Donald Trump’s impeachment inquiry is causing chaos at Fox News, with reports of “management bedlam” as hosts battle over how to approach a political drama that threatens its ratings as well as its valuable presidential TV star.

Fractures in coverage of the Ukraine whistleblower report were publicly exposed in on-air dispute between afternoon anchor Shepard Smith and prime-time host Tucker Carlson.

On Tuesday, the semi-moderate Smith invited Judge Andrew Napolitano, a legal analyst, on to his show. Napolitano suggested Trump had committed a “crime” by pressuring Ukraine’s president, Volodymyr Zelenskiy, to consider investigating former vice-president and current Democratic 2020 hopeful Joe Biden and his son Hunter.

“It is a crime for the president to solicit aid for his campaign from a foreign government,” Napolitano said. “This is the same crime for which the Trump Organization was investigated by Bob Mueller.”

That evening, the vociferous conservative Carlson called on his own judicial analyst, former prosecutor Joseph diGenova, who duly called Napolitano a “fool”.

“I think Judge Napolitano is a fool and I think what he said today is foolish,” DiGenova said. “No, it is not a crime. Let me underscore emphatically that nothing that the president said on that call or what we think he said on that call constitutes a crime.”

A day later, Smith was on air calling Carlson “repugnant” for not backing Napolitano.

According to reports, Fox News CEO Suzanne Scott and Jay Wallace, the channel’s president, stepped in the quell the discord, directing Smith to cease his attacks on Carlson.

“They said if he does it again, he’s off the air,” a source told Vanity Fair, though the development was denied by a Fox spokesperson.

Other disputes broke out. Juan Williams, a host on the afternoon opinion roundtable show The Five, opined that Trump loyalists, including his colleagues, appeared to be repeating White House talking points.

Jesse Watters and Greg Gutfeld bristled at the implication: “What does that mean?” Gutfeld yelled. “Are you saying I got talking points?! You got to answer to the accusation!”

Watters added: “Are you telling me I was told what to say?”

Gutfeld went on to accuse Williams of taking his lines from the liberal-leaning watchdog Media Matters.

Against falling polling numbers, the impact of the Ukrainian whistleblower drama reportedly caused Trump loyalist Sean Hannity to remark that the allegations are “really bad” for the president, while Fox Corporation’s CEO, Lachlan Murdoch, is facing how to position the news channel toward an impeachment.

Hannity responded, tweeting to Vanity Fair’s Gabe Sherman that his sources “had flat out lied”.

“Not only did I not say what they told you,” the host added, “but I believe just the opposite. The insanity, obvious hypocrisy, and overreach of the Democratic Party on this issue is DRAMATICALLY helping [Trump] get re-elected.”

“It’s management bedlam,” a Fox staffer remarked, according to Vanity Fair. “This massive thing happened, and no one knows how to cover it.”

One dilemma for Murdoch is how to position Fox News as a defender of conservative-thinking viewers in a post-Trump world: a path advocated by former House speaker Paul Ryan, who joined the Fox board earlier this year.

“Fox is about defending our viewers from the people who hate them,” the source told the magazine. “That’s where our power comes from. It’s not about Trump.”

That logic may now be coming to the fore. Over the past several months Fox News management has noted that following Trump’s line has begun to cost the channel advertising revenue.

After mass shootings in El Paso, Texas, and Dayton, Ohio, Carlson disputed that Trump ever “endorsed white supremacy or came close to endorsing white supremacy” and dismissed white supremacy as “actually not a real problem in America”.

According to Media Matters, the number of ads supporting Carlson’s show plummeted. The host left on vacation – which Fox New flacks claimed was planned in advance – as advertisers, including Stein Mart, HelloFresh, and Nestlé severed ties with Tucker Carlson Tonight and the fast food chain Long John Silver’s pulled advertising from Fox News entirely.

Nearly 50 companies have issued statements dropping Carlson’s show since December, when he asserted that migrants make America “poorer and dirtier” – and dozens more quietly cut ties without saying anything publicly.

Bloomberg News reported an overall decline in ad revenue for Fox, rejecting Fox claims that ad revenue is steady.

• This article was updated on 28 September 2019, to include tweets by Sean Hannity.