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Rupert Murdoch’s Billion-Dollar Headache: Who Can Replace Roger Ailes at Fox News?

Rupert Murdoch has over the years grappled with many formidable challenges at his companies, like the decline of “American Idol” at Fox, or a phone-hacking scandal in London that forced the shuttering of his newspaper News of the World. Now he must solve a problem with considerable stakes: How will Fox News Channel operate if the man who built it is no longer there?

Fox News Channel is believed to be the most profitable asset in Murdoch’s wide-ranging empire, which also includes the Fox broadcast network and the massive Sky satellite service. People who know the executive say he believes nothing is more important to his legacy than Fox News, which has grown into the nation’s most-watched cable-news outlet after fighting for its launch in 1996.

Fox News Chief Roger Ailes is in the cross-hairs of a sexual-harassment suit filed earlier this month by Gretchen Carlson, an anchor whose contract wasn’t renewed in June. A Monday report in New York magazine indicated that Murdoch and his sons, Lachlan and James, are moving to oust Ailes after launching an internal review of the allegations levied against him. Ailes has called the charges “false” and said they came in retaliation for Carlson’s contract not being renewed.

While James Murdoch and Lachlan Murdoch, who run 21st Century Fox day to day, are intimately involved in the matter, Ailes’ fate rests with the elder Murdoch, according to one person familiar with the situation. “This matter is not yet resolved and the review is not concluded,” 21st Century Fox said in a statement Monday, after the New York magazine report was posted online. A spokeswoman for Fox News referred an inquiry to the parent company.

If Ailes were to step down, will Fox News be able to maintain its status as one of the empire’s jewels? The network is said to contribute $1.35 billion in earnings before interest, taxes and amortization, or EBITDA, to 21st Century Fox, according to estimates from Nomura analyst Anthony DiClemente. That figure would represent about 20% of total EBITDA for the parent company in its fiscal 2016, the analyst said. Millions of dollars are at stake: Market-research firm SNL Kagan projects advertising revenue at Fox News Channel and Fox Business Network, both under Ailes’ aegis, will jump about 5.6% to $932.1 million in 2016, compared with $882.6 million last year. Operating revenue from the two networks this year is seen as exceeding $2.5 billion.

“Fox News is very powerful and very influential, especially among conservatives,” said David Caputo, professor of political science at Pace University in New York. “They see it as a balance among the more liberal media.”

The network’s adherents have helped transform it into a weighty entity. By building a schedule filled with anchors who take a plain-spoken approach to the day’s issues and surrounding them with sharp graphics and a smart programming flow, Ailes has built Fox News into a powerhouse influence on everything from the daily news cycle to the looming election. It’s a fact the parent company can wield when negotiating with Comcast, Dish Network, Charter Communications or any of the nation’s other big cable and satellite distributors. Popular anchors like Bill O’Reilly, Neil Cavuto, Megyn Kelly and Sean Hannity give the network and its parent entrance into the family breakfast table and living room as well.

To be sure, Ailes’ exit strategy could be complicated. O’Reilly faced similar allegations in the past, settling in 2004 a sexual-harassment lawsuit filed by a former producer on his show, Andrea Mackris that alleged he had made explicit phone calls to her. In 2016, O’Reilly has retained his star status at the network – and outsize ratings. In the current case, Carlson has alleged that Ailes worked to derail her career after she reported unwelcome behavior by Steve Doocy, her co-host during her time on “Fox & Friends,” the network’s morning show. She also claimed that Ailes propositioned her.

If Ailes were to step down, there is speculation the sands will shift at Fox News. “This isn’t just about ousting Roger. It’s about rooting out its culture,” said one person familiar with the Ailes operations. “It is a grim mess over there. The expectation is that Roger will go, but the guillotine is going to be very active afterwards.”

The company would have to find a new executive to run Fox News Channel and Fox Business Network. While Bill Shine, a longtime Ailes lieutenant, could take over operations on an interim basis, according to two people familiar with the situation, the Murdoch family would likely look elsewhere for a stronger hand. One of these people suggested family loyalists at 21st Century Fox or News Corp. could be tapped. Among this group might be Jesse Angelo, chief executive and publisher of the New York Post, or John Moody, a former correspondent for Time magazine who is an executive vice president at Fox News.

And then there is the question of the network’s top talent. Both O’Reilly and Kelly have contacts with Fox News that come up for renewal in 2017. Both are believed to have great loyalty to Ailes, and it might prove challenging for an executive without longstanding ties to the network to keep them on board.  In a recent interview with Seth Meyers on NBC, O’Reilly said he supported Ailes, one of many current Fox News employees who have come to his defense. On the other hand, Kelly has remained silent – a move that is being taken as a sign she might be considering her next step and not want to tarnish job negotiations by sticking up for the man who launched her career.

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