KATIE PHANG (HOST): Angelo, right now, in the short term, Fox continues to produce high ratings. But how do you think that this Dominion lawsuit, along with the Smartmatic lawsuit, Abby Grossberg's lawsuit, the shareholder derivative lawsuits, how do you think that's gonna affect Fox’s bottom line? Talk about how carriage fees fit into this whole calculus. I saw you posted a tweet about it, and I was very interested in it. So explain it to the viewers.
ANGELO CARUSONE (MEDIA MATTERS PRESIDENT AND CEO): The short of it is that Fox will be affected financially in sort of two ways. No matter what happens with the trial, the outcome, one thing is certain. They are sort of boxed in right now. Their ability to navigate the business climate, their audience, is deeply limited because they have to focus on this trial, and they’ll be walking sort of a tightrope.
So what does that mean? The dirty secret is Fox is one of the few commercial TV channels that actually doesn’t really care about commercials. That's part of the reason why when their prime-time advertisers leave, they never change their programming to try to bring those advertisers back, and the reason they don’t really care about commercials as much as other TV channels is Fox News is the second most expensive channel on everyone’s cable bill. ESPN is number one.
One of the things that Fox did strategically after Glenn Beck got fired more than a decade ago because of advertiser losses was to shift most of their revenue over to this thing called carriage fees, which is the money that cable companies pay per channel. Some people may have become aware of this with One America News when they sort of got booted off DirecTV and Verizon. They were another example where most of their money actually came from these deals with cable companies. It was like guaranteed revenue. It doesn’t matter if someone watches you, you get a certain amount of money. Fox News doesn’t need a single commercial, and they would still be profitable. They have a 35 or 40% profit margin. Most of their money comes from this.
What’s significant is, right now, this month, they are renegotiating a bunch of their contracts. They all sort of expired and they are in the process of renewing them. They are limited. And if nothing else, cable companies will leverage this moment to say wait, you know what? We are not gonna pay you that 50, 60 cent increase that you’re looking for because we don’t have to. That's just simple market economics, and the reality is that is a really big deal for Fox News.
Financially, that is one piece and from a larger perspective — have the intention with their audience no matter what it will be a lot more difficult in this moment to give the audience the red meat, the very thing that we saw that sort of led to this Dominion trial in the first place. They can’t really cater to them in the same way. Because think about what that would do for the trial? So they are really limited in this moment of transformation, and it is going to affect them no matter what. There will be a very long tail here and financially, they are going to end up experiencing real repercussions from this. Probably bigger than even billions of dollars in damages in the Dominion lawsuit.