Fox News: The Importance of Being Ailes

Posted by: Justin Bachman on September 15, 2009

The following post is from Ronald Grover, BusinessWeek’s Los Angeles bureau chief:

Anyone who ever wondered how important the Fox News Channel is to Rupert Murdoch and News Corp (NWS) need only peruse the company’s recent proxy statement. Roger Ailes, the former media consultant for Ronald Reagan who runs Fox News and other News Corp TV properties, collected almost $24 million last year in salary, bonuses, stock grants and other benefits – nearly $2 million more than Murdoch himself.

What makes the 69-year old Ailes so crucial to News Corp is the money-generating machine he has created out of Fox News, which clobbers both CNN (TWX) and MSNBC (GE) in ratings, and has become the third most watched cable channel during prime time. Its prime time anchors Bill O’Reilly and Sean Hannity are must-watch TV for news junkies.

That’s one reason why a big chunk of Ailes’ cash bonus — $5.5 million – came from a spike in the cable channel’s cash flow, which cable TV analyst Derek Baine of SNL Kagan pegs at 65% last year. He says Fox News had cash flow of $502.6 million last year. The channel saw big hikes in the fees that cable and satellite operators pay to carry it, while ratings growth also boosted ad sales, Baine estimates. Thus, the company awarded Ailes the maximum amount it could award under his contract, the company said in its proxy statement.

Even without the Fox News bonus, Ailes was not hurting. He gets an annual salary of $5 million and an annual bonus that last year was $1 million. (Murdoch gets an $8.1 million salary but no annual bonus). But while Ailes’ salary increased thanks to Fox News’ performance, Murdoch’s bonus was tied to the company’s earnings per share. As a result, like other News Corp executives with similar provisions, the CEO’s bonus fell by more than 60% “due to the negative impact of global economic conditions on the company’s fiscal 2009 performance,” the company said. In all, Murdoch received a cash bonus of $5.4 million, compared to $17.5 million the prior year, when his total compensation was $27.6 million.

Ailes is now turning his attention to the two-year old Fox Business Network, which he also oversees. FBN is seen in 50 million homes, about half the country. Ailes stands to get as many as 250,000 shares of the company’s stock (current value around $3.5 million) if he can get the channel to break-even on its cash flow. He would get another 350,000 shares if he can get its cash flow up to $100 million, according to the proxy. The channel had a negative cash flow of $46.9 million last year, says Kagan, and isn’t likely to break even until 2011.

That may be one reason why Ailes approved the signings of morning radio talk show host Don Imus and former ABC 20/20 co-anchor John Stossel, both of whom will be regulars on Fox Business. (Stossel will also appear on Fox News.) But fear not, Ailes still made money from his stewardship of the upstart business channel. Last year, he got 333,333 shares of the company’s stock, valued at around $4.4 million, the proxy says, because the fair market value of the channel “reached two times its cost.”

Other elements of Ailes’ compensation include the money that News Corp pays for his security during the work day, although he pays for his personal security. And there could be no end in sight for large pay days for Ailes. Under the terms of a contract extension that the Fox news chief signed last November, he stands to nearly double his bonus – to $10 million – by 2013. That comes on top of a hike to $1.25 million in his annual bonus and his $5 million annual salary. Then there’s the stock he’d get if Fox Business goes into the black.

But that’s not likely to make him the highest paid News Corp executive next year, even if the company revives and Murdoch’s salary returns to its lofty former heights. Former DirecTV (DTV) CEO Chase Carey, who rejoined the company on June 3 as its president and chief operating officer, got a $10 million signing bonus and will collect $8.1 million in annual salary. As for his bonus, well, Carey will pocket at least $5 million this year and could take home as much as $25 million. That could also make Murdoch second again.

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Reader Comments

robert

September 15, 2009 10:40 PM

sean hannity 'must watch tv'...? i suppose for anyone stupid enough to watch. and i say that as a lifelong republican. hannity is just a stupid blow hard who is a sad example of a voice or face political personality.

john

September 16, 2009 10:11 AM

great job Ailes and Fox News. #1 in primetime. #1 all day! #1 most watched cable news channel. CLOBBERS and DESTROYS its competition. Did you know Fox beats its competition combined?! Sometimes Fox news has DOUBLED the COMBINED averages of its competitors. The channel libs have love to hate is the channel most cable news watchers tune into. All the boycotts, scare tactics, in the world haven't stopped fox news!

GO FOX NEWS!! YEAAA!

john

September 16, 2009 10:17 AM

great job Ailes and Fox News. #1 in primetime. #1 all day! #1 most watched cable news channel. CLOBBERS and DESTROYS its competition. Did you know Fox beats its competition combined?! Sometimes Fox news has DOUBLED the COMBINED averages of its competitors. The channel libs have love to hate is the channel most cable news watchers tune into. All the boycotts, scare tactics, in the world haven't stopped fox news!

GO FOX NEWS!! YEAAA!

Steve

September 16, 2009 12:49 PM

I think it would be wise here to make a distinction between "news" and commentary.

Or between "anchors" and on-air personalities, for that matter.

O'Reilly's and Hannity's audiences aren't "news junkies" so much as they're 'the faithful', tuning in to hear someone validate and reinforce their world view so reliably every night.

SAH

September 16, 2009 01:25 PM

Clearly Ailes is doing something right- not only is Fox killing all other networks, but it is keeping America in check.

Allison Godwin

September 16, 2009 01:48 PM

Roger Ailes???How do you sleep at night. A big percentage of the American people are gullible and stupid and those are the crazy's who watch your station. Of course money grubbers will stop at nothing, not even putting idiots on their station like Glen Beck. It was bad enough with Hannity and O'hypocrite Reilly, but Glen Beck??? Give me a break!!!

Ned Wolf

September 16, 2009 04:06 PM

"FBN is seen in 50 million homes, about half the country."
I don't think so. Maybe it is available for purchase from assorted cable/satellite companies to 50 million homes ... but to imply that 50 million homes are watching FBN is untrue.
The last I heard 20,000 viewers throughout the whole day gaze upon the drivel offered up on FBN.
If 50,000,000 homes were watching FBN ... It wouldn't be in the red.

Wil Burns

September 16, 2009 04:14 PM

Huge ratings huh? Britney Spears CD's outsell that of Beethoven.....which one is more viable music?

Efmo

September 16, 2009 11:53 PM

Isn't Fox news free on basic cable & all the other stations cost extra to receive? It is that way where I live. Is Fox getting subsidized by Rupert's billions?

Loki

September 17, 2009 10:07 AM

I might hate Fox News and think people who watch and believe the so called tabloid propaganda...ERRR...news as less than intelligent, but I give kudo's to Mr. Ailes for creating a money machine even if have the content is fiction. I recall an article not long ago where a close friend of Rupert Murdoch stated that if he could make more money as a bleeding heart liberal news channel he would switch over in faster than a heart beat. (Murdoch worships money and he is great at making it!)

As for the signing of Don Imus though I feel Mr. Ailes is trying to convert the mostly white partially racist Fox News viewership into Fox Business News viewers by hiring Mr. Imus. Why else would they hire him? It is not like he has done Business News before, and yet he has had problems with racial comments in the past that align with Beck and Limbaugh.

The even more curious thing is since Fox News viewers often are a lower class of people who I would never expect to won stocks, this is an interesting demographic to go after.

Richard

September 17, 2009 11:11 AM

Ailes obviously has no shame. The garbage that appears nightly on the Fox News channel is a disgrace to journalism and to the United States. Beck, O'Reilly and Hannity are despicable "entertainers" who are about one thing and one thing alone: making themselves rich. Its a sad commentary on the state of our nation that we still have goobers who tune in.

MC71

September 17, 2009 11:36 AM

Roger is what Ailes America. He and Lee Atwater are the fathers of the evil, rancorous discourse so pervasive in today's society. They teamed up back in the Bush 41vs. Dukakis campaign to run a smear campaign packed with outright lies (such as blaming Dukakis for Boston Harbor pollution when it was the Reagan/Bush administration that cut the funding for the cleanup). They made racism a GOP staple (see "Willie Horton"). The Ailes/Atwater playbook lives on 24/7 on Fox News through Hannity, Beck, O'Reilly, Malkin and the rest, and the country that these sleazemeisters claim to love so much is much the worse for it.

Lizzy Ford

September 17, 2009 02:22 PM

The ever-increasing salary hikes to whores like Ailes and his ilk at FOX is utterly contemptible since it's happening as thousands of FOX employees across the country are getting laid off. The reason being given: lack of profits. But they have enough to squander on these thugs and thieves... while hard-working people are struggling to eke out a living.

Shame on Murdoch, double shame on Ailes for greedily sucking up all the money KNOWING what that's doing to other FOX employees.

Ken

September 17, 2009 04:55 PM

I don't know how Fox Anchors can say 'Liberal Media' when Fox is the most watched TV channel, and Limbaugh is the most listened to radio host. And both of these, not by a small margin, its by leaps and bounds. More 'facts be damned' opinion by Fox News.

StewartIII

September 17, 2009 06:00 PM

ChickaBOOMer -- Glenn Beck: The New $$$$ Oprah?
http://chickaboomer.blogspot.com/2009/09/glenn-beck-new-oprah.html

me

September 17, 2009 06:33 PM

of course fox beats the compitition.....its based on hate...i watch it all the time ...its like watching jerry springer.......

Bernhardt DeGiule

September 18, 2009 12:05 AM

Every American should be thanking FOX news. They we're the onlyorganization to break the ACORN story, actually begging the "mainstream" to do their own reporting on it. The Senate and House have just voted in a BIPARTISAN move. If FOX news could do that they're actually doing more for the country than any of our elected officials.

Dee

September 18, 2009 12:16 AM

Ailes and Murdock are true media whores. They care nothing about truth, facts, civility or country. It's all about the money.

bluerose

September 18, 2009 12:51 PM

MC71, you are 100% correct. This Jaba the Hut of the airwaves preys on the ignorance, fear and paranoia of incurious and I'm afraid rather stupid people. Sad that there seem to be so many of them I keep hoping that a good part of the audience are not Kool Aid drinkers but rather just watching the show. But that's not too cheering, either. Just like the "bread and circus" salves of the Roman era. And look how that worked for them!

bluerose

September 18, 2009 12:51 PM

MC71, you are 100% correct. This Jaba the Hut of the airwaves preys on the ignorance, fear and paranoia of incurious and I'm afraid rather stupid people. Sad that there seem to be so many of them I keep hoping that a good part of the audience are not Kool Aid drinkers but rather just watching the show. But that's not too cheering, either. Just like the "bread and circus" salves of the Roman era. And look how that worked for them!

James

October 6, 2009 05:57 PM

Wonder what the kids at Nickelodeon and Nick at Nite are making as they are ahead of the Faux Newz Propagandists - as well as ESPN!

James

October 6, 2009 06:04 PM

THE REASON PEOPLE WATCH ARE BECAUSE OF THE GULLIBLE PEOPLE LIKE BELOW. Americans love a good car wreck and/or tragedy. We have gullible, undereducated Americans (which is what the GOP revels in); the educated Americans can't "believe" these people are allowed to run wild, like so many others have mentioned here - Like Jerry Springer on Steroids, lying, distorting and anything, but reporting.

bernhardt DeGiule
September 18, 2009 12:05 AM

Every American should be thanking FOX news. They we're the onlyorganization to break the ACORN story, actually begging the "mainstream" to do their own reporting on it. The Senate and House have just voted in a BIPARTISAN move. If FOX news could do that they're actually doing more for the country than any of our elected officials.

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The media, entertainment and marketing worlds continue to shapeshift on a near-daily basis, as new forms arise and old assumptions erode. Where is it all going? No one really knows. But on this blog BusinessWeek’s media writers Tom Lowry and Ron Grover promise to provide ample helpings of scoop, provocation, and sharp analysis as they track and annotate this constantly changing terrain.

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