News Corp has paid out just over $US1 billion to settle claims against News America Marketing, including a settlement early this year, and there has been no public reports of an independent inquiry by Paul, Weiss or anyone else, or leaks about what an inquiry found.

From the moment Paul, Weiss was called in, Ailes was toast.

A shocking number of women subsequently emerged with harrowing claims of sexual harassment by Ailes and others at Fox News (which Ailes has denied). Reports of the Paul, Weiss investigations were leaked to selected journalists, continuing even after Ailes' departure on July 21.

Murdoch biographer Michael Wolff tweeted that the source of his information was the Murdochs themselves, via intermediaries.

News Corporation's New York Post reported Roger Ailes would be forced out of Fox News, one of a series of leaks about the Ailes investigation. Supplied

But in the Murdoch world, most thorny issues in the end reduce to the money question.

Ailes picked up a termination payment for $US40 million on his way out, and this month 21st Century Fox paid $US20 million to settle Carlson's lawsuit. It's a fraction of the three Murdochs' $US84.7 million Fox remuneration in 2016.

Yet all of these amounts are peanuts compared to what is at stake.


On July 5, the day before Carlson filed her sexual harassment lawsuit, 21st Century Fox had a market value of $US49.4 billion. Fox's B shares (the voting stock) closed last Friday at $US24.49, valuing the company at $US45 billion.

That's a loss of $US4.4 billion post-Ailes.

Empire split

When Rupert Murdoch split his media empire in two in June 2013, 21st Fox began trading at $US32.64 and the company was worth $US75 billion. Now it's worth $30 billion less.

Admittedly there are fewer shares. In three years Fox has spent $US14.7 billion buying back a fifth of its stock at an average price of $US32. The problem is those shares are now worth $US3.7 billion less than Fox paid for them—a direct loss for remaining shareholders.

The real genius of the 2013 demerger was that it killed the Murdoch Discount. Call it the family curse.

For decades News Corporation traded at a discount to other media companies despite showing year after year of stronger growth.

Investors discounted the stock because they worried what Rupert Murdoch was going to do next.


After News Corp split in 2013, the new News Corporation was still very much a Rupert Murdoch entity. But 21st Century Fox under Chase Carey was a much more conventional beast. Its stock price zoomed.

For two years the Fox share price stayed in the mid to high 30s. By early June last year it was down to $US32.85.

Carey consultancy

Two weeks later Lachlan Murdoch was appointed co-executive chairman with his father of 21st Fox. James Murdoch became chief executive, and Carey was suddenly number four in the hierarchy. On July 1 this year he left the company' He remains vice chairman and is a consultant, though Fox only announced this last Friday.

James and Lachlan moved against Ailes six days later.

Fox shares actually rose during the Ailes saga in July and did not fall until a week after his exit, when fourth quarter earnings disappointed again. It's the numbers that are doing the talking, not Ailes' exit. The market hasn't begun to be worried about that yet.

Last week at a Bank of America conference Lachlan complained about the "value discrepancy" between Fox and its rivals.

As Leon Lazaroff noted in TheStreet.com this week, Fox shares are trading at 13.7 times earnings compared with Time Warner's 15.2 times, Disney's 15.8 times and CBS at 13.9 times.


Fox shares are down 11 per cent this year, while Time Warner is up 17 per cent and CBS 11 per cent.

Fox's revenue results have missed analyst forecasts in five of the past six quarters. James and Lachlan may have inherited problems, but no one is cutting them slack.

Fox growth machine

The Murdochs have to keep the Fox growth machine going. If you compare 2016 earnings with 2012, operating income from Filmed Entertainment was down 17 per cent and television earnings are off 6 per cent.

That's OK though because operating income for Cable Network Programming was up a massive 45 per cent from 2012 to $US5.1 billion in 2016. It has provided all of 21st Fox's growth.

And the engine pumping at the heart of this giant money stream is Roger Ailes' legacy, Fox News.

What will the Murdochs do with it? Ailes biographer Gabriel Sherman has written of a "November Surprise", a culling of Fox News staff after the US election.

Rupert Murdoch, who is having a ball overseeing Fox News, has appointed Ailes lieutenants Bill Shine and Jack Abernethy as joint heads.


James and Lachlan appear at odds with Rupert over future directions but the Murdochs absolutely need Fox News to keep pumping, which means minimal changes. They can't afford to tinker.

Last Wednesday James Murdoch was telling a Goldman Sachs conference that Fox News ratings are "higher than ever", that it was bigger than just one man.

Management skills

James and Lachlan have made Fox News the issue on which their management skills will be measured. They have replaced almost all of 21st Fox's senior executives with their own picks. They can't afford to get Fox News wrong.

The Murdochs are not Trump supporters. Their frustration is that even with Ailes gone, they can't afford to change the course he set. Their best commercial course will be to ask themselves: what would Roger do?

The market doesn't like surprises and if it thinks Fox News revenues are at risk in a family dispute the stock will be hammered. You can call it a value discrepancy. What no one wants is any return to the Murdoch Discount.

That's good news for Abernethy. When he was a Fox Stations exec under Lachlan in 2005, Abernethy went to Ailes who in turn convinced Rupert Murdoch to overturn a Lachlan decision. So Abernethy as much as Ailes was behind Lachlan's decision to leave News.

He and Shine both signed new contracts this month. But Murdochs have long memories. Ask Roger.