Fox is likely to experience limited business impact from a settlement which could remake Dominion

Fox Corporation’s $787.5 million settlement with Dominion Voting Systems is a landmark payout likely to have vastly different impacts for either business.

The settlement $787.5 millions between Fox Corp. and Dominion Voting Systems on Tuesday is a historic payout in an case that has sparked debate about issues ranging from free speech to democracy’s health. The agreement has a vastly different meaning for each company.

“Settlements of such magnitude are extremely rare in defamation suits,” said Lyrissa Liedsky, a constitutional lawyer at the University of Florida.

Even though Dominion initially requested $1.6 billion in damages, nine-figure settlements are not unheard of for high-profile media suits. In October, Connecticut jurors ordered conspiracy-theorist Alex Jones pay $965,000,000 to families of Sandy Hook Elementary School victims for defamation.

The damages were calculated according to the number families involved. The jury awarded 15 separate awards ranging from $28,8 million up to $120,000,000 plus punitive damages.

Infowars’ size is a small fraction of Fox News, and the $965 million verdict didn’t bring it down. Alex Jones, the founder of Infowars, declared bankruptcy in late 2013 but has continued to broadcast daily from his studios in Austin, Texas. Jones’ Infowars Store has continued to operate since the lawsuit. It sells supplements and survival kit.

, Fox Corp. has over $4 billion of cash on its balance sheets at the end last year. This allows to pay without selling assets. Analysts at Bank of America Securities predicted that Fox shares would drop by $1 for every $500,000,000 in damages.

Based on BofA’s projection, the $787.5-million payment would have impacted each share of Fox, which traded at $34 when the settlement was announced. The share price of the company fell modestly during Wednesday’s trading, ending just 16 cents below its previous closing price.

Fox News said that as part of the settlement on Tuesday, the court had found “certain allegations about Dominion false”, and expressed the hope that the deal would “allow the country to move ahead from these issues.”

The company emphasized the durability, size, and reach of its network, noting that “currently, it is the number one cable news channel [and] was also the most watched TV news channel for over 21 consecutive years,” reaching almost 200 million people per month.

The settlement for Dominion is enormous — likely much more than the company’s value.

Staple Street Capital, a private equity firm, valued Dominion’s assets at $80,000,000 before it acquired it back in 2018. Staple Street’s co-founder Hootan Yahgoobzadeh said to CNBC that the remaining $787.5 after legal costs and corporate taxes would be divided among shareholders including Staple Street as well as employees and management.

The number needed to be correct to compensate for the damage and harm they caused the company, the employees and management,” Yaghoobzadeh stated.

April 19th, 2023 9:06

Uncertainty surrounds the amount of cash that will remain for Dominion, but this could help to further cement its position as a leader in the election technologies sector.

Researchers at Wharton Business School of University of Pennsylvania estimated that in 2021 the industry earned $300 million annually. Dominion captured about 37% of vendor marketplace among eligible voters.

Theoretically, Dominion can use the funds to upgrade the voting infrastructure that it operates. In a report published last year, the Brennan Center for Justice , a nonpartisan institute for law and policy, , highlighted that there are many voting machines in need of upgrading. It estimated that replacing all voting equipment would cost $580,000,000.

Fox has faced criticism for its broadcasts in the past.

The Daily Beast reported on a leaked Fox News 2020 advertiser’s presentation that detailed how the network had survived the ad-boycotts of activists. The presentation included charts that purported to show “conversation volumes [about boycotts] decreased quickly to normal levels, regardless of response,” among brands – those who pulled their ads or those who didn’t.

Fox News did not face a boycott of advertisers because the settlement prevented a long trial and the need for on-air apology.

In 2021, advertisers walked away from the highest-rated program of the company, “Tucker Carlson Tonight” due to racist remarks. They have not returned. The show’s ratings helped boost the network’s market power, but major brands continue to air ads in its lower-rated programs.

Nandini Jammi, co-founder of Check My Ads, said that Wednesday the bottom line for Fox likely depends more on their ability to recover carriage fees than whether certain brands decide to run ads in certain Fox shows. Carriage fees refer to the amounts cable providers, such as Comcast and Verizon (which is owned by NBC News), pay TV networks in order to make them available to their subscribers.

In a November earnings call, Fox Corp. CEO Lachlan murdoch stated that two-thirds (or 63%) of the distribution agreements with cable companies will be subject to renegotiation in the coming years.

Jammi believes that the settlement exposes Fox to greater business risks.

She said that after being charged a high price for airing certain contents, they were now in a position of greater liability. “I believe that makes them exceptionally vulnerable to a consumer-organized pushback at this time.”

Meanwhile, Fox is still in the crosshairs of another voting machine maker. Smartmatic sued Dominion for $2.7 billion, claiming that the company had falsely reported its equipment as part of a conspiracy aimed at rigging the 2020 elections.

Smartmatic stated in a press release that Dominion’s lawsuit “exposed some misconduct and damage” that Fox caused, adding that their own case “will reveal the rest”. Fox said on Wednesday that Smartmatic’s complaint “on the face of it is intended to chill First Amendment rights,” adding that this case will likely go to trial by 2025.

Fox and members of the Murdoch Family, who built the organization, will also be facing shareholder lawsuits, in which they will try to prove that the management breached fiduciary duty by broadcasting election conspiracies.

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