Murdoch aide has harder slog in his new role

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Over the past 10 years, Roger Ailes transformed the cable-news business using glitzy graphics, brash marketing and a take-no-prisoners approach. His playbook vaulted News Corp.'s Fox News Channel into the industry's No. 1 spot.

Using a similar approach, he has since taken on a more prominent role at News Corp. -- including running the company's local television stations -- but the results aren't as impressive. Accustomed to operating his own fiefdom, Mr. Ailes has ruffled feathers among other executives. He has started a new TV network, called MyNetworkTV, but it hasn't shown much sign of life amid a broader slump in the local-TV business. Meanwhile, ratings at Fox News are declining faster than those of its competitors and its advertising-sales growth is slowing.

Mr. Ailes's independent streak contributed to the decision last year of Rupert Murdoch's son and heir apparent, Lachlan Murdoch, to quit the company. The younger Murdoch felt Mr. Ailes was undercutting his position, according to people close to the situation.

His style has even affected News Corp.'s relations with other media companies. Executives at CBS Corp., frustrated with the slow pace of negotiations between the two, didn't tell Mr. Ailes they planned to shutter CBS's UPN network, which ran on 10 News Corp. stations, until 10 minutes before the January news conference.

Mr. Ailes's adventures mark a change of pace for one of the world's largest media companies, which owns, in addition to the Fox television business, the 20th Century Fox film studio as well as newspapers and satellite-TV operations. In the past, the company was largely free of the infighting typical of the media business because of the single-minded control wielded by Chief Executive Mr. Murdoch.

But in recent years, Mr. Murdoch, 75 years old, has allowed Mr. Ailes to carve out a larger power base. In the process, that's sparked tensions within the executive suite.

Mr. Murdoch has long been a big supporter of Mr. Ailes, 66, whom he hired a decade ago. Last year, Mr. Murdoch renewed Mr. Ailes's employment contract for another five years. In a written statement, Mr. Murdoch says, "Roger has done a truly amazing job growing Fox News into the number-one news channel." He adds: "Roger has my full support and complete admiration."

Mr. Ailes says any intimation that he has sharp elbows is overblown. "There are lots of things that can be said about me -- but not playing for the full team is not one of them," he says. If the only way to win is to damage someone else, he adds, "you're no damn good."

He says Fox's stations have performed better than expected and that the new network will pick up. On the ratings declines at Fox News, "we're not unaware of a little bit of deterioration," he says, adding that "if you look at all the pressure on cable news, it's amazing that it's held up as well as it has."

A former Republican political consultant who began his career working for President Nixon, Mr. Ailes approaches business with a campaign-like competitiveness. In his political career, Mr. Ailes can claim credit for crafting the television ad that helped sink Michael Dukakis's presidential bid. The ad questioned the candidate's national-security credentials while picturing him riding a tank.

At News Corp., Mr. Ailes insisted on a lot of autonomy. Upon his hiring, he reported directly to Mr. Murdoch, unlike the heads of News Corp.'s other cable channels, who report to a News Corp. executive in Los Angeles. Mr. Ailes also oversees Fox News's ad sales and negotiations with cable operators. The other cable heads handed off those functions to a centralized group. Mr. Ailes says he insisted on those conditions to prevent "second-guessing" about programming.

For 10 years, Mr. Ailes's go-it-alone style was successful. In 2002, Fox News toppled Time Warner Inc.'s CNN as the cable-news leader by recasting the medium with snappy on-air personalities, a graphics-heavy presentation and an evening line-up bristling with conservative commentary. CNN never regained the lead, and Mr. Ailes won't let them forget it: Last week, he held a Fox News 10-year anniversary party across the street from CNN's Atlanta headquarters.

News Corp. doesn't report financial results for the Fox News Channel, but says it is one of the biggest parts of the fast-growing cable-networks division. The division reported operating income of $864 million for the year ended June 30. News Corp. has been slow to launch a business-news cable channel that would be under Mr. Ailes's auspices. Mr. Ailes says he wants to wait until the channel has sealed distribution deals.

Mr. Ailes has chafed at interference from other divisions. Last year, when Mr. Murdoch decided to invest heavily in Internet businesses, FoxNews.com was folded into a centralized ad-sales unit. Almost immediately, Mr. Ailes battled to get his division back. He complained that the unit's profits were falling as the centralized division spent to hire more salespeople, even as ad sales rose.

"We had some disagreements," Mr. Ailes says of his relations with the Internet division. Mr. Ailes says he and the head of the Internet division agreed to part ways during a meeting in December. Despite being associated with the leading cable-news network, FoxNews.com ranks as the 11th largest Internet news site, according to August figures from comScore Media Metrix.

Mr. Ailes had long been interested in the Fox local TV stations. But that was the province of Lachlan Murdoch, Rupert Murdoch's son, who was appointed News Corp.'s deputy chief operating officer in 2000. In 2004, Lachlan Murdoch appointed longtime Ailes lieutenant Jack Abernethy to head the stations. The close relationship between Messrs. Ailes and Abernethy sometimes left Lachlan Murdoch out of the loop, according to people close to the situation.

Lachlan Murdoch, for instance, wanted to postpone airing a new show by Fox News Channel correspondent Geraldo Rivera on local TV stations, according to people close to the situation. He wanted first to cancel "A Current Affair," a failing news program. Mr. Ailes went directly to Rupert Murdoch and won permission to ignore Lachlan's preference, these people say.

Mr. Ailes says he doesn't recall circumventing Lachlan Murdoch. "If that's what happened, I don't know it," he says. "I don't think that's what happened because Lachlan and I get along great." Lachlan Murdoch, who was upset with other decisions made by his father -- such as moving News Corp. headquarters to New York from Australia -- quit the company last summer.

Mr. Murdoch immediately tapped Mr. Ailes to take on the TV station portfolio. The Fox television station group is the largest in the U.S. and an important part of the News Corp. empire. The stations contributed about $1 billion of the company's $3.9 billion operating income in the year ended June 30, 2006.

After he added the station group to his portfolio, Mr. Ailes started introducing more news programming and a greater reliance on Fox News content. Such offerings can be more profitable for local stations, which can sell all the resulting ad time themselves. With many syndicated and network programming deals, local stations have to share the ad time with program makers.

The news operations of local TV stations have started to look like Fox News. Many have imported Fox News's flashy blue and red graphics and its spinning 3-D logo, and have trained local news anchors in Fox News's chatty on-air style. Some markets have also started using a variant of the Fox News tagline, "The most powerful name in news."

Mr. Ailes insists that the stations will remain editorially independent. "Fox News Channel will act as a support mechanism but those are real local stations," he says. "Editorially every news director has got to make his own decisions."

When the new logo rolled out in Los Angeles in April, morning-show host Jillian Barberie jokingly complained on air about the size of the logo, which covered up her shoes. Former New York Fox station anchor Chris Gailus says he wonders whether a cable image is right for local news. "My gut instinct is that people who watch local news may be a bit more traditional about the look," he says.

Mr. Ailes says the feedback from the station managers about the new look has been "ecstatic."

More recently, Mr. Ailes told CNN that News Corp.'s stations will no longer buy its news feeds, something for which he had long agitated. Some station heads had resisted the move, worried, among other issues, about the relatively scanty nature of Fox News's overseas coverage.

Mr. Ailes, who refers to CNN's international channel as the "Anti-American channel," says stations can rely on Fox News and its partners. "We don't think we need to be in the business of paying CNN," he adds.

Overall, Mr. Ailes's changes haven't translated into more viewers. The local stations' latest national ratings -- from May -- were mostly flat to down, according to Nielsen Media Research, which tracks the numbers. The entire industry is in a slump as TV stations across the U.S. struggle with increased competition from Internet and cable television.

In September, Geraldo Rivera's show, the one that Lachlan Murdoch wanted to postpone, drew about the same ratings as the weak program it replaced. "He's doing extremely well in some markets and we need to get a little better in some of the larger markets," Mr. Ailes says. "But he's doing better shows every day, I think."

Station revenues were also flat in the year ended June 30, 2006. Mr. Ailes says the stations did better than the shortfall the company had projected.

One of Mr. Ailes's bigger projects came about unexpectedly. Ten of News Corp.'s 35 television stations used to carry the UPN network, which was owned by CBS. During the fall of 2005, CBS felt that Messrs. Ailes and Abernethy were dragging their feet about renewing the contract, which was set to expire in 2006, according to people familiar with the situation.

"We weren't in a hurry, but we weren't turning it down," Mr. Ailes recalls. Eventually, CBS decided to ditch the network. Mr. Ailes says he got a call from CBS Chief Executive Leslie Moonves 10 minutes before the announcement was made. "Les called me on his way into the press conference," Mr. Ailes says. "Had they signaled any kind of urgency or intensity we would certainly have met with them." He says he met with CBS executives once.

At the news conference, on Jan. 24, CBS announced it would merge the UPN network with Time Warner's WB network to make a new network called CW. CBS said the CW network would air on stations owned by Tribune Co., leaving Fox without a network for its 10 UPN stations.

The announcement left News Corp. scrambling to come up with programming before its annual presentations to advertisers in May. Messrs. Ailes and Abernethy decided to revive an idea that had been kicking around News Corp: translating Spanish-language telenovelas into English. News Corp. produces the episodes on a shoestring budget of $200,000 to $500,000 for each hour-long segment. Traditional network dramas can cost $2 million to $3 million an episode.

MyNetworkTV launched as a new broadcast network in the fall with two debut telenovelas "Desire" and "Fashion House" running back-to-back hour-long episodes every night of the week during prime time. It signed up stations reaching 96 percent of U.S. households.

In the weeks prior to the launch, News Corp.'s Fox-affiliated television stations promoted MyNetworkTV heavily, even when it competed with the stations' own programming. Some at the Fox broadcast network thought the Fox promotions were suffering as a result, according to people familiar with the situation.

Peter Chernin, News Corp.'s president, expressed concern to executives that there was a "lack of communication" between the stations and the network, says a person familiar with his thinking. Finally, Messrs. Chernin and Abernethy agreed to cut back on MyNetworkTV promotions for the two weeks leading up to Labor Day and then to promote the MyNetworkTV shows within the Fox premieres.

Still, viewers and advertisers have not flocked to the new network. Ratings for the shows have been low. A person close to the situation says the network is losing a million dollars a week.

Mr. Ailes says test audiences liked the shows and that the network's success is a matter of getting the word out. "I probably undermarketed it," he says.



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