WASHINGTON – For Fox News and parent Fox Corp., the hefty $787.5 million it agreed to pay Dominion Voting Systems to settle a defamation suit is just the beginning of legal-based woes that could have a ripple effect on its broadcast stations, including the Twin Cities’ KMSP-TV.
How much Fox Corp. will ultimately pay to settle Dominion’s claims is unclear because there are ways it can trim the expense, through its insurance coverage and the ability to deduct the expense when it files its taxes.
“It looks to me like Fox Corp.’s $787.5 million settlement with Dominion is tax deductible, which could bring the amount down by $100 or $200 million,” said Scott Robson, a senior research analyst with S&P Global Market Intelligence who covers television networks. “On top of that, Fox is insured against these types of lawsuits, which could lower their cost by another $100 million.”
Fox Corp. also reported a lot of cash on hand – about $4 billion – as of the end of the year in its last quarterly filing to the Securities and Exchange Commission, even after it spent $1 billion on stock buybacks last year.
“They are financially equipped to handle the settlement,” Robson said.
Fox Corp. also says it is financially strong.
Still, the settlement – and other costs of litigation the company is involved in – as well as the impact of firing popular host Tucker Carlson has placed the profitable and far-reaching Fox empire at some risk.
The company indicated its legal woes exposed them to some vulnerability in its last quarterly report, filed with the SEC in advance of the Dominion settlement.
“Any fees, expenses, fines, penalties, judgments or settlements which might be incurred by the Company in connection with the various (legal) proceedings could affect the Company’s results of operations and financial condition,” Fox Corp. said.
Regarding Fox’s recent headline-making news, Matthew Tuttle, CEO of Capital Management, an investment firm, said “the impact is huge.”
“At the end of the day the business is advertisers,” Tuttle said. “Advertisers like lots of viewers and no controversy. Dominion equals controversy. Tucker leaving equals less viewers. All in all, a really bad mix.”
The Dominion lawsuit centered on baseless allegations aired by Fox News that the company’s voting machines were rigged against former President Trump in 2020.
There are other lawsuits pending, including a defamation suit from Smartmatic, a maker of electronic voting systems whose integrity was also attacked on Fox News shows, as well as those by several Fox shareholders. In addition, there are allegations of sexual harassment and discrimination on the basis of sex and race, including one involving Carlson, pending against the company. Still, Douglas Arthur of Huber Research Partners remains bullish.
Fox Corp. stock fell last year – in large part because of Dominion’s pending lawsuit. But the stock has recovered somewhat and is now trending at about $30 a share. After the Dominion settlement was reached, Arthur cut his price target on the stock from $40 to $38.
But he said in a report to investors that Carlson’s firing is likely to help bring Fox News “blue chip” advertisers that would boost revenues. Carlson’s show had largely been sponsored by My Pillow’s Michael Lindell.
“A shift away from fanatical conspiracy content, less ‘My Pillow’ stuff, might begin to re-attract big-time advertisers,” Arthur said.
He also predicted that “it’s likely Carlson’s blood is not the last spilt here,” as the network looks to boost advertising revenues. The analyst also predicted the Smartmatic suit would be settled for a lot less money than the Dominion lawsuit.
Meanwhile, Jeffrey Sonnenfeld, senior associate dean of the Yale School of Management, said the shareholder’s lawsuits against Fox News could be more devastating than the defamation suits filed by Dominion and Smartmatic.
There are 11 defamation suits, based on the company’s “recklessness,” and the behavior of its hosts and management that was uncovered during the Dominion lawsuit’s discovery process.
“Any one of those (shareholder) suits alone could be devastating,” Sonnefeld said.
Fox has 18 broadcast stations that are wholly owned and operated, as well as dozens of affiliated stations that pay fees to broadcast Fox content, including KQDS-TV in Duluth.
Some of the wholly owned stations could be at risk if Fox Corp. bleeds money because of litigation. But that’s not likely to happen anytime soon.
“They are not at that point yet,” Sonnenfeld said.
The Smartmatic case is scheduled to go to trial in 2025, although Sonnenfeld said it could happen a little sooner because the Dominion case allows the discovery process to be short circuited. The stockholder cases, of whom only two have been filed yet, will also take time.
Meanwhile, Fox’s television stations have been very profitable, and its cable network’s fees to cable and satellite providers gives the company a steady source of income when advertising dollars and the number of viewers are in flux.
“We don’t expect significant operational effects or changes to our business given our cash flow, strong balance sheet and the health of our business,” a Fox spokesperson said.