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RUBY:

From Schwartz Media, I’m Ruby Jones. This is 7am.

From one of the biggest settlement payouts in US libel history, to Lachlan abandoning his defamation claim against the Australian website Crikey and Fox News parting ways with its biggest star – It’s been a tumultuous week for the Murdochs.

By avoiding open court, they’ve tried to draw a line under the furore around Fox News broadcasting claims the 2020 US election was stolen.

But will the Murdoch empire be able to put it behind them? Will the Murdoch’s ever be forced to testify in open court? And what does the settlement say about the strategy Fox News is taking under the leadership of Lachlan Murdoch?

Today, writer and contributor to The Saturday Paper, Paddy Manning, on why there was a last minute change of heart to keep the Murdochs away from the stand.

It’s Wednesday April 26.

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RUBY:

Paddy, the last time you and I spoke, it seemed as though the defamation case that Dominion was bringing against Fox news was all set to go ahead. But then, all of a sudden a few days ago, things changed dramatically. So, tell me what happened.

PADDY:

Well yeah Ruby. It was all set to go to trial. It was going to be billed as the media trial of the century and it was supposed to last six weeks.

Archival tape – Reporter 1:

“Dominion is seeking 1.6 billion dollars in damages from Fox…”

PADDY:

Now, just to recap what the case was about, in the wake of the 2020 election, when Fox realised that its audience were abandoning the network, Fox hit the panic button. And what they did was start to countenance baseless claims that were coming out of the Trump campaign that the election had been stolen.

Archival tape – Reporter 2:

“The high stakes trial centres on false allegations of fraud in the 2020 presidential election.”

Archival tape – Reporter 3:

“Those are claims, of course, stoked by then President Donald Trump and his allies…”

PADDY:

Dominion was a voting machine manufacturer, based in Canada. And on more than 20 occasions, Fox News put to air claims that Dominion had played a role in stealing the election.

Archival tape – Reporter 4:

“But Fox maintains all of its statements are protected by the First Amendment.”

PADDY:

On the Sunday before the trial was due to begin, the judge delayed the first day's hearings.

Archival tape – Reporter 5:

“We were all set to go here in Wilmington and then late word last night from the judge there would be a delay. This morning multiple reports that settlement talks are underway…”

PADDY:

And so, Monday passed and it was assumed, at that point, that the settlement talks had failed, and this was really going to trial.

Archival tape – Reporter 6:

“Good morning David. It is day 1 in Wilmington Delaware. We’re expecting to see both sides give their opening statements…”

PADDY:

So, on the Tuesday morning, a drab courtroom in Wilmington, Delaware, was packed with journalists and lawyers and I was dialling in. There was no webcast of these proceedings. They had ruled that there would be no cameras and they had made elaborate arrangements to make sure that Fox's talent, stars like Tucker Carlson and Rupert Murdoch himself at 92, they had a huge tent erected outside the building so that they could come and go without being subjected to a media scrum. And after the jury was impaneled, the judge broke for lunch…

And then at lunch, everybody filed back into the courtroom, but the judge never appeared. And that happened for 2 hours and everyone's just kind of speculating what is going on here. You weren't allowed to tweet, so there was no tweets coming out of the courtroom. I was sitting in my study at 3 a.m. in the morning. And then the judge simply came back and said the parties have resolved their case.

RUBY:

Okay. The lawsuit is gone. The trial was aborted and the case was settled. In terms of that settlement, Fox has agreed to pay Dominion $787.8 million US dollars. What else does the settlement involve? And crucially, does Fox admit guilt as part of this settlement?

PADDY:

Well, no, it doesn't, Ruby. It doesn't admit guilt. What it said, in its very brief announcement, it confirmed that a settlement had been reached. And this news came out just after the share markets had closed, so there was no chance of an immediate market reaction. But just in the late afternoon on Tuesday in Delaware, US time, the network said, quote,

Archival tape – Jake Tapper:

“We acknowledge the court's rulings, finding certain claims about Dominion to be false.”

PADDY:

And that was the only admission that Fox made. And CNN's Jake Tapper, when he read that out on his program that night, said it was difficult to read that with a straight face.

Archival tape – Jake Tapper:

“The settlement reflects… I'm sorry, this is going to be difficult to say with a straight face. This settlement reflects Fox's continued commitment to the highest journalistic standards.

We are hopeful that… sorry…. We are hopeful that our decision to resolve the dispute with Dominion amicably instead of the acrimony of a divisive trial, allows the country to move forward from these issues.”

PADDY:

So ultimately, you know, Dominion was supposedly pushing hard for an on air apology, but nothing speaks more loudly than an actual cash settlement. And John Poulos issued a statement. John Poulos is the CEO of Dominion, and this is what he said. He said Fox and Dominion have reached a historic settlement and, quote…

Archival tape – John Poulos:

“Fox has admitted to telling lies about dominion that caused enormous damage to my company, our employees and the customers that we serve. Nothing can ever make up for that. Throughout this process, we have sought accountability and believed the evidence brought to light through this case underscores the consequences of spreading lies.”

PADDY:

So Poulos and Dominion can claim a measure of vindication out of the case. On the other hand, Fox says that’s half what they were being asked for and their business is unhurt. And investors seem to agree.

RUBY:

And so, what was your first thought when you heard that a settlement had been reached? Were you surprised?

PADDY:

Yes, I was absolutely surprised, Ruby, because normally the reason to settle is to keep damaging evidence out of the public view. That's the main reason why you would settle on the courtroom steps. Obviously, there's a long tradition of doing that. But in this case, most of the damage had, it seemed to me, already been done, because the discovery process and the release of hundreds of thousands of pages of documents in February and that evidence continued to come out. The damage, effectively, had been done. We had seen an admission from the founder, Rupert Murdoch, himself that the network stars had endorsed the baseless stolen election claims of the Trump campaign. We had seen admissions in texts, for example, by Tucker Carlson, that he hated Donald Trump passionately. The damage was already done. And so I had, kind of reluctantly and slowly, come to the view that the Murdochs and Fox were willing to sustain short term reputational damage in pursuit of a longer strategy that would ultimately was likely to vindicate them. Bearing in mind it's very, very hard to get up a defamation case in the United States, which has a genuinely free press.

RUBY:

So why then did Fox change its mind at the very last minute, do you think?

PADDY:

Well, there's now a lot of speculation about that. And there are a few things that we can say for sure. One is that there was fear, inside Fox, about what Rupert Murdoch would say in an open court. They had tried to keep him off the witness stand. And Fox had already received notice that Rupert Murdoch himself was going to be one of the first witnesses that Dominion wanted to call. Part of Fox's argument, and they failed at this, was that the Fox Corporation office bearers, whether they were directors like Rupert and Lachlan or executives like Viet Dinh, the chief legal officer, should not be forced to appear in court and the judge ruled against them. And there was a slip up when it was revealed by Dominion that Rupert Murdoch had actually had an executive role at Fox News. And look, Fox apologised to the judge about this in court, but the judge observed that he thought Fox now had a credibility problem and he appointed a special master to investigate whether Fox had avoided its obligations during discovery by concealing this executive role Rupert had. So that was embarrassing to Fox. So certainly one motivation was to keep Rupert off the stand and end special master's investigation

RUBY:

Right. And so Fox settles the case. But then a couple of days after that, Lachlan Murdoch actually abandons a lawsuit here in Australia against Crikey. And that is not a coincidence, is it Paddy? Tell me about what happened.

PADDY:

Yeah, well, the cases are kind of connected in some ways. And what's happened is that in Australia, Lachlan Murdoch had sued Crikey last year over an opinion piece that was written by their national political editor, Bernard Keane, called The Murdoch's Unindicted Co-conspirators in the January six Insurrection with Donald Trump. And Lachlan had initiated this lawsuit after Crikey, you know, negotiations over an apology, had broken down and Crikey had republished the article which they’d originally pulled down that Lachlan's request and then gone on a campaign to raise funds to fight Lachlan, including advertising in Australia and in the States, in the New York Times, daring Lachlan to sue. And Crikey was seeking to add all of the evidence that appeared in the Dominion case to its defence to Lachlan's defamation suit in Australia. And the trial in Lachlan's case against Crikey, which was set down for October, there was no point in settling the Dominion case at huge expense in the United States and then continuing to litigate the same arguments in an Australian court for another year or two. I think from Lachlan's point of view, it's just an attempt to rule a line under both.

The problem for Lachlan and for Fox, is that there are other lawsuits coming down the line in the States connected with the big lie, including an even larger claim for US $2.7 billion by another voting machine manufacturer, Smartmatic. And then there's a raft of shareholder lawsuits threatened as well, and one’s been filed in the last two weeks. So, it's impossible to come to a hard figure, but it's quite likely that the combined cost of these lawsuits, whether it's the defamation lawsuit by Smartmatic or any of a number of shareholder claims, the combined costs of those will climb into the hundreds of millions of dollars.

RUBY:

We’ll be back after this.

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RUBY:

Paddy, the Dominion defamation case might be settled and the Crikey case is abandoned. But there are more lawsuits coming at Fox, both from other voting systems and also from inside the company itself. So, can Fox afford to keep these payouts coming and will they want to?

PADDY:

Well, the short answer is yes they can afford, at the moment, to certainly pay the Dominion settlement. So Dominion had been claiming $1.6 billion US, the sum that's been arrived at is less than half of that. Some are calling that a win for Fox, given that they did not have to make an on air apology in any of their anchors or on any of their programs and they haven't admitted fault. They've only simply acknowledged that the claims against Dominion were baseless. Most analysts believe that Fox, which has $4 billion in cash on its balance sheet, and cash flow of like $2 billion a year, can pay this Dominion settlement easily. The thing is, we don't know the size of any settlement that might result from the Smartmatic lawsuit. And we don't know how much aggrieved shareholders are going to claim against Fox as a result of the Dominion settlement and the other cases. So Fox is an incredibly profitable business. Its ratings have not dropped despite all of the headlines that have dominated the media for the last two months. Its audience is loyal. They aren't reading The New York Times, they're not watching CNN, they are wedded to Fox. And Fox’s ratings continue to hold up. It does seem that the general view of investors and commentators and analysts is that Fox is going to be able to weather this storm. Even if the costs continue to pile higher.

RUBY:

And it sounds like, Paddy, though, the strategy, broadly speaking, at Fox, is that, you know, they're betting that the benefit of broadcasting whatever they want to broadcast, even if it risks defamation, outweighs the potential financial consequences of a lawsuit. But surely there is a limit to that strategy. There could be one lawsuit too many, the bills could get too big. The anchors whose text messages have come out as part of that process could become unhappy. The audience might turn, it might shrink. So if any of that happens, you have to imagine that there would be consequences for Rupert or for Lachlan.

PADDY:

Yes, well, it's constantly surprising how the Murdochs manage to survive crisis and scandal and one after the other. Over the last decade alone, you can point back to the phone hacking crisis in the United Kingdom where in 2011 it was revealed that reporters for News of the World had been hacking the phones of a whole raft of people, including a murdered British schoolgirl. And that was the worst crisis that the Murdoch empire has, arguably, ever faced.

Archival tape – Rupert Murdoch:

”I’m afraid I don’t have much subtlety about me.”

Archival tape – Reporter 7:

“Don’t you, Mr Murdoch?”

Archival tape – Rupert Murdoch:

“No.”

PADDY:

And Rupert Murdoch himself was hauled before the British parliament and declared, unforgettably, that it was the most humble day of my life.

Archival tape – Rupert Murdoch:

“This is the most humble day of my life. Thank you. And I need to say something. And this is not as an excuse. Maybe it's an explanation of my laxity. The News of the World is less than 1% of our company. I employ 53,000 people around the world, who are proud and great and ethical and distinguished people.”

PADDY:

And we haven't seen Rupert put under the spotlight in an open hearing since then.

Archival tape – Reporter 8:

“Do you accept that the evidence demonstrates that your company managed the legal risk by covering it up? Even though, as you said, the sum.”

Archival tape – Rupert Murdoch:

“No, there was no attempt, either at my level or several levels below me, to cover it up.”

PADDY:

But even as the costs of the phone hacking crisis still are continuing to mount more than 12 years later, you know, there were recent estimates the phone hacking crisis itself has now cost the Murdoch empire more than £1 billion. Still, you would have to say the Murdochs have put that crisis behind them.

But there is no question that Lachlan Murdoch himself, as chief executive at Fox, will be held somehow responsible or accountable for the coverage of the 2020 election

RUBY:

Right, well how does that look, then, for Lachlan Murdoch? He’s supposed to be taking over from his father and beginning to steer this empire himself. So how does this Dominion settlement reflect on his ability to lead, and what does it tell us about what a new era could look like under him?

PADDY:

Well, it's an interesting question, Ruby, because you can't say that it's a great result for Fox. And ultimately, Lachlan is the CEO of Fox and the executive chairman, and he has to take a measure of responsibility for the outcome. I think that investors have shown, by their kind of shrugging off the news of the settlement this week, they expect ultimately the Murdochs will prevail through this crisis. And I spoke to Angelo Carusone, the president of Media Matters America, which is an activist organisation that targeted Fox News for years, and he said a few years ago advertisers were deserting the network because the hosts are so controversial, people like Tucker Carlson. Major corporations don't necessarily want to be associated with the more provocative comments that they make in those primetime opinion programs. And Lachlan Murdoch had a strategic kind of response. And his message to investors was not to worry. And he made the case that advertising wasn't the big money for Fox News. Instead, he said, the biggest revenue stream was the deal with cable providers who pay carriage fees to Fox to provide, you know, Fox news and Fox Business and Fox Sports, to their subscribers.

It's one of Lachlan's main achievements at the network is that he's been able to consistently build up these carriage fees as a source of profit. And it has kind of insulated Fox from a decline in advertising. Carusone told me they basically built the risk into their business model. We're going to burn hot, and there's a chance that there's going to be some scorching here and there, but by burning hot, we can leverage that for these extreme contract renewals.

So I think that's important context for the settlement this week. If these contracts, which Carusone says are worth $3 billion combined, they are far more important and valuable to Fox than a temporary setback in the form of an $800 million defamation payout.

RUBY:

Paddy, thank you so much for your time today.

PADDY:

Thank you Ruby.

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RUBY:

Also in the news today…

Fox News has parted ways with its biggest star, Tucker Carlson.

Carlson began his career television on CNN, before moving to Fox News – offering behind the scenes advice to Donald Trump during his presidency.

Archival tape – Tucker Carlson:

“I know that the left and all the little gatekeepers on Twitter become literally hysterical if you use the term replacement, if you suggest that the Democratic Party is trying to replace the current electorate, the voters now casting ballots with new people, more obedient voters from the Third World. Let's just say it. That's true.”

Carlson joins a growing list of hosts at Fox News who threatened to become bigger than the network, only to fall out of favour, including Bill O’Reilly and Glenn Beck.

And,

Australia’s defence forces will undergo a major transformation, after the government released its Defence Strategic Review earlier this week.

The review made the case that the military should have a focus on protecting Australia’s trade routes and maintaining regional stability and to do that, it needs more long range strike capabilities like anti-ship missiles and submarines.

I’m Ruby Jones, this is 7am. See you tomorrow.

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