News Corp. Profit Rises on Higher Ad, Subscriber Fees

Bloomberg

 

News Corp., the owner of Fox News and the Twentieth Century Fox film studio, said first-quarter profit rose 36 percent because of higher advertising and subscriber fees at its television channels.

Net income climbed to $775 million, or 30 cents a share, from $571 million, or 22 cents, a year earlier, the New York- based company said today in a statement. Excluding a tax benefit, earnings were 27 cents a share. Analysts on average estimated 24 cents, according to Bloomberg data.

Profit was driven by increases in the TV and publishing advertising markets. The company is also wringing higher fees out of television distributors for its broadcast and cable channels. Last week, Fox secured new deals with Dish Network Corp. and Cablevision Systems Corp., which agreed to pay what it called an “unfair price” to end a programming blackout.

“These deals are critical to driving the Fox network’s financial success to reflect its real value,” News Corp. Chief Operating Officer Chase Carey said today on a conference call. “Over the next couple of years as we continue to close new agreements we will be taking this business to a whole new level of profitability.”

Chairman and Chief Executive Officer Rupert Murdoch wasn’t on the call because he’s been traveling overseas, the company said. The last time he skipped an earnings call was November 2006, Bloomberg data show.

Sales in the first quarter ended Sept. 30 gained 3.2 percent to $7.43 billion, compared with the $7.41 billion average of 11 analysts’ estimates compiled by Bloomberg.

Case Closed

News Corp. rose 38 cents, or 2.6 percent, to $15.22 in late trading after U.S. markets closed. The Class A shares gained 23 cents to $14.84 today in regular Nasdaq Stock Market trading and are up 8.4 percent this year.

Cablevision and News Corp. resolved their dispute Oct. 30, after Fox broadcast stations and some Fox cable channels had been cut off to 3 million customers for two weeks. It was the longest blackout of a major broadcast network for a million or more people in at least a decade, and may signal media companies are gaining the upper hand in seeking payment for over-the-air telecasts that used to be free.

News Corp. is turning to so-called retransmission fees after advertising sales took a hit during the U.S. recession. Fox has also seen viewership fall, 16 percent among viewers 18 to 49 in the first six weeks of the TV season, threatening its six-year run as the ratings leader.

Cablevision and Dish probably will pay 55 cents per subscriber per month in the first year, rising to $1 in the fifth year, analyst Michael Nathanson of Nomura Securities International Inc. estimated in a Nov. 1 report.

TV Profit

Operating profit for the television unit more than doubled as a 22 percent jump in local-station ad revenue offset higher programming costs at the Fox broadcast network.

The cable networks, such as FX, increased operating income 28 percent to $659 million, on a 17 percent gain in revenue. At the U.S. channels, advertising grew 16 percent and affiliate fees rose 14 percent.

As part of Murdoch’s efforts to add to subscription operations, the company is bidding for the 61 percent of pay-TV operator British Sky Broadcasting Group Plc it doesn’t already own. In June the biggest U.K. pay-TV operator rejected News Corp.’s buyout offer of 700 pence a share, or 7.8 billion pounds ($12.5 billion). BSkyB’s independent directors are seeking more than 800 pence from News Corp.

Today, News Corp. formally asked for approval from European Union antitrust regulators, which set a Dec. 8 deadline for reviewing the BSkyB transaction. U.K. regulators may still decide to raise objections.

Box Office

During the quarter, the film studio generated $243.6 million at the box office with its top release being “Predators,” according to Box Office Mojo. That compares with $333.8 million a year ago when “Ice Age: Dawn of the Dinosaurs” was released.

Film operating income fell 28 percent to $280 million.

Advertising increased an average of 13 percent at the company’s newspapers around the world, including the Wall Street Journal and the Times of London. Publishing operating profit was up 51 percent to $178 million.

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. and its Dow Jones division in providing financial news and data.

Murdoch's BSkyB Bid Grows More Costly as Pound Gains

Bloomberg

 

Rupert Murdoch’s bid for the rest of British Sky Broadcasting Group Plc has become $700 million more expensive after the pound’s 6 percent gain against the dollar.

News Corp.’s 7.8 billion-pound bid for full control of the U.K.’s biggest pay-TV operator, dismissed by some investors as too little, was worth $11.5 billion when it was announced on June 15. It is now valued at about $12.2 billion. For News Corp. the cost in dollar terms may continue to climb, limiting its ability to raise the offer.

“It may make it more of a challenge for News to get to a price that we and most of the market feel they need to pay,” said Nick Bell, an analyst with Jefferies International in London. “It has been a very material rise since the deal was announced.”

Murdoch, chairman and chief executive officer of News Corp., wants full control of BSkyB to gain from its steady subscription business. He also has his sights set on the U.K. broadcaster’s cash flow, which increased 23 percent in the year ended June 30 to 626 million pounds as it reaped the rewards of investments in broadband and high-definition television.

The companies failed to agree on a price for 61 percent of BSkyB that News Corp. doesn’t already own and said they will focus on gaining regulatory approval first.

News Corp., based in New York, doesn’t hedge its investments in foreign operations, according to its U.S. regulatory filings. In an Aug. 6 filing, the company said that potential fluctuations in the pound may affect the amount of cash needed for the BSkyB deal.

The British currency traded at a six-month high against the dollar on Aug. 6. One pound now buys $1.5658, up from $1.48 in June.

‘Get More’

“Sterling may continue to do well,” Audrey Childe- Freeman, a senior currency strategist at Brown Brothers Harriman Ltd. in London. “The U.K. is a little ahead of the U.S. when trying to deal with the big-debt predicament.”

According to Bloomberg’s survey of 32 analysts, the pound may buy as much as $1.68 by the end of the first quarter of 2011. The median estimate is for $1.52.

The pound’s strength also means News Corp. will book greater BSkyB revenue when it’s converted into dollars.

“It looks more expensive, but they will get more from it,” said Lorna Tilbian, an analyst at Numis Securities in London.

A News Corp. official in London declined to comment on the impact of the pound’s gain on the deal. News Corp. will register its proposed purchase with the European Commission “very shortly,” Murdoch said last week. Both parties have said they will focus on regulatory approvals for the deal that would be Murdoch’s biggest acquisition.

Greater Scrutiny

“It could be 6 months or 12 months, but certainly not more than 12,” Murdoch said on Aug. 4. “We would be very disappointed if it went beyond this fiscal year.”

The transaction could take longer than one year if U.K. regulators and lawmakers intervene, said Martin Baker, an antitrust lawyer with the firm Taylor Wessing LLP in London.

“Anything to do with News Corp. tends to get scrutinized heavily by regulators,” Baker said. “On the whole, the merger control issues here are pretty benign. The battle will be over plurality of the media.”

BSkyB, based in Isleworth, England, in June rejected News Corp.’s offer of 700 pence a share. The independent directors, led by Nicholas Ferguson, chairman of SVG Capital, said they may accept an offer of more than 800 pence a share. There is a “significant gap” between News Corp.’s proposal and the company’s value, Ferguson said.

Small Premiums

News Corp. has said it plans to raise about $4 billion in debt to fund the purchase, and use cash for the remainder. The company has about $8.71 billion in cash.

Analysts at Citigroup Inc., Investec, Macquarie Securities, Numis Securities, Sanford C. Bernstein and Singer Capital Markets have named figures between 750 pence to 860 pence per share as a potentially acceptable price for shareholders.

Others such as Alan Gould, a New York-based analyst with Evercore Partners, said News Corp. pays small premiums when buying companies in which it has stakes, such as Fox.

“The history of News Corp. has been that they haven’t paid huge premiums once a deal’s been announced,” Gould said. “You have to pay a fair price. It doesn’t mean you have to pay an overly exorbitant price. There’s no reason for News Corp. to compete against itself.”

Gould estimates News Corp. may raise its bid to about 725 pence a share.

‘Disciplined Approach’

News Corp.’s Chief Operating Officer Chase Carey, who is leading the negotiations for BSkyB, said last week he isn’t talking to the independent board at this time.

Carey reiterated the offer was “full and fair” and said the company will take a “disciplined approach” to the deal.

News Corp. fell 25 cents, or 1.9 percent, to $13.14 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have dropped 4 percent this year.

BSkyB shares have gained 26 percent this year. They fell 2 pence to 706 pence today in London. BSkyB has traded close to 700 pence since the offer was announced, indicating investors are waiting for a formal offer to be announced before buying more shares, according to Panmure Gordon analyst Alex de Groote.

“The shares will narrow the gap as and when we get information that the deal is more firm,” he said.

Murdoch's Money for British Cycling Squad Provokes Envy at Tour de France

Bloomberg

 

Rupert Murdoch’s money is backing a U.K. cycling team at the Tour de France as the British try to end a winless streak that goes back more than a century.

Team Sky’s sponsors, led by British Sky Broadcasting Plc and Murdoch’s News Corp., see a marketing benefit during the current cycling boom for Britain, which won eight gold medals at the 2008 Olympic Games. Its superior financial clout is making the French envious, according to Daniel Malbranque, general secretary of the international riders’ union. A Frenchman hasn’t won the Tour since Bernard Hinault in 1985.

“There’s a lot of money in the Sky team and there are criticisms and comments” from French teams, Malbranque said from Perpignan, France. “If they were French, it would be different. There is jealousy.”

Team Sky, which wants a Brit to top the podium in Paris within five years, paid 2 million euros ($2.4 million) to hire U.K. rider Bradley Wiggins from the Garmin team in December, according to French newspaper L’Equipe. In promoting a high-tech approach, Manchester, England-based Team Sky is also irking some in France, host of the Tour since 1903.

The July 3-25 Tour crosses into France today after a prologue and two stages in the Netherlands and Belgium. Team Sky has three Britons among its nine competitors, and is in fifth place, 3 minutes, seven seconds behind the Quick Step team from Belgium after two stages.

British riders haven’t had success at the Tour de France, with none finishing in the top three. Wiggins was fourth last year, matching Robert Millar’s best performance by a U.K. rider 25 years earlier.

Last U.K. Team

The last U.K. Tour team was ANC-Halfords, which ran out of money during its 1987 appearance, according to William Fotheringham, author of “Roule Britannia,” a history of British riders at the race.

Team Sky has enough cash to fit mood lighting in its Volvo AB bus and equip its riders with Apple Inc. iPhones, BSkyB officials said. Sky cyclists are better paid on average than counterparts on other teams, according to Malbranque. Murdoch’s son James, News Corp.’s chief executive officer in Europe and Asia and a keen cyclist, is taking a special interest in the team and watched it at the Paris-Roubaix race in April, News Corp. officials said.

Murdoch, 37, declined to comment for this story, News Corp. spokeswoman Alice Macandrew said from London. In April, Murdoch, who’s also non-executive chairman of BSkyB, the U.K.’s biggest pay-television operator, told cyclingnews.com at the race that “we’re trying to push the envelope” with the team.

Takeover Offer

On June 15, BSkyB rejected a 7.8 billion-pound ($11.8 billion) offer from New York-based News Corp. to buy the 61 percent of the company it doesn’t already own.

News Corp. and BSkyB declined to give details of their financing of the team, whose other backers include Marks & Spencer Group Plc and Jaguar Cars Ltd., the luxury automobile maker owned by Tata Motors Ltd.

Tour de France teams’ annual budgets typically range from $10 million to $20 million, Jonathan Vaughters, manager of the Garmin team, said. While not the biggest in cycling, Team Sky’s budget is “healthy,” Robert Tansey, BSkyB’s group brand marketing director, said in a statement.

Team Sky is led by David Brailsford, who oversaw the British Olympic cycling success and who is bringing an approach to road racing that the team and backers call “aggregating marginal gains.” They’re not shy of talking about it: after testing riders’ aerodynamic profile in a wind tunnel, the team puts out a press release, says Marc Madiot, Francaise des Jeux team manager.

‘Media Driven’

“We too have that kind of know-how but we don’t make a fuss about it,” Madiot said from Paris. Sky is “more media- driven” than French teams, Madiot added.

BSkyB, which has shown English Premier League soccer games in the U.K. since 1992 and whose current contract with the league is worth 1.62 billion pounds, is backing the Tour team “not to promote a product” but to inspire millions of Britons to ride bikes, BSkyB’s Tansey said. The company, based in Isleworth, west of London, also supports “grass roots” cycling in the U.K., Tansey added.

The cycling investment is “small beer compare to what they pay for football,” said Nigel Currie, director of Guilford, England-based sports marketing agency BrandRapport. BSkyB “can help the sport develop and will easily get their money back” with the publicity, he added.

Of the Tour teams, Team Sky is not just upsetting the French. The Boulder, Colorado-based Garmin team objected when Sky lured away Wiggins while he had a year left on his contract. While signing under-contract athletes is common in soccer, it’s “not typical” in cycling, Garmin team manager Vaughters said.

Compensation

Wiggins told the Guardian newspaper Feb. 4 he couldn’t turn down the chance to lead a U.K. team, adding Garmin received compensation from Sky. Vaughters declined to comment, saying the accord was confidential.

The British shouldn’t get their hopes up, according to Madiot. Wiggins is fifth favorite at 20-1 with U.K. oddsmaker Blue Square and France’s best hopes are 250-1 chances, meaning a successful $1 bet would yield $250.

Spain’s two-time winner Alberto Contador is 1-2 favorite.

“There’s a possibility a French rider wins the Tour de France but it’s very difficult,” Madiot said. “And the same applies for the English.”

Less May Be More for Murdoch, New York Times as Newspapers Put Up Paywalls

Bloomberg

 

 

The Times, the London newspaper owned by Rupert Murdoch’s News Corp., is offering free tickets to Toy Story 3 or the chance of a weekend at the Grosvenor Hotel in Dorset to persuade readers to pay for news online.

The newspaper this week began closing down its free website and will charge for access, mirroring a long-standing practice at the Financial Times and the Wall Street Journal. The New York Times Co. plans to do the same next year. Both concede the step will mean fewer readers. A drop in advertising revenue is forcing them to seek other, more steady, sources of income.

“We don’t expect or require that all the people who do now will still look at it,” said Daniel Finkelstein, executive editor of the Times in London whose online fee will be 2 pounds ($2.89) a week. “What’s left is still a vast market.”

Among the first general newspapers seeking to charge for online content, the Times and the New York daily are betting that a smaller number of committed, paying online readers may allow them to extract subscription fees and bigger advertising sales. Print ads in the U.S. last year slid 29 percent to about $24.8 billion, the lowest since 1984. With online ad sales holding up better, newspapers want to capture a bigger piece of that pie, even as they lose some readers.

“Obviously a huge number of casual readers will get their news elsewhere,” said Paul Richards, an analyst at Numis Securities Ltd. in London. “What you’ll have left is a core of readers that you can target more effectively with advertising and services. If you know who your readers are it’s easier to monetize them.”

Hard to Do

While the Financial Times has had some success with the strategy, the ability of general interest dailies to carry it off is less obvious, industry experts say. Luring paying online readers may be harder with news that is more easily available for free on the Web.

“They’re not going to convince people to pay for news, because people weren’t paying for news,” said Nelson Phillips, professor of organization and management at Imperial College in London. “The big brands may be able to do it. But if you’re a mid-level paper, what do you have that’s not available on the Web for free?”

Murdoch’s News Corp., which this week offered to buy the rest of U.K. pay-TV operator British Sky Broadcasting Plc for 7.8 billion pounds ($11.5 billion), is pushing a business model with clients paying for content as a driver of revenue growth. He’s using that same strategy at the Times and the Sunday Times. The Times is now offering paying subscribers access to free events and discounted products through its ‘Times+’ service in an effort to build customer loyalty.

Volume Battle

News Corp. shares dropped 1.5 percent to $14.16 in Nasdaq Stock Market trading yesterday. The stock has risen 3.4 percent since the start of the year.

In May, the Times said it would cut its editorial budget by 10 percent, leading to the departure of as many as 50 staff. Editor James Harding said the newspaper’s “losses are unsustainable.”

Revenue at Times Co.’s News Media Group, owner of the New York Times, tumbled 23 percent between 2007 and 2009 to $2.32 billion. The company as a whole reported a $20 million 2009 profit, after a $58 million loss in 2008.

Charging for online content is among efforts at the two dailies to boost sales.

“If you want to get into a battle on volume, Facebook has already won,” said Rob Grimshaw, managing director of Pearson Plc’s FT.com, alluding to the world’s largest social-networking site. “You can gain a lot more on yield,” and by offering advertisers information on paying visitors, he said.

Striking a Balance

The Financial Times, which has a daily circulation of about 390,000, began its current system for access to its FT.com site in 2007. The site has about 126,000 subscribers, each shelling out at least 3.29 pounds a week in the U.K., and two million more registered users, who provide basic personal information in exchange for 10 free stories a month.

While the site usually charges about 35 to 40 pounds in fees from advertisers for every 1,000 views of a story, some parts of FT.com command “much higher” rates, according to Grimshaw. That compares with as little as one pound for less focused sites, he said.

The FT’s website has succeeded in striking a balance between mass-market appeal and winning money from subscribers, said Alexander Wisch, a media analyst at Standard & Poor’s Equity Research in London. “They are able to draw ads and get the eyeballs, and at the same time to monetize subscriptions.” Specialized publications “do draw audiences, and they draw audiences that pay.”

‘Prix-Fixe Menus’

The New York Times will see “some effect” on readership after it implements a paywall next year, Times Co. Chief Executive Officer Janet Robinson said in an interview. “We feel that we will protect as much of the audience as possible” with a “metering” approach, that allows free access to a limited number of stories, she added.

Existing paywalls usually follow one of three strategies: a flat-rate subscription for all content, a mix of paid and free articles determined by editors, or a metering system that allows readers a capped number of free stories of their choice.

Flat-rate subscription models have the advantage of “decoupling” the unpleasant experience of payment from that of reading articles, according to Ziv Carmon, who researches consumer behavior at INSEAD in Singapore.

Newspapers should “look at the prix-fixe menus in French restaurants,” he said. “If you’re eating a shrimp appetizer, you don’t think that every bite equals two bucks.”

Makes No Sense

The Financial Times in 2007 switched from a mix of free and paid content to its current metered model.

“One person’s goldmine of an article was behind the wall, but it could be irrelevant to another person,” Grimshaw said.

Still, any paywall strategy risks cutting newspapers off from an ecosystem of blogs and social media sites that was created partly by the availability of free content.

The New York Times in 2007 abandoned its two-year TimesSelect experiment, which charged for access to some columnists and articles.

Andrew Sullivan, a commentator at The Atlantic magazine whose site is among the top 15 blogs on the Web, dubbed the service “TimesDelete,” because of the difficulty of linking readers to stories behind the paywall.

Tim Kevan, a legal blogger, on May 28 left the London-based Times, arguing that he didn’t want his work to become “the preserve of a limited few.”

The Times’s Finkelstein argues that the newspaper needs to charge to invest in content output, even at the risk of smaller readership.

“It doesn’t make sense for any length of time to give away the product you’re selling,” he said.

Murdoch to Sulzberger: You are a Girly Man ?

Vanity Fair

It’s not just that Rupert Murdoch doesn’t like Arthur Sulzberger, or doesn’t think he’s a serious newspaper publisher. It’s that he thinks he’s weak—girly. Sulzberger—“young Arthur”—was a frequent subject during the many hours I talked to Murdoch when I was writing his biography. Sulzberger was always, for Murdoch, a punch line. Murdoch even mimicked him in a way to suggest … well … a certain lack of manhood.

It is a joke that is shared by Murdoch and Robert Thomson, the former Australian-rules football player who is now the editor of Murdoch’s Wall Street Journal: Arthur is a sort of poofter.

Well, on the front page of the Journal’s Weekend section this morning is a feature on how women from healthier populations prefer feminine-looking men. The piece is illustrated with a grid showing facial features of such feminine-looking men..

There is, in the bottom image of the lower quadrant of a male face, an unmistakable—if you pay attention to such things—dimple and odd right ear.

Without a doubt, the Wall Street Journal has selected Arthur Sulzberger as a prime example of its idea of a feminine-looking man.

Pure coincidence?

Murdoch often uses the editorial power of his papers to pursue his business goals. Foremost on his agenda is to maul The New York Times. Murdoch believes that one advantage he has in going after the Times is that Sulzberger is so easy to play and rile up—Murdoch once, with me, used puppet strings to refer to Sulzberger—and that Murdoch has a special understanding for how to get under Sulzberger’s skin. In the past, Murdoch has taken particular delight when the New York Post’s “Page Six” has ridiculed Sulzberger—with Sulzberger calling Murdoch personally to protest. “Whinging” is the word Murdoch uses for Sulzberger’s calls.

So just imagine what Young Arthur felt this morning when he saw the lower quadrant of his face in the Journal representing the archetypal girly-man.

This is a psychological warfare side of what’s going to be a very nasty newspaper war.

Ailes Finds Himself In Murdoch Family Firing Line

Guardian UK

Rotund, bald and ferocious, the Fox television boss Roger Ailes is said to have two speeds – attack and destroy. Every night under his watch, millions of Americans are enthused, engrossed or appalled by a lively diet of angry rightwing rhetoric served up on Fox's rolling news channel. But the heady mix of hectoring, finger-pointing and liberal-bashing may be proving too spicy even for the strong stomachs of his employers, the Murdoch clan.

Rupert Murdoch's family, a close-knit, powerful and discreet dynasty scattered across three continents, prefer to air their dirty washing in private. Rumoured squabbles over inheritance, succession and over Murdoch's choice of wife have generally played out behind closed doors.

But a gaping crack appeared in the edifice of unity this week as Murdoch's son-in-law, Matthew Freud, delivered an astonishingly public broadside against Fox News. Freud, a media-savvy London public relations supremo married to Murdoch's daughter, Elisabeth, told the New York Times that members of the Murdoch family had become embarrassed by Fox's output: "I am by no means alone within the family or the company in being ashamed and sickened by Roger Ailes's horrendous and sustained disregard of the journalistic standards that News Corp, its founder and every other global media business aspires to."

Freud is said to be adamant that he was speaking on his own behalf, but he is also unrepentant. His words were calibrated to exert maximum damage and are a stunning blow to one of Murdoch's longest serving and most successful lieutenants. Their impact was all the more powerful because such moments of indiscretion are anathema to Murdoch, as one high-ranking former employee recalls. "When you are in the inner circle, you are expected to keep your mouth shut. The mafia call it omerta – the code of silence."

On the face of it, Freud's remark indicates a rift within the family. But some Murdoch-watchers believe it may be a more subtle signal. When Freud spoke, it was not his voice but Murdoch's that many media observers in the US and Britain heard. The author Michael Wolff, who recently penned a biography of Murdoch, believes Freud's outburst may be part of an orchestrated attempt to undermine a lieutenant who is getting a little too powerful. He points out that none-too-discreet "whispering campaigns" pre-empted the departure of other top executives.

"In many instances, it takes about a year to fire someone at a high level within News Corp. They kind of marginalise you, stop speaking to you and eventually you get the message that it's over."

A former political strategist who worked on the successful campaigns of three Republican presidents, Ailes was hired by Murdoch in 1996 to launch Fox News, in a widely scorned effort to challenge the broadcast establishment.

Some 14 years later, Fox is by far America's favourite specialist news channel, pulling in 2.1 million prime-time viewers every evening – more than its two main rivals, CNN and MSNBC, combined. In business terms, it is a jewel in the crown of Murdoch's global media empire, tipped to make $700m (£430m) in operating profit in a difficult year for News Corp. Hit by asset writedowns, the parent company made a loss of $3.3bn last year.

"Fox is a star performer, without a doubt," says Edward Atorino, a media analyst at Wall Street stockbroking firm Benchmark, and Ailes is a key piece in the News Corp jigsaw. "There aren't too many Roger Aileses around … If he were to leave, it would leave a huge hole."

With a pay package of $23m in 2009, Ailes made more money than Murdoch himself. Unusually, he has revealed that he personally lobbied Murdoch after hearing that his US papers might endorse Barack Obama. That irritated younger members of the Murdoch dynasty, while Fox's coverage of Obama since has left some of them horrified. Andrew Neil, who edited Murdoch's Sunday Times for over a decade and is also a former News Corp executive, says James Murdoch and Freud's wife Elisabeth both supported Obama, while Elisabeth raised funds for the Democrats. Neither are liberal, he concedes: "They just happen to be marginally more liberal than Rupert. It's a difference of tone."

Neil doesn't buy the theory that Freud was acting with Murdoch's consent, but agrees that "he is reflecting the views of the younger Murdochs". "What better way to let their liberal friends know they are upset about the way Fox News is behaving than on the front page of the New York Times, the liberal journal of record?"

Although promoted under the slogan "fair and balanced", Fox News horrifies political moderates with the hectoring rhetoric of its prime-time evening anchors. One man in particular, Glenn Beck, raises liberal hackles with his furious diatribes against Obama. Advertisers including Procter & Gamble and the insurer Geico withdrew commercials from Beck's nightly show in August when the anchorman accused Obama of being "racist" towards white people. Just this week, Beck used a blackboard and chalk to illustrate the supposed similarities of Obama's policies to those of the Venezuelan president, Hugo Chávez.

Beck is by no means unique. Conservative commentator Bill O'Reilly has used his primetime Fox show to label Mexicans immigrant "wetbacks". A passionate opponent of abortion, he was criticised last year after a Kansas abortion doctor, George Tiller, was murdered. Repeatedly dubbing him "Tiller the baby killer", O'Reilly had eviscerated him for operating a "death mill" and "executing babies" for profit.

Fox's weekend line-up also includes a chatshow hosted by the former Republican presidential candidate Mike Huckabee, while Sarah Palin was signed up this week as a political commentator.

Fox's style was inspired by America's legion of rightwing radio "shock jocks", according to Kerwin Swint, author of Dark Genius, a biography of Ailes. "It's very anti-government, very anti-establishment," he says. "Part of Ailes's philosophy for television is that it should be confrontational. That draws viewers, it's exciting for people and it's always been a staple of talk radio."

Irritated by Fox's partisan coverage, the White House has upped the ante. Obama has described the Fox network as "entirely devoted to attacking my administration" and has repeatedly snubbed its shows. The White House has been accused of failing to call on Fox journalists at press conferences and freezing the channel's reporters out on overseas trips. Obama's officials are unapologetic – Anita Dunn, former White House communications director, described Fox as "the communications arm of the Republican party".

Fox argues that during daylight hours its coverage is objective, drawing a distinction between daytime reporting and opinion-driven evening shows in the same way that newspapers distinguish between news pages and editorials. And Fox has a track record of breaking major stories – including news damaging to Republicans. But clashing with the White House may not help Murdoch's other business interests, and he has faced pressure to tone Fox down.

"He has members of his family riding him hard about this all the time," says Wolff, adding that Murdoch has become increasingly embroiled with the liberal "chattering classes" of Manhattan and Hollywood under the influence of his wife, Wendi Deng. "He spends a lot of time socialising with people who tell him rather constantly that Fox News is contemptible."

News Corporation was quick to dismiss the row this week, portraying Freud as an outsider. A spokeswoman said: "Matthew Freud's opinions are his own and in no way reflect the views of Rupert Murdoch, who is proud of Roger Ailes and Fox News."

Ailes himself sought to defuse any notion of a rift, telling the Los Angeles Times that "the entire Murdoch family" had always been supportive of him: "There is nothing to the idea that I have any problem with the children."

Jack Shafer of the website Slate suspects Ailes is getting too uppity for his boss's liking: "There's only one star in the News Corporation firmament and it's Rupert Murdoch. You succeed there by keeping your head down and working hard. Murdoch despises glory-grabbers." Neil, who was sacked by Murdoch, concurs. "He hates it when the hired hands get above themselves, so Ailes's days are numbered."

Murdoch will be flying to the Swiss ski resort of Davos in two weeks to rub shoulders with the world's business and political elite. Unusually, Freud won't be attending. Murdoch watchers may seize on that as evidence that Freud has been frozen out by Murdoch, at least for now. Ultimately, however, it may be the rumbustious Ailes who is left out in the cold.

A Fox Chief At The Pinnacle Of Media And Politics

NY Times

In the fall of 2008, Roger Ailes, the head of Fox News, went to his boss, Rupert Murdoch, with two complaints: he had heard that Mr. Murdoch was considering endorsing Barack Obama for president in The New York Post, and he had read a book excerpt in Vanity Fair suggesting that Mr. Murdoch was sometimes embarrassed by the right-leaning Fox News.

Mr. Ailes threatened to quit, a person familiar with the conversation said. Instead, Mr. Murdoch soon rewarded him with a new, more lucrative contract — he made $23 million last year in salary, bonuses and other compensation, more than Mr. Murdoch — and The New York Post endorsed John McCain.

In an interview in late December in his office at News Corporation headquarters in Midtown Manhattan, Mr. Ailes conceded that he had opposed an Obama endorsement. (“I didn’t think he had the experience,” he said, adding, “I don’t tell Rupert Murdoch who to endorse.”) He was outraged by the Vanity Fair article but said he “demanded nothing” and did not threaten to quit. He said he did not have to.

“If you’re making money and you’ve hit your targets for five years, you don’t need to demand a new contract,” he said.

Mr. Ailes is certainly making money. At a time when the broadcast networks are struggling with diminishing audiences and profits in news, he has built Fox News into the profit engine of the News Corporation. Fox News is believed to make more money than CNN, MSNBC and the evening newscasts of NBC, ABC and CBS combined. The division is on track to achieve $700 million in operating profit this year, according to analyst estimates that Mr. Ailes does not dispute.

This outsize success has placed Mr. Ailes, an aggressive former Republican political strategist, at the pinnacle of power in three corridors of American life: business, media and politics. In addition to being the best-paid person in the News Corporation last year, he is the most successful news executive of the last 10 years, and his network exerts a strong influence on the fractured conservative movement.

Mr. Obama told The New York Times Magazine in October 2008 that the “Fox effect” had cost him two to three points in the polls. Since that election, Mr. Ailes and his cohort of conservative anchors like Glenn Beck, Bill O’Reilly and Sean Hannity have been riding a wave of discontent that sometimes puts them at odds with the Republican Party’s establishment, most recently with Fox News’s advocacy of an independent candidate in the 23rd Congressional District in upstate New York. The Republican candidate eventually withdrew.

“When you think about that, it’s the equivalent of the endorsement major newspapers used to provide,” said David Gergen, an analyst on CNN who has been an aide in Democratic and Republican administrations.

He went on: “Regardless of whether you like what he is doing, Roger Ailes is one of the most creative talents of his generation. He has built a media empire that is capable of driving the conversation, and, at times, the political process.”

Mr. Murdoch, in a statement relayed by a spokesman, said: “I’m proud of Fox News and what it is accomplishing, and I am grateful to Roger and his team for creating such a great asset for News Corporation.”

Mr. Ailes’s approach has put him at odds not just with the Democrats but also with the more liberal members of his boss’s family.

He played a well-chronicled role in the decision in 2004 by Lachlan Murdoch, Mr. Murdoch’s eldest son, to leave the company; he thought Mr. Ailes was intruding on his corporate turf. Two other Murdoch children, Elisabeth, a television producer in London, and James, the only Murdoch scion employed at the company, are sympathetic to Democratic causes and frequently voiced concerns to their father during last year’s presidential campaign about Fox News’s coverage of Mr. Obama.

And those concerns have only grown.

“I am by no means alone within the family or the company in being ashamed and sickened by Roger Ailes’s horrendous and sustained disregard of the journalistic standards that News Corporation, its founder and every other global media business aspires to,” said Matthew Freud, who is married to Ms. Murdoch and whom PR Week magazine says is the most influential public relations executive in London.

In the interview, Mr. Ailes said that both Mr. Murdoch and the News Corporation had been consistently supportive of Fox News and its approach.

Mr. Ailes, the son of a foreman at the Packard Electric plant in Warren, Ohio, described his upbringing with three words: “God, country, family” and said that credo was responsible for the success of Fox News.

“I built this channel from my life experience,” Mr. Ailes, 69, said. “My first qualification is I didn’t go to Columbia Journalism School. There are no parties in this town that I want to go to.”

Mr. Ailes majored in radio and television at Ohio University and worked for “The Mike Douglas Show,” where at age 27 he met then-presidential candidate Richard M. Nixon in 1968.

“The camera doesn’t like you,” he told Mr. Nixon, according to “Crazy Like a Fox,” a book by Scott Collins about Fox News.

“It’s a shame a man has to use gimmicks like this to get elected,” Mr. Nixon said.

“Television is not a gimmick, and if you think it is, you’ll lose again,” Mr. Ailes said. The Nixon campaign hired him a few days later.

The night in 1969 when Neil Armstrong walked on the moon, Mr. Ailes was inside the Oval Office setting up a screen on the president’s desk. The next year, Mr. Ailes was sent to Hawaii in advance of the attempt by the troubled Apollo 13 mission to return to earth. He prepared for two events in adjacent hangars: a funeral and a welcome home ceremony. Apollo 13 made it home safely.

 Joe McGinniss, who wrote about Mr. Ailes in his 1969 book, “The Selling of the President 1968,” keeps in touch with him. “Success never made that chip on his shoulder go away,” Mr. McGinniss said. “He holds onto what he envisions to be the values of the heartland and is suspicious of people on either coast.”

After serving as a communications consultant for politicians and executives, Mr. Ailes ran CNBC, the business network, in the early 1990s under Bob Wright, then the chief of NBC.

 “He’s got a very good sense of simplicity on air,” Mr. Wright said. “Because he had that background of being involved in political campaigns, he could develop a message and deliver it, and test it quickly to see if it’s effective.”

Mr. Ailes started Fox News in 1996 and faced skepticism that it ever could be a rival to CNN, much less the ratings and profits leader it is today. As recently as 2002, the network made very little money, said Michael Nathanson, an analyst at Sanford C. Bernstein & Company. Today, its vast profits secured by ever-rising fees from cable companies make it “probably the single most important asset at News Corporation,” he said.

“I built this business to throw off a billion dollars in profit,” Mr. Ailes said. “That was the goal from Day 1. In my own mind.”

Rick Perlstein, author of “Nixonland,” sees a strong resemblance between Mr. Ailes’s political experience and his approach to television.

“Like Richard Nixon, like Spiro Agnew, Fox News can never see itself as the attacker,” he said. “They are always playing defense because they believe they are always under attack, which attracts people that have the same personality formation. By bringing that mind-set, plus the high energy seamless stream of the aggression of talk radio, he has found an audience.”

Not all of Mr. Ailes’s political interests are national in scope. In 2002, after buying a weekend home in Putnam County, N.Y., an area rich in American history (a passion of Mr. Ailes’s) about 60 miles north of Manhattan, he became keenly interested in local issues. In 2008, he bought two local newspapers and installed his wife, Elizabeth, as publisher of both. He also has a young son.

There, he has engaged in a more direct version of politics. He is extremely concerned about zoning, among other local issues.

At a town hall forum on Oct. 26 sponsored by one of his newspapers, he had a heated exchange with Richard Shea, a Democratic councilman who was running for town supervisor. “I turn around, and there he is,” said Mr. Shea, who won the election. “He starts right in on the zoning. He says, ‘What are you trying to hide from me in the zoning?’ He said, ‘I own the newspaper.’ ”

Mr. Shea continued, “My takeaway was that this guy is pretty much threatening me.”

Mr. Ailes said he simply asked for Mr. Shea’s phone number and complained about “environmental zealots” in the town. “I am a conservationist,” he said. “I try to put the bottle in the right can.”

As powerful as he is within the News Corporation, Mr. Ailes remains a spectral presence outside the Fox News offices. National security had long been a preoccupation of Fox News, and it was clear in the interview that the 9/11 attacks had a profound effect on Mr. Ailes. They convinced him that he and his network could be terrorist targets.

On the day of the attacks, Mr. Ailes asked his chief engineer the minimum number of workers needed to keep the channel on the air. The answer: 42. “I am one of them,” he said. “I’ve got a bad leg, I’m a little overweight, so I can’t run fast, but I will fight.

“We had 3,000 dead people a couple miles from here. I knew that any communications company could be a target.”

His movements now are shadowed by a phalanx of corporate-provided security. He travels to and from work in a miniature convoy of two sport utility vehicles. A camera on his desk displays the comings and goings outside his office, where he usually keeps the blinds drawn.

Mr. Ailes said he received frequent threats over the years, but his concerns for the safety of his family were heightened by an incident at his New Jersey home after the 9/11 attacks. There was an intruder on his property, but no arrest was made. In Putnam County, he has bought several properties surrounding his home. A sign outside his house shows an illustration of a gun and advises visitors that it is under video surveillance.

After 9/11, Mr. Ailes sent a memo to President George W. Bush urging harsh action. Despite the influence Fox News has over many Republicans — the megaphone of Fox News is a valuable one for Republican politicians — he is generally not eager to be seen as having any relationship with the party. His influence in politics is once-removed, expressed through the talent he chooses and the tone he sets.

In a sense, trading intelligence with party officials would be a step down for Mr. Ailes. “He understands the news media, politics and the American people as well as anyone in the modern age,” said Newt Gingrich, the former speaker of the House.

Even Mr. Ailes’s political foes understand the influence of what he has built at Fox News.

“If he were a Democrat, I think there would be 67 Democratic senators right now,” said the political consultant James Carville, a former Clinton aide and a frequent guest on CNN. “In terms of the news business, the cable television business, and the political business, there is him and then there is everybody else.”

Murdoch To Try Making Paid Content Stick

from Media Buyer Planner

Rupert Murdoch plans to use the Sunday Times as a test for his new push to charge for online content, beginning in November.

The Sunday Times website is currently combined with sister title the Times, but it will be launched as a stand-alone site in the fall and will begin charging a fee to access content, according to the Guardian. So far, it is unclear whether the site will charge a fee for each visit, or whether it will offer a subscription model.

Following the announcement of huge financial losses in its fourth quarter, News Corp. chairman Rupert Murdoch said earlier this week that the company will charge for access to all news websites, including FoxNews.com, by the middle of next year. News Corp. revenue fell 11% to $7.7 billion in the quarter ended June 30; the company’s loss was $203 million, down from a $1.1 billion net gain last year.

The Sunday Times is the largest of the weekend newspapers in the U.K., with more than 1 million copies sold per week. It has long offset losses at the Times, but is now thought to be losing money.

Murdoch’s public announcement that he plans to charge for all titles indicates he may be subtly encouraging competitors to do the same, industry executives say. “[Murdoch] knows that this will work better if all the main competitors do it,” Andrew Neil, former editor of the Sunday Times and a key executive in Murdoch’s empire, is quoted as saying. But Neil said the online version of the paper will have to change significantly and have a distinct character, different from the print version, if a pay model is to succeed.

Meanwhile, readers of the News Corp.-owned Australian news site, news.com.au, are threatening to quit News Corp. sites should Murdoch make good on his plan to charge for content. More than 140 replies from readers were attached to Murdoch’s announcement, with most of them opposed to the move.

Murdoch is likely aware the move will not be a popular one among readers - but if he is successful in prompting enough other newspaper companies to charge for content, readers may have little choice but to ante up for the news. “Quality journalism is not cheap,” Murdoch said (via Australian paper The Age). “An industry that gives away its content is simply cannibalising its ability to produce good reporting.”

Murdoch is not alone in his claim that quality journalism does not come cheaply. BusinessWeek points out that New York Times executive editor Bill Keller, for example, used a similar phrase in an interview last December with NPR.

The most prominent newspapers that charge for content online are the Wall Street Journal and the Financial Times. Both offer some content for free but charge fees to those who want complete access.

How NOT To Show Up In Google SERPs

Rupert Murdoch is determined to change the way print content is treated on the web. In addition to being one of the first and largest media companies to plan a full-scale switch from free to paid content models for its newspapers, Murdoch is saying he will block News Corp content from being indexed by Google.

The issue involves the debate surrounding free versus paid content. Murdoch has made it clear for months that he believes free content online devalues the worth of the content. With that in mind, News Corp plans to stop offering its news sites for free, though Murdoch has said the company might not meet its own deadline of charging for content across all sites by the middle of next year. Murdoch’s company has clearly been at the forefront of the debate, and Murdoch expects a paid model to begin to be played out more and more often over the next two years.

News Corp, if it does indeed block Google’s access to its content, will be the first major media company to do so. “The traffic which comes in from Google SEO brings a consumer who more often than not reads one article and then leaves the site,” Miller says. “That is the least valuable traffic to us… the economic impact [of not having content indexed by Google] is not as great as you might think. You can survive without it.”

Google, for its part, claims to send news organizations about 100,000 clicks every minute. “Publishers put their content on the web because they want it to be found,” said a spokesperson (via the Telegraph). “But if they tell us not to include it, we don’t.”