Roger Ailes was a nationally known figure before 1996, when Rupert Murdoch hired him to launch Fox News Channel. But FNC will define the part of his legacy that he most coveted: The TV producer and political consultant wanted to be seen as a shrewd businessman — equal, if not superior, to his bosses at NBC and Fox.
His record is mixed, at best. Ailes, who died today at 77, was no manager: He ran FNC as a fiefdom, demanding personal loyalty and success at any cost as he tolerated — even encouraged — paranoia and violations of ethical norms.
There’s no escaping the fact that he was forced out last year after several women accused him of sexual harassment. Fox paid its former anchor Gretchen Carlson $20 million and apologized for the fact that she “was not treated with the respect and dignity that she and all of our colleagues deserve.”
But there’s also no gainsaying Ailes’ success in creating cable’s most profitable channel. He recognized that talk is cheap — and lucrative in a pay TV universe that values audience passion as much as size.
Fox News generated $1.6 billion in profit last year, according to an estimate from Kagan, a group within S&P Global Market Intelligence. FNC’s profit margin, at 64.1%, is the highest in pay TV.
Conservative viewers rallied to the channel — especially prime time commentators including Bill O’Reilly, Megyn Kelly and Sean Hannity (the first two no longer at FNC).
That made it a must-have for distributors. The bulk of FNC’s cash comes from the estimated $1.40 that cable and satellite companies pay it each month for each subscriber. Like with most basic cable channels, that amount is passed along to everyone, including non-viewers.
About 35% of FNC’s revenues come from ad sales. That’s relatively low relative to the audience size because the channel’s average viewer is 68, too old to excite most buyers.
Ailes was an early believer in the financial power of talk TV. Prior to moving to Fox, he ran CNBC where he appealed to day traders by infusing dry reports about the markets with a mix of know-it-all sass and sports programming pizzazz. That included assigning Maria Bartiromo to file reports from the floor of the New York Stock Exchange.
Ailes might not have moved to Fox if NBC had stuck with his idea to nurture a companion channel: America’s Talking. But Ailes was seen as a loose cannon at the network, then owned by General Electric. His idea was scrapped when the company decided to contribute America’s Talking to a joint venture with Microsoft: MSNBC.
Eager to get back at NBC, Ailes was a natural ally for Rupert Murdoch. The mogul also had been rebuffed in his effort to buy CNN; Ted Turner sold his company to Time Warner.
In the end, Ailes owed as much to Murdoch and Fox as it owed to him. FNC’s success is tied to the combination of bottlenecks among programmers and distributors that made basic cable a near monopoly — and one of the world’s most profitable businesses.
That model is beginning to collapse. Basic cable costs too much for many people at a time when household incomes have been stagnant, and the Internet has opened the way for less expensive alternatives.
But the cable era will define Ailes. He never became a mogul like Murdoch, or even Turner. He is a symbol, though, of a period of excess that enabled clever entrepreneurs to make extraordinary fortunes — and indulge in the belief that success was the only thing that mattered.