Roger Ailes resigned as head of the Fox News Channel, felled by sexual harassment accusations leveled by a former anchor, leaving his boss and longtime ally Rupert Murdoch to settle frayed nerves at the most-watched news network in the US.
21st Century Fox, which owns Fox News as part of its collection of cable and entertainment assets, confirmed the extraordinary changes in a e-mail Thursday. Ailes will become an adviser to Murdoch, who at 85 becomes chairman and acting CEO for Fox News Channel and Fox Business Network.
Murdoch's decision to take on oversight of Fox News Channel will provide a measure of stability at the No. 1 cable news network as Ailes, its only chief in 20 years, is pushed out by the harassment suit filed by Gretchen Carlson, a former Fox star. Reports of Ailes's impending departure had rattled investors, sending the shares down 3 per cent this week.
The company's cable networks, led by the news channel, accounted for as much as half of 21st Century Fox's revenue last year and more than two-thirds of operating income.
"Having spent 20 years building this historic business, I will not allow my presence to become a distraction from the work that must be done every day to ensure that Fox News and Fox Business continue to lead our industry," Ailes said in a statement distributed by his lawyer, Susan Estrich.
"I am confident that everyone at Fox News and Fox Business will continue as the standard setters that they are, and that the businesses are well positioned for even greater success in the future."
As part of his resignation, Ailes agreed to a no-compete commitment, a person with knowledge of the matter said.
His compensation will be less than if he were fired for cause, said the person, who asked not to be named discussing private personnel matters. He will advise Murdoch through 2018, when his contract is set to expire, the person said.
21st Century Fox addressed concerns about the Fox News Channel work environment that were raised by Carlson's allegations in a joint statement from Lachlan Murdoch, the company's executive co-chairman, and James Murdoch, chief executive officer.
"We continue our commitment to maintaining a work environment based on trust and respect," they said in the statement. "We take seriously our responsibility to uphold these traditional, long-standing values of our company."
Ailes, 76, started Fox News at the behest of Murdoch, creating an alternative to more liberal competitors. While Fox News has been criticized for its partisan programming, it has used controversies, such as the fight between anchor Megyn Kelly and presumptive nominee Donald Trump to build ratings.
Fox has been marked by a consistency of serving an audience, and the next leader must keep Fox's unique vision, the identity of the brand and the star talent on point.
At 85, Murdoch is unlikely to be a long-term leader for the news network. But his decision to take over will buy time for the media baron and his sons, who were promoted to the top spots at 21st Century Fox last year, to decide how much to deviate from the template Ailes created. His decision to take the top spot suggests the company didn't expect Ailes to fall so quickly.
"That's not what you do when you have a succession plan in place," said Andrew Tyndall, who publishes the Tyndall Report, a website that monitors TV news. The Murdochs "have been taken by surprise."
Whoever ultimately replaces Ailes must help the channel adapt to the arrival of smartphones, social media and online video, while trying to preserve a franchise that delivers $1.5 billion or more in earnings before interest, taxes, depreciation and amortization.
"Fox has been marked by a consistency of serving an audience, and the next leader must keep Fox's unique vision, the identity of the brand and the star talent on point,'' said Andrew Heyward, the former president of CBS News. However, Heyward said, "there are certain endemic challenges facing 24-hour news operations.''
Fox News has shunned some of the costly field reporting common on CNN in favor of opinionated anchors sitting behind a desk -- a far cheaper option. It's proven more popular as well, consistently beating rivals CNN and MSNBC, even after MSNBC adopted a similar strategy with a progressive political slant.
As most TV networks fret about the defection of younger viewers to YouTube, Facebook and Snapchat, Fox News has leaned into its loyal, older audience.
Yet some analysts wonder how long Fox News can continue that approach. ESPN and CNN have invested in web operations to build relevance with younger consumers who don't have the same loyalty to conventional pay-TV.
"If the goal is to run the operations along the lines it has been, there are internal candidates who can do that,'' Heyward said. "But if the goal is to have someone who can not only continue to preserve, but also enhance the brand for the next generation of viewers, that seems like a harder order to fill.''
If the goal is to have someone who can not only continue to preserve, but also enhance the brand for the next generation of viewers, that seems like a harder order to fill.
Like Murdoch, Ailes carried the mantle of founder and visionary. Unlike Murdoch, he is not handing over Fox News to his two sons. Lieutenants Bill Shine, Michael Clemente and Jay Wallace are able to execute a strategy Ailes implemented, and keep the trains running.
Yet Ailes possessed skills, like his eye for talent, that will be hard to replace.
He plucked Kelly from obscurity and turned her into one of the biggest stars in TV. He hired former newsman Bill O'Reilly to host a nightly rant about the state of U.S. politics. And it was Ailes who created "The Five," which began as an emergency replacement for firebrand Glenn Beck and is now among the most-watched shows on the network, along with "The O'Reilly Factor" and "The Kelly File."
"Roger changed the face of media, not just television,'' said Jonathan Klein, the former president of CNN. "He's leaving behind quite a legacy and it's tough to find a another visionary like that in the business.''
Ailes's departure will lead to speculation about whether his on-air personalities follow suit.
O'Reilly and Sean Hannity both defended Ailes as the sexual harassment allegations spread. O'Reilly already has a side career as a best-selling author, while Hannity hosts a nationally syndicated radio show.
Kelly indicated a desire to transcend cable news with a special she hosted for the Fox broadcast network earlier this year. She also told lawyers that Ailes harassed her, according to a report in New York magazine.
A mass exodus is unlikely, according to Jason Schloetzer, associate professor at Georgetown University's McDonough School of Business, since Fox was unlikely to completely sever ties with Ailes. Schloetzer compared Ailes to Rebekah Brooks, CEO of the Murdoch's News Corp UK division. She resigned from the company during a phone hacking scandal, yet remained close to the Murdochs and returned after being cleared of all charges.