Fox Q3 Profit Wiped Out By Dominion Defamation Lawsuit Costs
The costs of a closely scrutinized defamation lawsuit levied by Dominion Voting Systems wiped out profit at Fox Corp in its fiscal third quarter., spurring a loss of more than $50 million in its third fiscal quarter despite seeing increases in revenue from advertising and distribution.
The costs of managing the suit — Fox ultimately agreed to pay $787.5 million to settle claims that Fox News personalities had deliberately passed along erroneous information about Dominion’s role in the 2020 presidential election — were substantial enough that they offset a 43% gain in advertising during the quarter due to Fox’s broadcast of Super Bowl LVII, typically an event that boosts corporate performance year in and year out.
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“During the quarter we booked an $850 million charge in Other, net in relation to the Fox News Media defamation cases, reflecting all incurred and estimable costs at this time,” Fox Corp. said in a statement. The actual cash for settlement was taken out in April, as previously disclosed in Fox SEC filings.
Fox posted a loss of $54 million, or 10 cents as share, compared to profit of $283 million, or 50 cents a share, in the year-earlier period. It attributed the loss to “charges associated with legal settlement costs at Fox News Media.”
Speaking during a call with analysts and investors, Fox CEO Lachlan Murdoch told those assembled that settling the suit marked “a decision clearly in the best interest of the company and its shareholders.” An appeal, noted Murdoch, could have taken as long as two to three years to mount, and said a Delaware court hearing the case threw out many of Fox’s defense arguments.
But he doubled down on Fox News decisions that led to the massive payout, saying that the company’s decision to settle “in no way alters Fox’s commitment to the highest journalistic standards across our networks, or our passion for unabashedly reporting the news of the day.”
Fox said the lawsuit costs weighed on the operations of its cable-programming unit, where revenue fell to $1.57 billion from $1.58 billion in the year-earlier period. Affiliate fees were flat with last year due to subscriber declines, while ad revenue was off by about $23 million due to “the continued impact of elevated supply in the direct response marketplace at Fox News Media.” Cash flow also declined due to higher legal costs associated with Fox News and higher costs tied to the USFL and World Baseball Classic.
Revenue from broadcast TV operations rose 36%, or $655 million or 36%, as add revenue rose 61% due to Super Bowl LVII and more NFL games than in the year-earlier period. Affiliate fees rose 9%, or $64 million.
During a call with investors, Wall Street analysts peppered executives with questions about the company’s standing to handle legal costs. Fox faces a second defamation lawsuit with Smartmatic, another voting-technology firm, that is likely to come to trial in 2025. Executives said the company was optimistic about its standing in court.
Murdoch indicated that Fox News Channel was not likely to shake up its primetime lineup in the wake of the ouster of former primetime host Tucker Carlson noting, “there’s no change to our programming strategy at Fox News. It’s obviously a successful strategy.”
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