The Integrity Price Tag Comes with Rewards

Fox is by far the most profitable cable network, with cash flow expected to top $1.6 billion this year. Credit for this feat is universally assigned to Roger Ailes, the recently removed CEO. His departure seems to have rattled investors who after weeks of paralysis began to sell Newscorp’s shares to then rebuy three weeks after the Ailes exit. This atypical behavior has puzzled analysts who for the better part of the Ailes affair remained silent with the exception of Brian Weiser at Pivotal Research Group who maintain his “buy” recommendation along the Ailes scandal. Weiser’s certainty and the short lived sell bout typify the dilemmas being faced by most TV leaders and principals.

Uncertainty about what the final picture of the technology revolution will be as it multiplies distribution channels and generates free content. Both developments subtract eyeballs from TV screens. And less eyeballs mean less advertisement which, in turn, represents revenues.

With younger generations devoting less and less time to television while conducting life through smarts phones, the FOX empire could meltdown should its leaders refrain from preparing the network for change. This entails becoming more attractive to Millennials and their following. With the majority of Fox News’ viewers over 64, James and Lachlan Murdoch, Rupert Murdoch’s sons and Millennials themselvesdecided to plunge into the waters of change by sacking Ailes. The overriding thought in the move being how their network targets younger people.

And younger people price portability above everything else. But next to portability comes integrity. Yes, they adore Megan Kelly delivering news as is she was about to attend a cocktail party hosted by George Clooney but they also expect Ms Kelly to be treated with dignity. For them it is not enough to shower employees with huge pay checks. Respect for their persona is part and parcel of any company attributes. This rule is specially applied to public service companies such as a cable TV network. These generations view news as a product that results from a creational concept that is wrapped and embodied in a transparent delivery system. Sex harassment obviously misses this description.

Ailes demise was thus clearly a requisite for the networks successful travel into the 21^st century. Yet another factor weighting in the decision to remove Roger Ailes was the knowledge that the talent he had sealed into Fox had no other destination in the TV universe. Indeed, Fox’s leading news stars are unlikely to leave the conservative network for CNN or MSNBC. Also other conservative stations simply don’t have the resources to take them away. So, besides Greta von Susteren, who was already unhappy before the Ailes affair broke lose, no other leading screen star will take the exit door any time soon.

The price tag for the network so far has been about $70M when one adds the Ailes exit agreement to the Gretchen Carlson Settlement. And while there are other suing women in the pipeline that could bring the price tag to about $90M, these are peanuts compared with the palpable rise in ratings for Fox as younger people flow to the network to get their news from a company they perceive as principled.

Featured Image:Fox News chairman Roger Ailes walks with his wife Elizabeth Tilson as they leave the News Corp building, July 19, 2016 in New York City.