Will Bill O'Reilly exit hurt Fox money machine? Wall Street weighs in

Bill O’Reilly’s ouster from Fox News is a blow to the network’s prime-time lineup. But the financial effect of O’Reilly’s departure on the company overall likely will be just briefly negative and not matter that much in the long run.

That’s the Wall Street take on the news Wednesday that the two-decade reign of Fox News’ biggest draw had come to an end following multiple allegations of sexual harassment. The stock of the network’s parent, Twenty-First Century Fox (FOXA), dipped less than 1 percent on the day, to close at $30.39. Since a bombshell New York Times report appeared April 1 detailing some $13 million paid in settlements to five women who worked at or appeared on his show, the stock has lost 6.25 percent.

But the investment community mostly views this situation as a temporary blip, owing to Fox News’ preeminence in the cable news realm. “There will be some impact, because O’Reilly will be tough to replace,” said Brett Harris, an analyst with investment firm Gabelli & Company. “But things are not really going to change because their position is so high.”

Fox’s position appears impregnable, and it seems fully capable of getting past the O’Reilly exit. It blew away the competition in the ratings for this year’s first quarter, which marked the highest-rated quarter ever in cable news history by the total day viewership measure, Nielsen data show. That  made 61 consecutive quarters that Fox News has finished first among cable news networks in total daytime and primetime gauges.  

Consider what happened after Roger Ailes stepped down as head of Fox News last July, also following multiple sexual harassment charges. The company’s stock slid 16 percent through mid-September, then rebounded. Certainly, the overheated presidential race, starring a Fox viewer favorite, Donald Trump, helped. 

But so did the parent company’s financial performance. In the last two quarters of 2016, net income surged 51 percent on revenue growth of 16 percent. Results for the just-completed January-to-March quarter will be announced May 10. And even with the latest stock downdraft, the shares are 15 percent above their level before the Ailes problem surfaced. 

The political commentator’s show, “The O’Reilly Factor,” was a big financial contributor to Fox, and it no doubt hurt when more than 50 advertisers fled from the program after the scandal broke in April. Still, the estimated $111 million that the show garnered in ad income yearly amounts to about 4 percent of Fox News’ total revenue, according to figures from research firm iSpotTV.  Analysts predict that many of those advertisers won’t be lost to Fox News, but will reallocate their spending to other parts of the network.

What’s more, the advertisers may find their way back to O’Reilly’s successor, Tucker Carlson. The network is moving him from his slot at 9 p.m. Eastern Time to O’Reilly’s former berth one hour earlier. Carlson is a fast-rising star at Fox, and he deftly replaced another top network personality, Megyn Kelly, after she moved to NBC in January. In fact, Carlson’s viewership is 10 percent above hers, Nielsen ratings indicate.

Even after the scandal appeared, O’Reilly’s viewership remained strong. Over the past two weeks, he has been on vacation to Italy, where he shook hands with Pope Francis, and was due to return to the show next Monday. His absence highlighted that not just anyone can substitute for him: Viewership declined by 26 percent as a rotating crew -- Dana Perino, Eric Bolling and Greg Gutfeld -- filled in. 

O’Reilly denied wrongdoing Wednesday and previously, saying he paid settlements to his accusers to “put to rest any controversies to spare my children.” His lawyer labeled the charges against him part of a “smear campaign” mounted by“far-left organizations bent on destroying O’Reilly for political and financial reasons.” 

One impetus to lay the O’Reilly predicament to rest may be that it has been a distraction to Twenty-First Century Fox’s expansion efforts. The company seeks regulatory clearance for its $14.6 billion acquisition of Sky, the U.K.-based satellite-TV provider.   

The decision to dismiss O’Reilly was widely viewed on Wall Street as demonstrating the rising power of Fox founder Rupert Murdoch’s sons. Although the elder Murdoch, 86, still heads the company, and stepped in to run its Fox News subsidiary when Ailes left, the sons -- CEO Lachlan Murdoch, 45, and Executive Co-chairman James, 44 -- have shown a yen to alter the perception of the family business as mired in old ways of thinking about things like gender relations. 

The public announcement of O’Reilly’s departure was curt and impersonal: “After a thorough and careful review of the allegations, the Company and Bill O’Reilly have agreed that Bill O’Reilly will not be returning to the Fox News Channel.”  

A later message from the three Murdochs to company employees was somewhat warmer toward the ex-host, although it tried to show that Fox would move on without him just fine: “By ratings standards, Bill O’Reilly is one of the most accomplished TV personalities in the history of cable news. In fact, his success by any measure is indisputable. Fox News has demonstrated again and again the strength of its talent bench. We have full confidence that the network will continue to be a powerhouse in cable news.”  

O’Reilly embodied the Fox News appeal to a right-leaning American demographic that felt traditional news coverage did not reflect their views. A strong conservative voice, O’Reilly delivered his gruff comments about liberals and perceived enemies of the right that struck a chord with this group. President Trump, a frequent guest on O’Reilly’s program, voiced his support for the commentator after news of his plight got out. 

But O’Reilly’s audience -- and Fox’s in general -- is aging: prime-time viewership for the network averages 68, versus 59 for CNN and 63 for MSNBC. Carlson, at 47 (two decades younger than O’Reilly), may be able to appeal to a younger crowd that will keep Fox at its lofty position.  

  • Larry Light

    Larry Light is a veteran financial editor and reporter who has worked for the Wall Street Journal, Forbes, Business Week, Money, AdviceIQ and Newsday.