Monday, January 11, 2010

Stick a Fork in Fox News (and the Wall Street Journal)

Stick a fork in Fox News (and News Corp profits). Recent articles in the New York Times and The Daily Beast show that Murdoch's adult children, and his current wife Wendi, loathe the conservative bent of Fox News that is more profitable (estimated $700 million to $1 billion operating profit per year) than CNN, CNBC, MSNBC, and the news broadcasts of ABC, CBS, and NBC combined. Murdoch cannot live forever, and as soon as he passes, the Murdoch family will fire Roger Ailes and run Fox News (and its profits) into the ground. The WSJ too, will come under pressure to be a mere, "me-too" earnest, SWPL lifestyle rag, instead of a serious business newspaper with a conservative editorial page (mostly). Indeed in the Wall Street Journal, this process is already underway.


Why is this? Why does Richard Branson, owner of airline Virgin Atlantic, want a series of carbon targets/taxes? Why does the Murdoch family (or the New York Times controlling Sulzberger family) prefer political correctness over money? A lot of money? Terminal political correctness and "diversity" commitments have driven the NYT to near bankruptcy. You'd imagine that the Sulzberger family would do all it could to keep its money machine going.

The problem is, people with a lot of money, in their personal bank accounts, don't respond well to classical economic rewards. If a person has already, $20, or $80 million dollars, in their bank account, what do they care if the multi-billion dollar business empire they run goes belly up? It won't affect their personal consumption or status within their social group. Meanwhile, holding the politically incorrect, "normal" middle class opinions, is terminal to their social ambitions. James and Lachlan Murdoch, Elisabeth Freud, and Wendi Deng Murdoch all have considerable social ambitions, as does Richard Branson. They won't be invited to the right parties, be fawned over by the "correct" people, will in fact be considered (horrors) "middle class" and there is nothing that rich people hate more than being considered middle class.

This is the same impulse that leads Hollywood to sign "Free Roman Polanski" petitions and dismiss rape of a 13-year-old girl as "judgmental."

The parallels between decadent 18th Century French aristocracy and the peasant and bourgeoisie morality could not be more striking, than the attitudes of the Murdoch family, or Richard Branson.

News Corporation, long term, is finished. Lacking any ability to generate viewers, the Murdoch family (no one is immortal) will turn Fox News into a clone, harder left at that, of MSNBC with a fraction of the latter's tiny amount of viewers. The Wall Street Journal will become a SWPL parody, with no business news at all. Fox Broadcasting will turn into an earnest, PBS-style purveyor of PC moralizing with maybe the viewership of half of PBS.

Unlike the NYT, News Corp is even more highly leveraged, and so the Murdoch family will run it into bankruptcy and sale for assets fairly quickly. About three to five years, would be my guess. Enormous debt levels allowed Murdoch to make expensive acquisitions (such as the WSJ, which News Corp recently wrote down about $1.7 of the book value of the purchase), without diluting equity control, making shareholders very, very rich as the cash comes in. The high level of debt, however, requires the cash coming in, constantly. No one in the Murdoch family besides Rupert seems to understand this financial reality.

Of course this means more influence for conservative blogs and websites, when News Corp flips Fox News to MSNBC-lite, with anchors Markos Moulitsas and Maureen Dowd. Andrew Breitbart's investments in his websites looks more and more prescient. Eventually all of TV and print will be nothing more than a female/gay, SWPL ghetto. Which is not much of a sustainable business model, particularly in a depression, but there it is. Most rich people would rather be thought Politically Correct by their social circle than keep their business empire going.

21 comments:

Teresita said...

Whiskey, in reply, I will start off with the latest ratings:

FOXNEWS O'REILLY 3,919,000
FOXNEWS HANNITY 2,611,000
FOXNEWS BECK 2,609,000
FOXNEWS BAIER 2,182,000
FOXNEWS GRETA 2,154,000
FOXNEWS SHEP 2,005,000
MSNBC OLBERMANN 1,085,000
CNNHN GRACE 983,000
MSNBC MADDOW 983,000
CNNHN BEHAR 689,000
CNN KING 656,000
MSNBC HARDBALL 615,000
CNN COOPER 590,000

The biggest guy on FOX is four times bigger than the biggest guy on MSNBC. From this sample of thirteen shows, total viewership on FOX alone is three times bigger than the total viewership on all the other guys. This goes back to your earlier post about TV shows for only women and gays leaving a lot of money on the table. It's not a zero-sum game, with FOX currently getting the biggest piece of the pie...those viewers are there because FOX provides a counterpoint to the Libstream Media and generates new viewers. Money talks, Bolshevik walks. If FOX goes lib, somebody at MSNBC, CNN, Bloomberg, or what-have-you is going to say, hey, we can sell a lot of advertising minutes if we get some of these righties on the air. Ideology be damned, that's some tall money.

Kevin J Jones said...

"Meanwhile, holding the politically incorrect, "normal" middle class opinions, is terminal to their social ambitions."

While social ambitions have a lot to do with it, elite mores have found their way into law and there are now heavy legal pressures to bring one's business practice (and therefore outlook) into line with elite opinion.

Anti-discrimination law, for instance, bars the rise of any media company that holds to New Deal-era assumptions about rewarding male breadwinners more than unmarried men or women. This narrows the limits of permissible opinion and policy proposals.

Any media personality who pushes too hard against the overbroad implementation of non-discrimination orthodoxies will likely face lawsuits in addition to social ostracism.

And since non-discrimination laws have passed first in large media/entertainment hubs and college towns, this attitude has shaped corporate opinion in significant ways. Thus we have a large ideological and economic vacuum unfilled, and a continual leftward pull on social habits.

Whiskey said...

Agreed with Kevin, and the possibility of MSNBC or CNN tilting rightward in the event of a Lachlan Murdoch run Fox News is zero. They won't do that because they already have plenty of money (the talent and the execs) and the execs don't reap the reward -- the shareholders do.

Classic Agency problem.

However, a possible work-around would be extensive use of contractors and incorporation abroad. For example, New Zealand or Switzerland are small countries that need cash. Heck, Iceland (of all places, sorry inside joke) is pretty desperately in need of revenue. They are going to have repudiate guarantees made to the UK and Netherlands regarding repayment of Icesave deposits. They need cash now. The herring harvest is not going to do it.

Anonymous said...

Obama budget director makes a love child - NYPOST.com

http://tinyurl.com/yztd38z

Amateur Strategist said...

Any chance Rupert Murdoch can pass the company to someone else besides idiots?

Advocatus Diaboli said...

you might be interested..

http://rebuildingmedia.corante.com/

Anonymous said...

First of all, the notion that Fox News is the only source of profits at News Corp is absurd. Family Guy
by itself probably generates as much profit as Fox News, which is why Seth MacFarlane gets paid 100
million dollars by Murdoch. FX, which is also a top-10 cable outlet, also makes tons of money.
The movie studio is making money.
FNC is valuable, but its power is
wildly exaggerated by both right and left. And the notion that the
Murdochs would interfere with anything that makes them money is
even more ridiculous. They may find
Ailes distatefu, but their goal is
to put him in his place, not to get
rid of him or the money he makes them.

Kevin J Jones said...

"And the notion that the
Murdochs would interfere with anything that makes them money is
even more ridiculous"

Heirs often notoriously fall short of the business acumen of their pioneering fathers. Do Murdoch's heirs show evidence they measure up?

Whiskey said...

Does Family Guy throw off, year after year, between $700 million and $1 billion of Operating Profit?

I think not. Not even close to that. Nor F/X (which is AFAIK, mildly profitable). Not even Fox Broadcasting. Which has let me note, far more operating costs that Fox News.

And you missed the point. Murdoch's heirs want Ailes GONE. Fox News remade as CNN-lite, or MSNBC but harder left.

Who cares about profit if your life is already set, and you have more money in the bank than you know what to do with.

This is why Branson wants carbon curbs even though it will kill his Airline. He doesn't care -- he's Richard Branson, he's got his own islands. He'll never run out of money.

Novaseeker said...

Yep. That's what used to be called "limousine liberalism". Make the average guy suffer for your own rich guilt, when the impact on you is minimal.

Motherfuckers. Only way to describe these bastards.

Anonymous said...

Actually, if you read the NYT article that had Matt Freud coming out at Ailes it does not seem at all like the general editorial bents of FoxNews and the WSJ will change at all. In all honesty, the WSJ is still very good, and factually dependable. The only real difference since Murdoch took over is that the writing is shorter (Murdoch has a tendency to dumb down his news, he hates to read long articles... read the New Yorker profile of him for more on that.) Unlike the WSJ, FoxNews is prone to so many errors that are, like it or not, often politically motivated, that it's not really journalism anymore, per se, but a media arm of the Republican party. I occasionally come across Glenn Beck as I'm channeling surfing: puke on a stick! The guy's beliefs are redolent. Such a black-and-white, 2-d view of the world. It's unfortunate that so many people trust him. And he perfectly highlights the politics at all costs, facts when they're convenient ethos of the network. Too bad.

Also, as someone who does have a bit of money, I can tell you that polarization spreads through all of the classes, there is no drive to be more liberal in the upper echelons of our society. You seem to have some fundamental misunderstandings of both culture and media, whiskey.

all best,
zach

Nine-of-Diamonds said...

"puke on a stick"

"arm of the Republican party"

"someone with quite a bit of money", eh? Well, it looks like there are certain things that money can't buy - that's for sure.

Advocatus Diaboli said...

I have a feeling about your reaction to this post..

http://dissention.wordpress.com/2010/01/13/google-and-chinese-delusions-01/

sparkupthenight said...

It's possible that Comcast might launch a conservative news network, and if there were to be an editorial change at Fox there be a huge demand for it. A media empire providing a left-wing and a right-wing network would be perfect in our cynical age.

http://www.mediaite.com/online/msfnc-comcast-didnt-dismiss-idea-of-launching-right-leaning-cable-network/

Whiskey said...

Anon -- I've had posts up on the SWPL-ification of the WSJ, including stuff with Julie Powell, of "Julie and Julia" fame. Very, very SWPL lifestyle-ish. A shame from where the WSJ started -- a straight business newspaper.

Fox is one of the few outlets to cover stuff that the hard-left media does not: Van Jones being an avowed communist, the desire by the head of Obama's FCC to replace Whites with Blacks in positions of power, Anita Dunn having Mao as her favorite philosopher, the abject failure of the stimulus to create jobs, and so on.

The media worships Obama as a Spike-Lee "Magical Negro" and only Fox News has criticisms of him, and very mild ones at that (Shephard Smith worships Obama, as did Charles Krauthammer, and Mara Liasson).

Merely breaking the Media blockade of stories like the Edwards affair is a "sin" to hard-left ideologues of the wealthy left. Who in a mirror of China's oligarchy, use their power and position to extract crony capitalism profits from Government decisions.

Advocatus Diabli: Yes I agree, China is a joke. Google is leaving because they are not making money and getting their IP stolen (they could care a rats ass about hacking emails of Chinese democracy advocates). China is basically Japan, right before the "Lost Decades." When the Chinese bubble bursts, and it will, the trust issues and over-savings hit lack of growth.

A FT.com columnist the other day noted Japan's lessons, from high-growth in the 1960's-1980's, the end of the asset Bubble (at one point Downtown Tokyo real estate was worth more than all of US real estate), and the decades of lost growth as high-savings both personal AND Corporate meant no internal demand, no matter how hard stimulated. Making Japan a high-cost, aging nation depended almost entirely on exports, vulnerable to swings in the global market for demand and inputs (commodities), and stagnant in growth.

Truth(er) said...

Whiskey, one thing I don't understand. The Murdoch family does not have a controlling interest in News Corp. How can Murdoch's kids decide to tank Fox news?

Whiskey said...

Truther -- As I understand it, Murdoch's family has "A" class shares with more voting rights than "B" class public shares, the same way the Sulzbergers have with the NYT, and Redstone family with Viacom.

That's great if the family is filled with savvy guys/gals who are better than whoever shareholders/BoD pick, in a succession battle, not so great if that's not the case.

Amateur Strategist said...

Whiskey, I've asked TFH and now I'm asking you, if you happen to know (since this is a bit more financial than political). I understand China is a bubble waiting to pop, but what I want to know is which American companies are most heavily invested in China? Just wondering.

Also, Japanese firms tend to be higher leveraged, both operationally and financially, so they carry a lot of risk and a lot of possible reward, I don't think it mixes with their position or culture very well, but that's just me.

Truth(er) said...

I have a more general question about the the interconnection between Hollywood executives, profitability of movies and the agency problem.

If you notice the opening credits to any film, you will see all kinds of deeply nested corporate entities. For example, you may see something like: Time Warner presents a Spyglass Studio production in association with Legendary Pictures and Village Roadshow Productions, or something like that.

In other words, there seem to be a lot of "shell" corporations operating in the production of movie.

Might it be possible that the profitability of these shell corporations is not the utmost priority? What we may be seeing is a similar confusion noted in non-profit entities: just because the corporation is a non-profit does not mean nobody is making money. Likewise, just because "Avatar" may not be profitable for a studio does not mean that all kinds of principals are not making money.

Anonymous said...

Meh... Fox News is pro-Israel. They're just plain old Zionist Neo-Cons at the end of the day, not conservatives. They are as bad as any other news station.

Anonymous said...

"Right-wing" "left-wing"

What the hell is the difference

They both support feminism.

Remember that left and right wing are calibrated on our Social and Political Norms: which are based primarily on feminism.