Inside Fox Business News (p. 2)
Sizing up the competition
News Corp.'s chairman and CEO doesn't even view Bloomberg as a competitor. He praises the company's services to pros with its terminals, newswire, and TV programming, but believes he can create his own global empire serving the world's remaining business people.
"I used to have a Bloomberg machine. I found it hypnotic and threw it out. I'm not saying the service isn't fantastic. But for me it was hypnotic, and I was spending too much time on it and not running the business." His daily information gathering is basic: First he reads the New York Post's business section, then he turns to the Wall Street Journal - conveniently, a paper he owns and one he will soon own. "And that's it," he says.
While Murdoch has been thinking about the global implications of launching Fox Business, creating the channel has been the responsibility of Roger Ailes, who ran CNBC before jumping to News Corp. in 1996. Three years ago he strolled into Murdoch's Manhattan office for a meeting to discuss the Fox News Channel.
"Rupert said offhandedly that CNBC needs some competition," recounts Ailes. "He said, 'I think another business channel would work. What do you think?' I said, 'I think whenever there's a monopoly, like with CNN, there is an opportunity.' He said, 'Go ahead and do it.' And then he just switched to talking about the Internet."
But Ailes, who has had a colorful career that includes being an advisor to Richard Nixon and a producer of Shakespeare's plays for television, left the meeting deeply skeptical about launching a new business channel, an arena littered with failures. The erstwhile network CNNfn failed because it couldn't get carried on Time Warner cable (Charts) - a division within its own company.
In late March 2005, New Yorker writer Ken Auletta hosted an 8 A.M. breakfast in which he interviewed Ailes at Manhattan's Bryant Park Grill. Murdoch had been pushing to launch the network as early as 2005. This was Ailes's moment to push back. "I keep telling Rupert, 'Quit saying that,'" Ailes said to Auletta.
"Rupert is the eternal optimist," Ailes says now by way of putting that remark in context as he sits on a couch in his eighth-floor office, once occupied by Murdoch's son Lachlan, the former publisher of the New York Post who left the company in 2005. Three TVs are on in the background, including one in the lower left corner tuned to a soap opera. "They have those hot girls, but some of those guys, if I could turn them into anchors, that would be great," he says of why he leaves a monitor tuned to the soaps.
Ailes claims he was never opposed to the idea of a new business channel but just wanted to proceed slowly. "While Rupert always sees the glass as half full, I felt it was my job to present it as half empty until we were certain to get the maximum number of subscribers. I assumed since he wanted a business channel, we would eventually get there."
At that March 2005 breakfast, Ailes fretted over whether the Internet could make television business news irrelevant. "The question is, Does a business news audience really exist? Have they gone to the Internet? Are you playing to the ladies in Indiana who are investing? Are you playing to Wall Street? Are you looking at capital markets?"
When Murdoch once said that the new network would be more "business-friendly," earnest journalists everywhere shuddered, interpreting it to mean the network would be a public relations arm of corporate America. Ailes explains: "What we mean is we don't feel guilty about getting rich or being capitalists. I think many people in journalism do - or pretend they do. What I've learned about journalists is that they are all capitalists when they negotiate their own contracts and on payday. Other than that, they're suspicious of corporations, profits, capitalism, and generally democracy. We tend to be enthusiastic capitalists all the time because we refuse to be phony about it."
Murdoch, too, isn't above tweaking the sanctimonious members of the Fourth Estate who dismiss him as a bottom feeder. As some Wall Street Journal staffers spent the summer fretting about the impending invasion of the tabloid king, Murdoch recently visited the newsroom and had Col Allan, the colorful editor-in-chief of the New York Post, tag along, prompting frantic rumors that Murdoch had plans to install Allan at the Journal. No such thing. "I just thought that was a bit of fun," Murdoch says. Psych!
While Murdoch's optimism dueled with Ailes's skepticism about the Fox Business Channel, Beta Research published a study for cable operators that gave Fox hope that the market could accept a new channel. According to a copy of the report, the percentage of adults with a "high interest" in a Fox Business Channel was 23% in 2007, up from 16% in 2005 and 2006 - not off-the-charts figures, but a start. Participants in the study were told that Fox Business analyzes "the issues and events shaping our economy and tells viewers exactly what it means to the market and their own lives."
The Internet implications also gave Ailes cold feet. "We're basically launching two channels on Oct. 15. We're launching a cable channel and an Internet channel. You can't tell me that five years from now the Internet site might not be more valuable." He may be right about the website's eventually being worth more, since advertising in this sector is booming.
One immediate challenge for Fox Business is an exclusive content-sharing agreement between Dow Jones and CNBC that runs through 2012. CNBC pays a fee - probably under $100 million over the next five years, according to one well-placed source - for access to Dow Jones's content and reporters for on-air commentary. While News Corp. lawyers have been chewing over the deal, Murdoch told Fortune he expects it will run its course - meaning it could be five years before the Journal and Dow Jones can be fully integrated with the Fox Business Network.
But according to one source familiar with the situation, executives expect one of three scenarios to play out: The deal continues until 2012; News Corp. buys out the contract; or the Wall Street Journal uses wiggle room in the contract to reduce its presence on CNBC, forcing General Electric's lawyers to negotiate a settlement with News Corp. In the meantime, because of the CNBC-Dow Jones deal, Fox and Dow Jones executives are often present at CNBC programming meetings, according to one source.
That's content. On the business side Fox and Dow Jones are not waiting for the merger to close and are looking at ways to offer package deals to advertisers for the WSJ, Marketwatch, and Foxbusiness.com sites. And there's already a PowerPoint presentation floating around News Corp. about how FBN and Dow Jones could work together.
"Rupert has a global vision of everything," says Ailes. "It is hard for me to believe that if we have any kind of reasonably successful television and Internet strategy for business, that once the Journal gets integrated into that, we don't ultimately command the worldwide business market."
In January, Fox secured a deal to carry the Fox Business Network on Time Warner's (Charts, Fortune 500) cable systems, including placement on a low channel (No. 43 in the Manhattan market) - key for reaching Madison Avenue and Wall Street types. Where CNNfn failed in getting distribution, Fox succeeded because of Ailes's record of success.
"It was all wrapped up in cable operators' confidence in Ailes's ability to perform and achieve," says one Fox insider who was involved in the negotiations with cable companies. But it wasn't until this June that News Corp. began spending money on the channel and hiring talent. (While reporting this story I got a call from a Fox producer asking me to come in and interview. Also, in the interest of full disclosure, I worked at the New York Post for four years, writing about the media business.) The network has hired roughly 300 people, a fifth of the 1,500 people employed by Fox News and foxnews.com.
Ten days before the Oct. 15 launch, it is chaos in the Fox Business street-level studio as anchors and reporters run through dress rehearsals. The studio is busy - a table for group discussions sits atop a platform, next to a sunken circular couch. Cody Willard and Dagen McDowell, a Fox News veteran who switched to the business channel, present the day's business stories Fox-style, with production assistants pretending to be guests.
The story lineup is pure Main Street: the price that ticket scalpers are charging to see teen wunderkind Hannah Montana, a recall of Cub Scout badges for potential lead poisoning, a couple in New Hampshire who threatened IRS agents when they tried to collect their taxes, oil prices and what they may mean for the average American's heating bill.
At CNBC's headquarters across the Hudson River in New Jersey, the network's president, Mark Hoffman, is not worried about McDowell and Willard's populist patter, nor is he apologetic about CNBC's obsession with the stock market. He thinks Fox Business's plan to cover personal finance is a nonstarter. (CNNfn tried that and failed.)
"Cable works best when it is narrow and deep," he says. "We want to be popular but not populist. CNBC is focused on the markets and is for anyone who has wealth or aspires to wealth." He plans to continue airing segments from various Wall Street-area bars after the trading day. He doesn't deny copying Fox's idea but says it was hardly a novel one. "This isn't actually a breakthrough idea - interviewing people at a bar after the game," he says.
But before the CNBC vs. Fox Business matchup is over, bet on Ailes ditching his initial playbook if it falters. He's like Peyton Manning that way. "I'm going to call a lot of audibles at the line," he warns. "And that scares [CNBC] more than anything else, because I'm pretty good at calling audibles."
Back in the studio, McDowell and Willard are still working on their audibles: They move from the table to the circular couch, and the talk turns to campaign finance and the amount of money raised by Hillary Clinton. The phrase "war chest" is tossed out, and Willard says, "Those are some big chests."
McDowell responds, "Don't go there - I know what you were thinking."
With that kind of repartee, the tip jar at the Bull & Bear should stay empty.