropped off in late 2018 and then quite severely in early 2019. The show has still not recovered.
According to approximated advertising revenue obtained and analyzed by Media Matters, Carlson’s show generated about $100 million in advertising revenue for Fox News in 2017. Carlson’s revenue plummeted following the advertiser exodus in 2018. The effect was so significant that if you combined the total advertising revenue his show generated in 2018 and 2019, the combined amount is still less than what Carlson’s show earned in 2017. The loss is anywhere between $70 million and $80 million.
Carlson’s show is not the only Fox News program that experienced big dips in the number of paid commercials and revenue either.
Bottom line: Fox News has lost a significant amount of advertising revenue.
Much more than advertising revenue is at stake for Fox News this year, though. Fox also has to worry about its contract negotiations with cable providers. This year, Fox News is renegotiating cable contracts that account for about 65% of its subscriber fee revenue.
Fox News actually gets the majority of its revenue from subscriber fees, not advertising revenue.
Every TV channel charges cable providers a fee for carrying the channel that is determined during contract negotiations. It’s called a subscriber fee. Providers pay this fee for each customer they have, regardless of whether that person ever watches the channel. Providers then bundle channels into packages and pass costs to subscribers.
Fox News is notoriously recognized as the most aggressive negotiator. To be clear, it’s not just that the network is good at negotiating. It lies, bullies, and -- in my opinion -- cheats. For example, during these negotiations, Fox doesn’t tell viewers it is trying to charge them more. Instead, it threatens the provider with access to Fox News. Then it turns around and tells Fox News viewers that their cable company is trying to silence Fox News for ideological reasons; the network enlists hosts to spread misinformation too.
So what’s the effect of all this? Subscriber fees for news and information channels are normally pretty small. MSNBC gets about 33 cents, CNN gets about 70 cents to 90 cents (and that includes CNN and CNN Headline News). In contrast, Fox News gets more than $2 per month from every cable customer in the country. This is wildly out of step with industry averages.
During this round of renegotiation, Fox News is trying to inflate those fees even more. The network is looking at increases as high as 75% in some cases. If it's successful, that would mean Fox News could be getting as much as $3 per month in some circumstances per customer.
Much like advertisers have been increasingly rejecting Fox News, a backlash among cable providers has been brewing as well. The recognition of Fox News’ toxicity and extremism only compounds the headwinds the network faces heading into negotiations.
In part because of all the advertising revenue the network has lost, Fox News needs this current round of negotiations to succeed. It can’t merely hold the line; it needs big increases to offset the lost advertising revenue.
To fully understand Murdoch’s cause for concern, it’s important to recognize that it’s not just about advertising revenue, but also the revenue earned from these contract negotiations.
For more, here’s a Twitter thread that delves a bit deeper into Fox News' trouble with advertisers as well as the importance of these subscriber fee renegotiations: