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Big League Economics

The Impending Entertainment News Realignment



With the firing, then death, of Roger Ailes, the departure of Bill O’Reilly, and the swirling rumors about Sean Hannity either leaving or being fired at Fox News, many conservatives flippantly insist that any one (or combination) of these and other conservative entertainers/news people could “start their own network.” It’s certainly possible that the right combination of entertainers and capitalists could buy an existing structure and form it into a network—itself a mammoth undertaking, but not impossible—but start one from scratch?

It’s worth the time to recall how Fox News got to where it is today. In 1986 20th Century Fox television began operations, first with a Joan Rivers late night show (a failed undertaking that got her permanently banned from Johnny Carson’s Tonight Show), then in 1987, with “Married . . . With Children” and “The Tracey Ullman Show,” then added a show a week on Sundays only.

It gradually expanded its lineup and then added Mondays with “The Simpsons,” which remains the longest running sitcom in television (27 years). Fox Television fought its way into competition with the “Big Three” for entertainment value by the early 1990s. In 1996, Rupert Murdoch founded Fox News Channel (FNC) and appointed Roger Ailes as the CEO, with its ratings surpassing those of rival CNN in 2002. Bill O’Reilly’s show, first called “The O’Reillly Report,” then changed to “The O’Reilly Factor” was also started in 1996, along with “Your World With Neil Cavuto” and “Hannity & Colmes.” Murdoch, meanwhile, had acquired a significant interest in Fox in 1985. In 2013, FNC was split off from 21st Century Fox entertainment, including 20th Century Fox Television.

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Currently, the stock repurchase price of 21st Century Fox is $4.96 billion. That’s with a “b.” The company’s revenues have shrunk from $31.8 billion in 2014 to $27.6 billion in 2016. Of that, the films account for 31% of the income—down from 33% in 2015—and television (including FNC) yields $5.1 billion in revenues (up from $4.89 in 2015). Television, while seeing more revenue, has witnessed its share of the company’s overall revenue fall from 19% in 2015 to 17%, mostly due to affiliate fees. Sports can be a money maker if  Fox carries the Super Bowl, but the NFL keeps raising its rates too. Still, there appears to be no good news on the horizon. In December 2014, the company’s stock stood at $37.32 per share, compared to today’s price of around $24. Both the net sales and net income through the first three months of 2017 are down (5.7% and 3.9%, respectively. Meanwhile, despite a huge hit with “Deadpool” (over $280 million), Fox’s film revenues declined by $1 billion in 2016, producing fewer blockbusters than 2015.

The film industry, as everyone knows, is somewhere between a slow descent and a death spiral. Hollywood execs measure their tenure in months instead of decades. Studio wizards who had presided over a string of hits are now fired for a single pending bad quarter. The latest blockbuster to tank appears to be Dwayne “The Rock” Johnson’s “Baywatch,” and despite a few tentpole super-hero/spandex movies, it’s entirely likely that at least one major studio could leave the scene in the next year. In short, for FNC, it will not be possible for even a committed conservative leadership (which the company doesn’t have) to subsidize a conservative news organization the way Jeff Bezos can prop up the Washington Post with Amazon millions, or Carlos Slim can keep the struggling New York Times on life support with outside cash. A thriving Hollywood, with the right leadership, could have provided a nice buffer for FNC. No more.

What does all this mean for the Hannity, and FNC? First, while television revenues are up, sports remains a key driver. And since overall the television affiliate continues to lose its share of revenues, FNC has a problem. The Murdoch boys can play it safe and hold fast to the conservative audience that built Fox News, but this would require them to suppress their Inner Liberal (as well as that of their wives). If one lives inside the LA/NY/DC bubble, and thinks Donald Trump and his supporters are toxic, it might appear on the surface that shifting leftward would be a good business move. Again, though, that requires that one live in the bubble. Fox’s only chance to avoid irrelevance is to tack much harder to the right, not only keeping Hannity, but recruiting strong Trump defenders such as Laura Ingraham, or witty iconoclasts such as Mark Steyn.

That is, of course, if one is approaching FNC’s problems through a business eye. It’s unlikely that’s the case with the Murdoch boys, who seem intent on virtue-signaling to the Hollywood and New York elites. In such a case, falling revenues are less important than rising social status.

And as for that “new network?” The history of Fox shows that it was carefully planned, with FNC only “arriving” some 17 years after launch of the network itself. Most of all, Fox’s history shows that from the outset its leadership understood the core value of entertainment. However informative Mark Levin, Rush Limbaugh, or Glenn Beck are, the entertainment value of watching someone do a live radio show on television rates down there with “The Great Octopus Cookoff” and “Recycling Kings.” And entertainment ain’t cheap. Any new competitor must be phenomenally well-capitalized (in the billions), have a clear business plan that focuses on entertainment value first, and which is in it for the long haul—at least five years before seeing success. Right now, few such billionaires with a conservative vision are raising their hands.


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Big League Economics

Derrick Wilburn Explains Why Democrats Are So OLD



Derrick Wilburn of Rocky Mountain Black Conservatives (RMBC) explains in a stirring new piece shared on Facebook why the Democratic Party leaders are so old, while the Republican Party — adherent to its own term-limit laws — provides fresh faces in committee leadership.

Wilburn writes:

Quick, name a nationally-prominent Republican who’s under 60 years of age. Those who pay even the least bit of attention to the political game can likely name Tim Scott (52), Marco Rubio (46), Mia Love, (48), Ted Cruz (46), Rand Paul (54), Trey Gowdy (51), Nikki Haley (46) among others.

In recent weeks as many as 7 Republicans who are current committee chairmen have announced their intentions to retire from Congress. Why? Many in the media are attempting to sell the narrative that its because they sense impending doom. Not true. Its’ because the Republican caucus term limits its chairmanships and these have reached the end of their terms.

A recent piece in spotlights a key difference between the way the Republican caucus & Democrat caucus in Washington D.C. operate, but a difference few in the USA are aware of: “The term-limit policy, put in place by former Speaker Newt Gingrich (R-Ga.) in 1994, was designed to keep the party from growing stale by regularly injecting new blood and fresh ideas into the mix.”

The GOP’s self-imposed rule is that legislators can not serve more than six years as the party’s top lawmaker on a committee. So once you’ve chaired a committee for six, you’re out and it someone else’s turn. And there’s no back-dooring it. Once you’re done, you’re done. You can’t return to committee member status for a year or two then run for Chair again. They can chair another committee, but not the same one again.

Democrats have no such rules and its at least a part of the reason there’s such a lack of youth in the Dem caucus leadership.

Apply the same question which opened this newsletter to today’s Democrat party leadership — *quick*, name a prominent Democrat, someone with presence on a national level — who’s under 60 years of age. Nancy Pelosi (78), Harry Reid (tho now retired most can name him, 80), Diane Feinstein (84), Chuck Schumer (68), Maxine Waters (80), Elizabeth Warren (70), Bernie Sanders (76 – tho technically an Independent not a Democrat) & the list goes on. All nationally prominent, all 70, 75, 80+ years of age.

Where’s the youth? Blame, at least in part, a lack of (self-imposed) term limits.

Democrats pay their dues early in their careers by carrying the water (i.e. providing necessary votes) and one day ascend to the desired position of Committee Chair, then stay there, …forever.

So what happens often times is younger Democrats win local elections, get to D.C., look up and realize that these old farts aren’t going anyplace! The old guard is from districts in which they can’t be un-elected; they’ve been their for 25 years; been chair for 14; are currently 72 years old meaning they’ll be Committee Chair for at least another 10 or 15 until they retire (if they ever do.) So the young bucks realize, “I’m frozen out.”

For example: Rep. John Conyers, who was forced to (finally) resign in December amid the #MeToo scandal, was born in 1929. Conyers helped draft the presidential articles of impeachment — against Richard Nixon! Conyers first won a seat on the Judiciary Committee in 1965. He first became Chair of the House Oversight Committee in 1989.

Imagine you’re a young lawyer, say 46 years old, a Democrat who just won an election and your dream has been to get to D.C. one day and chair a committee that’s chaired (when Dems are in power) by 70 y/o Elizabeth Warren. You know good & darn well that you’ve no hope of that chairmanship for another 10 or 15 years! What’s that do for your hopes for your future?

You’ve heard of, seen and know Trey Gowdy, Ted Cruz, Marco Rubio, Rand Paul, Tim Scott, and they’re nationally prominent because they get a shot at the top much earlier in their careers and that, at least in part, summarizes why pretty much the only Democrats you see on the nightly news speaking from a podium into a microphone at press conferences are old farts. Nancy Pelosi, Chuch Schumer. That’s just about it.

The situation caused the National Review to write a major piece which it titled “Old-Guard Democrats Refuse to Leave the Stage” sub-title “They’re keeping new leaders from emerging.”

Are term limits a good thing? That debate rages on. But the Capital Hill Republican party took the step of self-imposing them 25 years ago and it cannot be argued that the step has not created some very noticeable separation and differences between the parties.

-A Derrick Wilburn original


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