Die-hard Fox fans have been shuddering over reports that the recent changes by the sons are a sign that the new generation is steering the network more to the left by getting rid “of the old-guard culture on which their father built his empire” and bringing “a warmer and fuzzier workplace” that would move away from an “anti-politically correct environment.” But, let’s step back, and take in a bit of business and legal truth, and realize, in all seriousness, decisions like this are not made for “warm and fuzzy” reasons so that we can all feel good about Fox News. Despite rumors, the decision mostly certainly didn’t come at the urging of James Murdoch’s “liberal” wife whose tweets apparently exhibited some sign of “disdain” for Donald Trump.
The Murdochs run the fourth largest media conglomerate and are worth billions. Make no mistake, the young sons have every ambition of growing the company their father built to even a larger media empire. Yes, Fox News brought in 25% percent of 21st Century Fox’s operating revenue last, but there is a much bigger play here that seems to be missed in all of the hype. The decision likely comes down the Murdoch’s desire to own outright the very profitable Sky Network in the U.K. Right now they have a 39% percent stake, but in December, 21st Century Fox announced a £11.7bn bid for the 61% stake it does not already own.
However— and here’s the key to this entire thing (and it’s a legal point) — there are three words threatening to hold up the deal, and this is where the sexual harassment scandal and subsequent fall out at Fox News comes in. As The New York Times’ Jim Rutenberg adeptly pointed out, the Murdochs, as news and information owners, must be deemed by British regulatory authorities “fit and proper” owners to gain and retain a broadcast license. So, as you can see, it comes down to somewhat a “fuzzy” legal ethics concept imposed by the British government and lots of $$$$ on the line for the Murdochs.
As Rutenberg explains:
Understanding just how important the Sky deal would be for the Murdochs’ personal and global ambitions, and the complications that “fit and proper” could present to them, is vital to understanding the head-spinning developments at Fox News these past few months.
So what does it mean to be “fit and proper” to own a broadcast license in the U.K.? According to guidance from Ofcom, the government regulatory and competition authority for the broadcasting, “[i]n considering whether any licensee is fit and proper Ofcom will take into account any relevant misconduct of those who manage and control the licensee.”
Certainly, a large and looming sexual harassment scandal hovering over Fox News Network doesn’t bode well for the Murdochs. You add on top of that reports that the network is under criminal investigation by the U.S. Attorney’s office for possible misconduct involving the settlements for alleged victims of sexual harassment and you can see why attorneys for 21st Century are trying to clean up shop at Fox News — and fast. Literally, billions of dollars are on the line for them.
“The outcome (of an Ofcom investigation) may well depend on the circumstances – so flagrant disrespect for laws might be a factor to be taken into account whereas comparatively small/infrequent breaches of technical regulation would be much less likely to have an effect – indeed if we look at the position with regard to breaches even in the UK a serious breach would be required for Ofcom to take action,” University of Essex Law Professor Lorna Woods told LawNewz.com.
James Murdoch has been in trouble with the Ofcom before during the hacking scandal involving the Murdoch-owned News of The World. That debacle involved employees at the newspaper who were accused of illegally hacking phones in order to get scoops on high-profile celebrities. While the agency cleared Murdoch of any specific wrongdoing, they found he “repeatedly fell short of the exercise of responsibility to be expected of him as C.E.O. and chairman.”
In fact, the regulators were very critical of Murdoch for the way he handled a settlement agreement for one of the alleged victims of the hacking scandal. Here’s the key paragraph from the 2012 Ofcom ruling:
There is no evidence that James Murdoch took the necessary steps to apprise himself of the information he needed (some of which he knew existed) to carry out his duties responsibly following publication in a national newspaper of such nature and detail about the settlement he had personally authorised the previous year. We consider that James Murdoch’s failure to apprise himself of this information, given the information which he accepts he knew, fell short of the exercise of responsibility to be expected of the chief executive officer and the chairman.
If it sounds like deja vu, that is because during this latest round of scandals involving Ailes, the U.S. Department of Justice is also reportedly investigating whether Fox News failed to inform its shareholders about settlements made by the company to women who claimed they were harassed.
While it might be easy to boil this all down, as some media commentators have, to a “tug of war going on between Rupert [who was initially resistant even to parting with Ailes] and the sons [Lachlan and James, who are pushing for a cultural makeover],” the reality, I believe, is decidedly more complicated than that.