Here's a fun fact:
If you have basic cable TV service, chances are you're paying roughly two dollars a month for your access to Fox News. Whether you ever watch it or not.
And Fox wants a raise. They want to break the three-dollar barrier. They're in negotiations right now with three of the major cable companies — mine, for sure, and probably yours — over what they call 'carriage fees,' and what we call extortion.
The dirty secret about Fox News is that it is one of the only commercial TV channels that doesn’t need a single advertisement to be profitable, if not the only one. In fact, Fox could have zero dollars in ad revenue and still have at least a 35% profit margin. This is the result of carriage fees and the guaranteed revenue they provide Fox.
One dollar more per subscriber would add around a billion dollars to Fox's bottom line. In the past, they've always managed to strong-arm the cable companies into raising these fees, but this time around, it might not be a sure thing. Cable TV itself is in decline, losing market share to the online wire-cutter services, and that extra dollar could be the last straw for customers who were thinking of dropping cable anyway. The cable providers can either pass the added cost on to us — sort of a "Fox tax" — or eat it themselves.
Or, they can drive a harder bargain with Fox. And there's never been a better time to do that.
Because Fox is now facing a cascade of threats on both the legal and financial fronts, and it's hard to keep the two fronts from colliding.
If this were a normal company, we'd also say they were facing reputational threats, but with a business model that relies on inverting reality, it's not clear whether the Fox brand will be hurt or helped by that. Regardless, with a market capitalization of roughly $18 billion, Fox remains somewhat well-protected from most slings and arrows.
But once you start chipping away — a few billion here, a few hundred million there — it starts sounding like real money. And while each individual threat may be shrugged off, when you look at those threats in aggregate, the damage mounts up.
We're still enjoying the buzz surrounding the Tucker Carlson firing, though questions still abound. I don't buy for a minute that Tucker had hurt the delicate feelings of Rupert and Lachlan, who are not known to have any. You don't drop your most profitable asset just because he said things you don't like. Especially when it leaves such a gaping hole in your programming lineup. I'm not the only one thinking there's a bigger problem than we've been led to believe.
Keep in mind, Fox stock took a half-billion-dollar haircut on the very day the firing was announced. They had to have known that was coming. They had to have also known that their ratings would nosedive. Yet they fired Tucker anyway. What do they know that we don't?
And then there are the legal threats.
I won't even get into the Smartmatic case, which is still a year off, but which will probably present a far bigger problem — with a far bigger downside — than Dominion.
Nor will I dwell on the shareholder lawsuits I mentioned last week, except to say that in losing a half-billion in market value the week after cutting a check for almost $800 million, Fox did not endear itself to its investors. A harsh light is now being focused on the tyranny of the Murdochs, on the policies and practices they put in place, and on the craven acquiescence of both the board of directors and executive management.
But if I had to guess what truly keeps the Murdochs up at night, it's the claims coming from ex-Fox producer Abby Grossberg. A civil case with possible criminal implications, she is, at minimum, suing over what she claims was a toxic work environment, a frat-boy culture where the misogyny and racism was open and rampant. These claims themselves could result in painful punitive damages.
But add to that the likelihood of a conga line of copycat plaintiffs, most of them ex-Fox employees, most of them women. Then throw in Grossberg's revelation that Fox executives apparently tried to suborn her testimony in the Dominion suit, which could leave some of those very executives with criminal exposure.
And even with all that, the real story here is the contemporaneous recordings Grossberg seems to have been in the habit of making — some of which have been leaked — that are detonating right now. The immediate fallout is raining not just on Fox and Tucker, but also on Ted Cruz, Rudy Giuliani, and whoever else Grossberg was lining up for Tucker's show in the days surrounding Jan 6.
We already know, from last year's congressional hearings, that several Fox personalities — Hannity and Ingraham for sure, but maybe Tucker too — are potential material witnesses in Jack Smith's federal investigation of Jan 6. For all we know, they may have testified already. Grossberg's lawyer has apparently shared the tapes with Smith, and if they're as good as the teasers have been, we're in for a fun summer.
For Fox, this is all happening against a backdrop of whistleblowers, covert recordings, toxic leaks, a visible overlap with any number of Trump-related crimes, and an assault by hungry competitors far to their right, who say Fox is too woke for real Americans.
These are the kinds of pressures that can mess up any company. Each piece of bad news — each new legal exposure, each new financial hit, each new employee lawsuit or political scandal — just adds momentum to the downward spiral.
Bad news drives down the stock price. Which pushes away investors. Which becomes a story in itself. Which gets mixed in with any other bad news floating around that day. Which creates more bad news. Which drives down the stock price even more. Rinse and repeat.
It's too soon to know how any of these things will turn out for Fox, but it won't be pretty. Most of their options will be either expensive or extremely expensive. Their law firms will be charging them upwards of $2,000/hour, win or lose, with billable hours stretching out several years. Their PR firms will be charging them for combat pay.
And there will be copious opportunities to make mistakes. Legal mistakes. Financial mistakes. Personnel mistakes. Political mistakes. Any kind of mistake a business — or a 93-year-old businessman — can make.
To be clear, I am not saying that Fox is in imminent danger of collapse. At least not yet. But even so, there has never been a better time to step on their neck.
In which spirit, I offer you NoFoxFee.com, a place where you can tell your cable company exactly what you think of paying even a penny for access to Fox News.
Let alone three bucks a month.