After Roger Ailes Era, Fox News Faces Tipping Point

Analysis: It's a 'no-spin' zone. Fox News faces the same challenges of viewer migration and millennial multiculturalism as every other TV-news outlet.

To the untrained eye, Fox News Channel on Thursday morning presented what looked to be just another day in “America’s Newsroom,” one of the many programs that populates its regular schedule.

Bill Hemmer and Martha MacCallum were holding forth from Cleveland, the site of the Republican National Convention. The pair traded thoughts about last night’s speeches from Senator Ted Cruz with Karl Rove, the Republican political consultant, and Pam Bondi, the Florida Attorney General. Nothing unusual there.

Hemmer and MacCallum likely won’t say much about it, but there’s another big story these days at Fox News Channel, and the way it ends could mean big changes at the 21st Century Fox-owned network that often bills itself as “America’s HQ” in its bright on-screen graphics. Fox News Chairman and CEO Roger Ailes is in negotiations with the parent company that are likely to remove him as head of the network after numerous allegations of sexual harassment have been levied at him  – and his  departure would take place as TV-news in general faces some of its most daunting challenges.

Ailes’ position at the network has become untenable, according to management experts. “It’s a virtual crisis for a company that has a situation like this,” said Sydney Finkelstein, a professor of management at Dartmouth College’s Tuck School of Business. “The board should be pretty alarmed. We have multiple victims with parallel accounts and the arm-twisted testimony of a few high-profile anchors in defense of Ailes should not add noise to the legal investigation,” said Jeffrey A. Sonnenfeld, senior associate dean at the Yale School of Management. “Having somebody die on the vine is demoralizing and confusing. He should step down immediately.”

A spokesman for 21st Century Fox did not respond immediately to a query seeking comment.

And yet, Ailes oversees an asset that is arguably the crown jewel in the 21st Century Fox empire. Fox News Channel throws off around 20% of the parent company’s cash flow, according to estimates.

You’d think Roger Ailes would be irreplaceable. In another era, that might be correct. Consider, however, that viewership for Fox News in the 10 p.m. hour of the first night of the Republican convention – when Melania Trump addressed attendees – fell 8% compared to the same hour in the 2012 event, according to Nielsen.  Fox News won the most viewers during the time period of any network, cable or broadcast, but it’s tougher to win comparable increases when a network already leads in audience and when viewers have so many ways to gain access to information.

Just as dozens of Fox News staffers this week cover the crowning of Donald Trump as the Republican Party’s  nominee for President of the United States, there are giant signals flashing that a new time is coming. The GOP has grown more radicalized. About 72% of the public gets news on a mobile device, according to  a July study from the Pew Research Center, and about 84% of 18-to-29-year-olds access news through social media. Millennials, who are expected to comprise almost 75% of the workforce by 2025, say they are more engaged in organizations when they perceive a more inclusive culture, according to a 2015 study from Deloitte.

Simply put, there are only so many “no-spin zones” O’Reilly can throw at viewers before Fox News Channel is caught in the same whirlwind of technology, viewer migration and millennial multiculturalism as every other entity on the set-top box. Younger viewers likely won’t watch a whole hour of O’Reilly; they may just snack a few streaming-video snippets of the show from the night before that a friend or politically active social group zaps his or her way. And they may want a broader array of viewpoints than what Fox News has offered in recent years.

Given the churn taking place in the Republican Party during this election cycle, “it is probably timely and necessary for FNC to re-assess how to align itself going forward,” said Todd Juenger, a media-industry analyst with Bernstein Research. “Maybe it’s a good time for fresh thinking.”

To be sure, there’s little reason for executives at the network to act in haste. Fox News’ loyal fan base guarantees the outlet carriage on most if not all cable and satellite systems. That carriage, in turn, means 21st Century Fox has leverage in trying to wrangle access for FX, Fox Sports 1 and other holdings. If Fox News maintains its current format and programming ideas, there’s little reason to think its audience will disperse.

Over time, however, the Fox News viewership will have less appeal.  The network’s audience tends “to be very old, with an average age of more than 70 years,” noted Juenger, the analyst. “This limits their appeal to most advertisers.” Indeed, the network’s top advertisers in the first quarter of this year , according to Kantar Media, included direct-response marketers like My Pillow; NutriSystem;  gold-and-silver collector Rosland Capital; non-stick cookware manufacturer Gotham Steel; and Vermont Teddy Bear Company.

The current behind-the-scenes story at the network would likely fascinate even an older crowd. Ailes and his attorneys have denied sexual harassment allegations filed in a suit by Gretchen Carlson, a former Fox News anchor. The action prompted an “intenral review” by 21st Century Fox that has proceeded as more accounts of similar behavior by Ailes have turned up in media reports – including a dispatch by New York magazine stating Fox News star Megyn Kelly could be one of those who had to deal with unwanted advances. In statements, Ailes and his attorneys have denied any harassment of Kelly.

The ensuing narrative, however, would seem to leave the executive’s place at Fox News untenable. Until a resolution is reached, details are likely to be leaked rather than announced. 21st Century Fox has  an incentive to keep the case under wraps, said Gloria Allred, a high-profile attorney who is known for taking on cases having to do with discrimination,civil rights law and sexual harassment. “Once the word is out  a high-profile employee is alleging sexual harassment, others may be inspired to come forward themselves,” she noted.

The longer-term story of Fox News is likely to play out on the network’s primetime schedule. There are challenges looming. Both O’Reilly and Kelly, the network’s two biggest stars, have contracts that expire in 2017. Viewers will have to keep watching to see what fills “America’s Newsroom.”

James Rainey contributed to this report.

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