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Bill O’Reilly Sexual Harassment Scandal, Advertiser Defections a Test for Fox News’ Future

Variety logo Variety 4/11/2017 Brian Steinberg

Just as Fox News was moving forcefully into the post-Roger Ailes era with none other than Rupert Murdoch at the helm, a fresh crisis has erupted to underscore how hard it will be for the news organization to clean up unsavory aspects of its toxic workplace culture, past and present.

Bill O’Reilly is accustomed to slinging condemnation on his nightly “The O’Reilly Factor,” but now the top-rated cable-TV news personality has become the focus of outrage and advertiser defections following the April 1 New York Times exposé about sexual-harassment allegations against him.

The same day the scandal surfaced, news broke that O’Reilly’s multi-million-dollar contract had been quietly extended. His previous deal had been set to expire at the end of 2017. After losing star anchor Megyn Kelly to NBC News in January, Fox News moved quickly to re-up with O’Reilly, although they kept it quiet, even internally, in anticipation of the Times story. It’s understood that the new deal includes tougher language that gives the network leeway to end the relationship if there are fresh allegations leveled at O’Reilly for unacceptable workplace behavior.

The accusations that O’Reilly used his clout to seek sexual favors and punish those who didn’t acquiesce — resulting in at least $13 million in settlements — was an uncomfortable echo of the allegations unleashed last summer against Ailes. Ailes, the seemingly indomitable Fox News founder and CEO, was forced out last July, albeit with a $40 million settlement. Ailes and O’Reilly have denied wrongdoing. (O’Reilly has said he entered into settlement agreements to protect his children.)

Severing ties with Ailes was a shock to the system for Fox News, which he led for 20 years to great heights of viewership and profitability. The mounting pressure to make a decision on O’Reilly’s fate could deliver an even bigger shock to the bottom line of parent company 21st Century Fox.

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21st Century Fox initially issued a qualified statement of support for O’Reilly, acknowledging the sexual harassment-related settlements but in the same breath asserting that no employee has ever filed an HR complaint against him.

“Mr. O’Reilly is fully committed to supporting our efforts to improve the environment for all our employees at Fox News,” 21st Century Fox said.

But as the advertiser pullouts snowballed throughout last week, the unease caused by the situation was palpable, insiders said. There’s a sense that the question of O’Reilly’s fate with Fox News is far from settled — and executives were on eggshells about the prospect of more revelations to come. For the first time, sources said, there has been real thought given to who might succeed the network’s longtime star in the crucial 8 p.m. time slot.

The situation amounts to an enormous dilemma for Murdoch — who stepped in as interim Fox News chairman after Ailes’ hasty ouster — and his sons, 21st Century Fox CEO James Murdoch and executive chairman Lachlan Murdoch, who have taken the corporate reins of their father’s empire.

Fox News alone generates as much as 20% of 21st Century Fox’s annual operating profit. “The O’Reilly Factor” has been the cornerstone of the channel since its inception, drawing nearly 4 million viewers a night. More than 60 advertisers were quick to drop out of O’Reilly’s program, but those dollars were largely shifted to the other programs on the Fox schedule. By the end of last week, “The O’Reilly Factor” was airing with as much as 10 minutes of extra editorial content to make up for the glaring lack of advertising.

From the outside, it appears that the Murdochs face the choice of standing by the personality who put Fox News over the top in its early battle with CNN, or risk losing his ratings and value to the network. Fox News is vulnerable to lost revenue if advertisers continue to stay away from “The O’Reilly Factor.” But the host has even greater value to Fox News as a must-have personality for a big slice of the cable news audience — a following that helps Fox News command nearly $2 per subscriber per month from MVPDs, the highest sub fee of any cable-news operation.

And then there’s the question of the message sent to employees and the news biz at large. If the allegations are credible — the claims of former “O’Reilly Factor” contributor Wendy Walsh are now being investigated by Fox News — leaving him on the air calls into question the parent company’s assertion that it takes questions of workplace behavior “very seriously.”

Another hard fact that will surely influence the Murdochs’ decision-making around O’Reilly is whether his core audience will be as alienated by the sexual harassment allegations as major advertisers. They did not abandon him last week: “The O’Reilly Factor” averaged 3.7 million total viewers and 652,000 in the target adults 25-54 demo last week, up by double digits in both measures from the year-ago frame. He ranked as the No. 2 show of the week in all of cable, behind only USA’s “WWE Raw.”

Ailes’ tenure at Fox News was finished when he lost the support of Rupert Murdoch after an internal investigation brought forth numerous reports of alleged harassment of female employees over the years. O’Reilly’s supporters at the network maintain that some of the incidents with five women detailed in the Times report began as consensual affairs. None of the material in the report came as a surprise to O’Reilly’s higher-ups. But the swift success of the campaign to pressure O’Reilly advertisers to drop the show has been a surprise. O’Reilly has steadfastly kept mum on-air about the harassment allegations and the advertiser defections on his show.

Taking O’Reilly off the air for at least some period of time could serve as a useful strategy, said Scott Tattar, a longtime public-relations executive who teaches communications at Drexel University in Philadelphia. “The basic rule of thumb in the PR business is to react swiftly and communicate from the top. That means the CEO of Fox needs to act with alacrity in order to sweep the O’Reilly situation away with minimal damage,” said Tattar. “Unfortunately for Mr. O’Reilly, that likely means some time on the beach.”

“Bill O’Reilly is going to be driven out.”
Lisa Bloom, attorney for Wendy Walsh

There are loud voices out there pushing for much more than a long vacation for the commentator.

“We will keep the pressure on,” says Lisa Bloom, attorney for Walsh. “The public is keeping the pressure on. The advertisers are keeping the pressure on. Just like everyone said Roger Ailes is so powerful, Bill O’Reilly is going to be driven out. He’s become a real detriment.”

Trying to fill hours without O’Reilly on the air would pose a challenge for Fox News. Simply put, it is difficult to envision the network without him. His program attracted an average of nearly 3.3 million viewers in 2016, according to data from Nielsen — making it the most-watched program on cable news. A boost from O’Reilly’s lead-in has built other careers on the network. Megyn Kelly was a force in her own right, but she also benefited from O’Reilly’s weeknight lead-ins. Jesse Watters, a “Factor” regular who draws attention with man-on-the-street interviews, was recently granted a new hour-long berth on Fox News’ Saturday-night lineup.

Who might Fox News use to stand in for him? Eric Bolling, a former commodities trader who is a co-host of the Fox News late afternoon program “The Five,” has worked as a “Factor” substitute, as has Watters and Fox News personalities Greg Gutfeld and Juan Williams. Bolling has been a semi-regular fill-in for O’Reilly on Friday editions of “Factor.”

The red-hot controversy swirling around O’Reilly has pushed Fox News to the brink of crisis when it should be doing a victory lap. But rather than riding high on its momentum, Fox News Channel can’t seem to shake the continuing fallout from the past.

Among the recent revelations:

» Julie Roginsky, a Fox News Channel contributor best known for her appearances on “The Five” and “Outnumbered,” raised new allegations of sexual harassment at Fox News in a lawsuit detailing her account of being harassed by former Fox News chief Roger Ailes and then discriminated against in retaliation for reporting the harassment. Ailes has denied the allegations.

» The former chief financial officer of Fox News Channel, Mark Kranz, is said to have been offered immunity from prosecution by U.S. government attorneys looking into payments by the network and 21st Century Fox to women who claimed to be harassed by Ailes. In February, 21st Century Fox acknowledged that it had “been in communication with the U.S. Attorney’s office for months,” but said that it had not received a subpoena. Fox also said it “will continue to cooperate on all inquiries with any interested authorities.”

» Three African-American employees of Fox News filed a racial discrimination lawsuit charging that they had been subjected to racist comments and discriminatory actions from the company’s longtime comptroller, Judy Slater, who was fired before the suit was filed in March. The complaints filed by the employees were full of details and comments attributed to Slater that reinforced the notion of Fox News being a rough working environment for women and minorities.

But nothing is a more immediate crisis to solve than the fate of O’Reilly. Behind the scenes, some Fox News executives have voiced quiet support for the host. But even those who believe the latest scandal is rooted in old news — the largest of the settlements in the Times report was widely publicized in 2004 — there is a grudging understanding that O’Reilly has become a litmus test for Fox News’ future.

Ramin Setoodeh contributed to this report.

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