Media

Tara Lachapelle is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

If you thought Rogers Ailes leaving Fox News was the end of an era, then what do call the network saying goodbye to its biggest on-air personality, Bill O'Reilly?

In light of the sexual-harassment allegations made against O'Reilly -- the same thing that led to Ailes's ouster last summer -- 21st Century Fox Inc., the network's parent company, announced the 67-year-old host's departure on Wednesday afternoon. He's on vacation, which means no sign-off to viewers, and there were no warm words in Fox's terse statement, showing how seriously the Murdochs took the matter.

The tricky thing for anyone opining on this is, of course, reconciling the fact that the right move for Fox News as an employer, corporate citizen and brand could still be argued as the wrong move purely from a cold business standpoint. 

Sure, advertisers were already jumping ship from his show, "The O'Reilly Factor," but viewers weren't. And something tells me those advertisers might have returned once the dust settled. This is the most-watched -- and most profitable -- cable-TV network, and O'Reilly brings the eyeballs.

Glued
Fox News still tops the list of most-watched cable networks
Source: Bloomberg Intelligence, Nielsen
Note: Live+ same day, persons age 2 and above, prime time

Then again -- and without getting into the politics and ethics of it all -- this might not be such a loss for the company, for two main reasons: 

  1. Fox News has the most loyal audience there is, and that's because it has a monopoly on them, so to speak. For a big portion of its conservative viewers, not only do other networks not provide what they're looking for, they may even be repulsed by those other networks, especially left-leaning anchors. MSNBC, ABC, CNN -- they all compete with one another. But for a chunk of Fox News's audience, there probably is no competition. Donald Trump, president of the United States and cable-TV aficionado, is also a big fan of Fox News and constantly directing his base to the channel. 
  2. James and Lachlan Murdoch -- mogul Rupert Murdoch's sons who are pretty much running the show now -- know that Fox News needs to think about how it captures younger viewers. As I wrote in July following Ailes's exit, even though Fox News has by far the biggest audience, it also skews much older. Younger generations won't have the same attachment to O'Reilly and so this presents an opportunity. Megyn Kelly, 46, who left for NBC earlier this year, was Fox News's way to reach out to those viewers. Tucker Carlson, 47, replaced her in the time slot and ratings have stayed strong -- so much so, in fact, that he's been tapped to replace O'Reilly.  

Fox's cable-network division generated more than half the company's $28 billion of revenue and three-quarters of its $7.1 billion of operating profit in 2016. Any major changes in the news division may make investors skittish. But it's hard to imagine losing a meaningful amount of viewers because of O'Reilly's departure. This may just facilitate any transformation the Murdoch sons want to make at Fox. 

Holding Up
Fox shares are still up for the year and even outperforming some peers
Source: Bloomberg
Note: Time Warner's stock performance is capped by AT&T's pending acquisition.

The biggest impact O'Reilly's exit may have on investors is the parent company's 11.7 billion-pound ($14.5 billion) bid for Sky Plc, the British pay-TV company he founded almost 30 years ago. Fox is seeking approval from U.K. media regulator Ofcom, which among other things must determine whether Sky would continue to be a "fit and proper" holder of a broadcast license. The almost 10 percent spread between Fox's offer and Sky's stock price before the latest O'Reilly news showed doubts about the deal. Could be it's looking a little more fit and proper now.

As for Fox News's image, if it waters down its male-conservative appeal too much it risks looking too much like its peers (whether that would be a good thing or not, again, is for another discussion). What the network becomes is still an open question, but it's slowly adapting to a new time without alienating its loyalists -- so far. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tara Lachapelle in New York at tlachapelle@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net