Power Lunch

How Fox Is Making Hay from Tea Parties


Watching cable news these days, you might think last year's Presidential election was still in full swing. The Fox News Channel's (NWS) right-leaning prime time shows have all but anointed themselves the Tea Party channel, marshaling Obama opponents for antitax parties around the country that its anchors stoked by calling it a "growing revolution." Meanwhile, MSNBC's (GE) ultraliberal commentator Rachel Maddow denounced the "revolution" as "tea tantrums," while fellow MSNBC talking head Chris Matthews could barely restrain his disgust at the protests. Even the traditionally evenhanded CNN (TWX) seemed to join the Fox bashers when reporter Howard Kurtz clucked that Fox "practically seems to be a co-sponsor of the event."

Nowhere on the TV dial is the competition more cutthroat these days than among the three largest cable news channels. With an estimated $1.4 billion in advertising revenue at stake, Fox News, CNN, and MSNBC are acting more like politicians on the make for an endorsement or vote than ever before. The catalyst for such an over-the-top display is a recent Nielsen report that MSNBC, once a rounding error for the ratings agency, had popped ahead of CNN (even briefly) for second place during the lucrative prime-time hours. The two are still a good-size neighborhood behind Fox, which was quick to hustle out a press release pointing out that its own hefty first-quarter ratings growth allowed it to "dwarf" its two smaller competitors combined.

Entertaining Rant

What we're watching is the politicizing of cable news networks as never before. More and more, Fox seems like a journalistic extension of the Republican right. When George Bush was riding high, so were Fox's ratings. When Bush's popularity plummeted, Fox's ratings weakened. (Fox did show growth last year as the white-hot, historic Presidential race was the tide that lifted all cable news boats.) MSNBC's own meteoric rise corresponded to its decision in 2006 to convert its traditional news coverage to all-politics, says NBC News Senior Vice-President Phil Griffin, and was stoked by the vehement anti-Iraq War sentiments of prime-time anchors Keith Olbermann and Chris Matthews. CNN, which prides itself on covering the news (and not taking sides), saw its four-year decline in ratings turn around last year as it captured key Presidential debates that helped boost its rating to a seven-year high.

The problem is that the news channels (or at least two of them) are becoming perilously close to entertainment outlets, with a little news thrown in on the side. It's little wonder, for instance, that Fox went into overdrive to stoke anti-Obama sentiment among its faithful, turning loose four of its anchors to report on the scene at different Tea Party events. For the first quarter, Fox is up an impressive 26%, including 24% in the prime time where Obama baiters like Bill O'Reilly and Sean Hannity continue to roll up massive prime-time numbers. Fox gives its conservative viewers a little more anti-Obama programming at 5 p.m. with its new anchor Glenn Beck, who draws an amazing 2 million viewers to that once all but dead pre-prime-time spot. You may not share the Fox anchors' politics, but I defy you to tear yourself away from their shows.

As for liberal viewers, it was hard to be unmoved by MSNBC anchor Olbermann's heartfelt defense of gay marriage this November in the wake of California's support of the anti-gay-marriage Proposition 8 ballot initiative. Nearly 1 million folks downloaded his eloquent commentary on YouTube (GOOG) alone, no doubt giving MSNBC a much-desired promotional platform for younger viewers who don't often seek out cable news. Clearly, Olbermann's brand of populism plays. His ultraliberal rants were one reason MSNBC saw its first-quarter ratings jump by 22% in prime time. Olbermann draws 1 million folks every night at 8 p.m. and another 635,000 for a repeat at 10 p.m. Better yet for MSNBC, its new liberal voice Maddow goes glib for glib with the venerable Larry King at 9 p.m., beating him as often as not.

The payoff for all this politics on the tube, of course, is ad revenues, the Holy Grail of TV. With liberalism pumping up MSNBC's ratings, media analyst SNL Kagan figures its ad sales will grow by about 4% this year, to $235.9 million—no mean feat, coming at a time when the rest of the media world is expected to see ad sales fall. Let's not cry for Fox News, however. It's still a monster, with projected 2009 ad sales of $563.7 million, total revenues of nearly $1.1 billion, and a profit margin of nearly 44% that most media properties would die for. (Do I need to explain further why news channels are so important to their corporate parents?)

Oh So Lucrative

As for CNN, it seems perfectly happy to let its two competitors slug it out. "We're happy to let Fox and MSNBC stake out their positions on the left and right," says Jonathan Klein, president of CNN's U.S. operations. "We're going to do what we have always done, provide the objective, quality news that our audiences come to expect from us." What CNN has is a killer brand name, of course. That's helped it to double its earnings over the last five years, to what SNL Kagan estimates to be around $455.5 million last year—just shy of Fox's $467.3 million—by heavily selling its news to overseas markets. Its ratings are up by 17% this year, but dropped by 10% in the lucrative prime-time hours (and a staggering 22% among the 25- to 54-year-old news watchers that advertisers target), so you have to wonder if the bean counters at CNN's parent Time Warner have started to sharpen their pencils.

Still, there is some good news on the dial as well for CNN, only at its smaller sibling HLN, formerly known as Headline News. HLN's ratings jumped by 62% in the most recent quarter. The big winner there is Nancy Grace, whose 8 p.m. show jumped by 82% in the most recent quarter, to 1.1 million viewers. (Better yet, it nosed ahead of Olbermann in the key 25-54 age group.) Of course, Grace doesn't exactly read the news, either. Her forte is racy crime stories. Ah, yes, even at CNN it seems, the winning formula can boil down to offering up a little news with the entertainment.

Grover is Los Angeles bureau chief for BusinessWeek.

Ron_grover2
Grover covers the media and entertainment industry for Bloomberg Businessweek in Los Angeles.

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