Inside Ailes' Plan To Blow Away CNBC

The lightning round starts now. Roger Ailes, the proudly capitalistic mastermind behind Fox News Channel and one of television's fiercest warriors, throws the switch Monday on Fox Business Network, his biggest gambit since, well, Fox News Channel.

Last week, Ailes conceded that the new network was not quite ready for primetime. But the FBN chairman professed confidence that viewers would have something to look at on Monday, and much more as the weeks go by.

FBN faces a formidable market leader in CNBC. The 17-year-old cable channel is available in 95 million homes and, under the stewardship of president Mark Hoffman, is on a ratings upswing after bottoming out with the market in the years after the dot-com bubble burst. Today, the channel averages 250,000 viewers in daytime (as of the second quarter of 2007). And CNBC has become extremely profitable -- bringing in $245 million per year in ad revenue, according to SNL Kagan -- by attracting a highly affluent viewer whose average yearly income hovers around $100,000.

FBN will launch in a very modest 30 million homes, largely on digital tiers everywhere but New York (where FBN will be on Channel 43, next to Fox News Channel, which moves to Channel 44). Bloomberg TV reaches 43 million U.S. homes.

Of course, FBN will come to market with the significant monetary muscle of Rupert Murdoch's News Corp. behind it. And with its purchase of The Wall Street Journal (for $5 billion), the company will have access to the newspaper's reporters and resources and an invaluable branding opportunity -- in five years, once the Journal's exclusive contract with CNBC expires.

In the 11 years since Ailes launched Fox News as a populist (and unapologetically opinionated) alternative to CNN, the media landscape has undergone seismic adjustments. Fragmentation and proliferating technology have turned the playing field into a free-for-all. And business news, no longer just the purview of Wall Street traders and Fortune 500 executives, has become trendy, even sexy (thank you, Maria Bartiromo).

In a conversation with B&C's Marisa Guthrie in his Manhattan office (where CNBC plays incessantly on one of his TV sets), Ailes talked about the state of business news, FBN's Main Street approach and what it would take for him to be recognized by the “National Television Academy of Liberals.”

It's less than one week before you go live with Fox Business Network. Are you ready?

We're behind schedule. It's a little ragged. We're not doing real interviews because real people aren't showing up because it's not on the air. So we're doing fake interviews. We're doing remote feeds from places that we have never tried to do remote feeds from. We have talent that has never worked together before, so it would be like putting a professional football team on the field; they're all professionals, but the quarterback doesn't know the center. So when the ball is snapped, the count could be off.

Are you getting more nervous as Monday approaches?

No. Look, when you die, the first 100 years in the ground is just the beginning. So you just can't get yourself all worked up over things like this. You must stay calm. This is a job. [It] requires a professional approach, reliance on other people, an ability to delegate, determination and creativity. But I don't get nervous about things like that.

You're going into this venture to provide an alternative to what is out there, from CNBC to Bloomberg, to Business Week to The Wall Street Journal. What do you feel is missing in business news?

It's a very broad subject matter and a very broad field. And the only thing you can do is present it sort of in a linear fashion. You can take the next three minutes and discuss housing, or you can take the next three minutes and discuss unemployment, or you can take the next three minutes and discuss the last quarterly earnings or a CEO getting fired or going to jail. But in effect, whatever you're doing, everything else is not being covered. And there are probably a thousand things.

So it's being able to select, make relevant, produce in a meaningful way, transition to the next thing. So in one sense nothing is being left out and everything is being left out. It sounds a little Zen-like but it is true, that whatever you're doing I can do something else, and if it's more interesting people will watch me.

Obviously CNBC is the market leader and the one to beat. But do you consider Bloomberg a real competitor?

I like competition. As a matter of fact, they do a lot of things better than CNBC. They're more detailed, they're more technical. If you watch them and you are a real business junkie, you'll learn more.

CNBC has been touting its affluent audience, which means that it can command very healthy CPMs.

CNBC announced it the other day: We only play for rich people, we get the really rich, really, really, really rich [viewers]. And that's our audience and that's who we like. Now this annoys them because they're also very liberal.

We're a little more for people who are doing well who want to do a lot better, and we'll cover the markets and we'll cover the businesses, but we're not necessarily going to be centered in the hedge funds and the multibillion-dollar deals. We think people watch business news to try to improve their lives and we're hoping to be able to do that a little bit.

You were at the helm at CNBC for three years, from 1993-96. Do you think the CPMs are the holy grail for niche channels?

I did go over and help turn it around, and I had a lot of good people. I didn't do it myself at all. A lot of the good people were already there, they just didn't have a focus. But CPMs are important. These things are to make money.

But the secret of CNBC is that without infomercials, which they can run all night, every night and 24 hours a day on the weekends, they are in effect a daytime, five-day-a-week network. I don't have that luxury.

So they can sell these Body by Jake things and all that stuff and make good money. But the challenge will be to try to do business news 24 hours a day, 7 days a week. They have never had to do that.

So the task is a little tougher here. We're coming in late, we have 30 million homes, they have The Wall Street Journal, they have a 17-year head start, 40% of their schedule they don't have to program and they still make money. So if they can't win with that, God help them.

Your approach at Fox News has been described as populist. Do you agree with that? And is that same approach going to apply at FBN?

Well, business news generally plays to people who have enough money to worry about that sort of thing. I always hated anchors who talked down to people. Television was this sort of strange thing where some guy would sit up there and look down at you and say, ‘I'm the anchor and you're a dope, but listen to me and I'll give you the news.’

I wrote a book 20 years ago called You Are the Message because I think the people are the message, and I think that being able to talk to people directly in words that they understand, about things they care about with some feeling involved, is better. And so Fox News Channel, for instance, I think changed the way anchors communicate. They did it more conversationally. And I think that at the business channel, I tend to hire people overall who are good communicators and do it that way.

And so I have less-formal anchor types than I do smart conversationalists. And I know the other channels are trying to do that to some degree because they've seen what I did.

But you have to have that sensibility personally. If you're an East Coast elite person, then your comfort level at conversation is the bar at Le Cirque or Elaine's. If you come from somewhere between the Hudson River and the Sierra Nevada, that isn't your sensibility in terms of conversation. I mean, there are people who are just sort of elitist, they're locked in their behavior and they think they're better than the average working person.

A lot of them are in Manhattan.

Many of them are in just a few restaurants in Manhattan. And that's not my audience. I don't think they're gonna change. I mean, they just don't get it. I sat next to [Columbia University president Lee] Bollinger at three dinner parties. I don't understand what he's saying. Talking to him is like … it's like liberal word salad. You don't know what the hell he's talking about.

I have nothing against him, he's a perfectly nice fellow. Although as a general rule, if you have silly hair, there's something silly about you. It's just a general rule.

Obviously you're not going into this to lose. So how long do you think it will take you to surpass CNBC?

If I had all those advantages I'd beat them in two weeks. It's gonna probably take a few years, just like it did for Fox to take CNN. It takes a while to do it. And they're very aware. I mean, they've been trying to pre-empt anything I might do, they've been trying to copy what we do at Fox. They're not asleep at the switch, they've got professional people; [CNBC president Mark] Hoffman's a pro.

I think Fox News might have been the fastest and most spectacular rollout in history in the sense that we actually caught up with it, took down a competitor from behind in four years, which was considered impossible. If we were to replicate that, it would be another miracle. If I can beat that, I think I'd get a bonus.

You think you'd get a bonus?

Yeah, I think I'd get sainthood or I'd get something. You know, the National Television Academy of Liberals would have to actually recognize that we exist. I mean, there would be some recognition of that. But anything that would get anywhere near the rollout success of the Fox News Channel would be unprecedented.

CNBC's partnership with The Wall Street Journal is good for five more years. But News Corp. will acquire the paper. Can you work around that deal?

We're in the process of looking at all of that; no decisions have been made about it. I'm trying to get a definitive answer from the lawyers about what we can't do and I assume anything else we can do.

If I were CNBC, however, I'd sort of step it up, since they've had it for seven years and never done anything with it. I don't know whether they're holding in reserve to swamp us on the 15th with some great Wall Street Journal programming, or whether they've frittered away seven years of that relationship or whether they don't understand how to translate the culture. I'm not quite sure what they're doing.

How have the advertisers responded to Fox Business Network? What are you showing them to sell it?

We're not showing them a whole lot and the response has been very good. I think that they sense that there's a need for product in the business news area. We always did very well with Neil Cavuto's shows on Fox [Your World with Neil Cavuto]. [Cavuto is the managing editor of FBN and also will host a show on the network.]

There were 32 business shows on cable; the top five have been at Fox for the last five years. So we beat Bloomberg and CNBC every day that we're against them on business news at the Fox network.

But Cavuto, I think, changed the game a lot by talking to Main Street as opposed to just Wall Street. And yet, he gets the top CEOs and the top investment people.

Anybody in the business world will do Cavuto's show, partly because of Neil and they know he does good interviews, and partly because we're winning. So advertisers are aware of that, and so we're beginning to bring in money on both the Web site and the channel without it having launched yet.

How about the personalities you've amassed for Fox Business? Who out there are you still trying to lure?

We have not locked down every position, every hiring position. We're still open. I'm looking and I look all of the time. I have to be careful of people who already have jobs because it could be interfering with their contracts and so on.

But we locked in enough to launch. I hope they all make it; if they don't, I'll have to make some adjustments. And I'm always looking, because you never know when you're going to find somebody.

Do you think the personality that an anchor or host brings to a program is important? Bill O'Reilly is the top-rated program on Fox News.

Yeah, but there are two distinct types of journalism in cable; there's the news, [Fox News anchor] Shep Smith, what we do all day, how we handle breaking news, how we handle stories. And I have no idea what any of those people think politically. I honestly don't, I never have, I don't care, they don't try to sell it and we don't worry about it.

And then there's opinion-analysis journalism, and those people have opinions and it's pretty clear where they're coming from and who they are. Bill is a populist to me. Some days he's calling for Jeb Bush's resignation or Don Rumsfeld's and some days he's calling for somebody else's.

So it's hard to pin him down. Sean [Hannity], very clear, Alan [Colmes], very clear. And so it's an exercise in freedom of speech and it's fine. But we don't let that taint our journalism, but we get accused of it because the mainstream media hates us because we won't follow the line and do what they do.

You know, I went to a dinner party and a guy said to me, ‘Well aren't you guys too conservative at Fox News?’ And I said [to him], ‘Let me ask you a question. Are you comfortable with the position of CNN?’ He said yeah. I said, ‘What about ABC, NBC and CBS?’ He said yes. I said, ‘New York Times? WashingtonPost? NPR?’ Yeah, fine. I said, ‘So what you're saying is this little cable channel doesn't meet your world view and everybody else's world view, so you want to kill it?’

That's really what you're saying. I said remember the last two guys to get all the journalism lined up the same way were Hitler and Stalin. That didn't work out well for a lot of people. So if I'm the last guy standing in the doorway, tough luck, I'm gonna stay there.

As it stands, Fox Business Network will be on digital tiers everywhere but New York, which can be a bit like cable Siberia. Are you negotiating to get lower down on the cable dial?

Well, we were offered positions if we paid for them. [NBC Universal] paid for theirs because they're very worried, despite the fact that none of these changes they've made have anything to do with us. They obviously thought it was worth millions to try to get lower, so I guess maybe they weren't worried, they just felt like wasting money that day.

But I doubt it; I think they paid for those positions because they're nervous and there's some advantage to those positions. In every case where it was offered to me, I said it's not worth that. We'll get them to watch us where we are.

I think once you launch, you can't buy your way to success. I think what you really have to do is count on hiring the right people and having good ideas. And if you do that, that's more valuable than the millions you're going to pay to be in a dial position.

Are you working to get more analog carriage?

Yeah, although the first-level tier of digital today is not a whole lot different than what analog was 10 years ago.

I think actually the Fox News Channel 11 years ago was one of the last analog channels to come in that got full distribution. So I think getting on the first tier of digital, anybody in the economic bracket that would be interested in the business has already bought most of those tiers.

I think that that's going to be a little less of a problem than it appears on paper, although we can't tell. In the end, the truth has always been that if you put up a reasonably good product, some people will find you.

The reviews for Fox News Channel in the days after the launch were generally excoriating. Will you be reading the coverage of Fox Business on Oct. 16?

It's already been written. [The critics] will probably make a few phone calls on Tuesday morning to try to get our fingerprints on it … yeah, about your debacle. So we sort of expect what we call fingerprint phone calls by the end of the day on Monday. The stories have already been written and they won't be great.

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CNBC has made some changes lately. They’ve tinkered with the early fringe schedule and the Web site. Do you think they’ve made those changes as a pre-emptive strike?

I’d feel better about it if they just told the truth but I don’t really care what they do. We have to go out and get viewers to watch this network. And where they come from … I hope some of them come from [CNBC], but if I take one-half of their audience, I’m only in 75,000 homes, so why is that the end of my life? I mean, I’ve got to do better than that.

So it’s kind of fun to play like this is some kind of great war between these two teams. We have to create a start-up in a tough climate on a narrow field against everything that’s challenging everybody’s eyeballs and still win, without having a net because we don’t have the infomercials, which is a financial net. So they’re a piece of the competition but not much. I’m not gonna tie myself up in knot, as they have, to try to get 75,000 homes from them.

What about Bloomberg TV?

Bloomberg has never pursued business news as a commercial venture. I’ve noticed lately that they’ve hired some more attractive people, they’ve hired some professional people, they’re simplifying their graphics, they appear to be trying to compete now because we’re getting in the game.

I don’t think [Mayor] Mike [Bloomberg, founder of Bloomberg LP] is running out of money, so I think somebody over there has just decided to make [it] look better and work better. I think that raises everybody’s game.

What do you think of CNBC president Mark Hoffman as a competitor?

He’s supposedly a smart television guy. He was a good general manager of a television station [WVIT, the NBC O&O in Hartford, Conn.]. He’s got some production skills and I suspect probably some leadership skills, whether that’s small-unit leadership or large-organization leadership I’m unclear. I’d say he’s a professional broadcaster who has not done a lot of stupid things. So I would have to say he’s a worthy competitor. He’s never been challenged. So we shall see. But I look forward to it.

What would you do if you had The Wall Street Journal contract that CNBC has had for the last seven years?

Well the first thing is that I would’ve done something in the last seven or eight years. Beyond that, I don’t have to think about that because now they’re my R&D department. Anything they develop, I’ll eventually own anyway over here, so our view is: Have at it, boys, come up with some really good ideas that we can take over one of these days.

Going forward, how important is The Wall Street Journal to the Fox Business brand?

 [News Corp. CEO] Rupert [Murdoch] has always thought it was the greatest newspaper in the world. He loves The Wall Street Journal. All this nonsense about him doing something to it, he bought it because he actually likes it. So he decided to go into business news without The Wall Street Journal. Now that he will have it, I’m sure he sees the possibility of synergies. And the price he paid, there’d have to be synergies, he’s got to figure out a way to do it. I think he’ll rely on me to try and come up with some of those methods, but it’s not actually in-house yet, and we’ve got to really work through all these legal things.

So it’s hard to say. But it seems impossible to me that it won’t function with a lot of synergy somewhere down the road, but we’re not relying on it for the Fox Business Network in the first several months or year. I think some of their content is spectacular and would love to see it translated to the air, but I think that’s down the road, we’re just not there yet.

What will your measure of success be initially: ad revenue, households, ratings?

Well, the first is really ad revenue, because you sort of have to not bleed to death when you do these things. And so we won’t even be rated for nine months or six months. It’ll get rated at some point, and we’ll be in 35 million homes or 40 million homes. So it’s hard to say. I think it’s the quality of the product and the audience you deliver. In the end it’s your income side, you’ve got to have a real serious income side. And then eventually, when there is some parity in the number of subscribers, then it will be ratings and demos and those types of things. You look at Fox News, we rolled out 17 million homes and it took us four years to catch CNN.

What’s your assessment of the retransmission debate? Do you think that stations are getting the short straw?

That’s an internal debate, so I really don’t want to discuss that because we have an ongoing debate among divisions here regarding that all of the time, as many companies do. And it would not be wise for me to get into that too much. I mean, it obviously has value, and how that’s applied to the overall corporation is an internal discussion.

You didn’t want to leverage Fox News Channel to get carriage for Fox Business Network because it was important to get FNC renewed at an advantageous price. What kind of leverage will you have going forward with respect to FBN?

News Corp. is a huge company, and Rupert Murdoch is the biggest, most respected entrepreneur in the field. He carries with that a lot of power. [News Corp. chief operating officer and Fox TV Group CEO] Peter Chernin did a superb job of working to help get the business channel in a position to launch. So between Rupert’s inherent power and actual negotiating power -- I went on many of the calls with him, he was really good -- there’s a certain amount of leverage that comes with News Corp. I don’t want to get more specific than that, but we do deals all of the time. And now that the business channel has become a priority for the company, I’m sure that it will be in every negotiation.

What’s your take on digital and advertising on digital platforms, and where that is going?

I wish I knew. I think people who answer that question are making it up. You know, clearly, if you look at ad rates in television, they’re going up, but by very modest numbers, 1%-5% a year. The problem is there aren’t any little zeros out on the end of those lines.

As the product gets better and people begin to narrow down the sites they look at, I think the costs will go up. And like everything else, the really good ones will be able to charge a lot of money and make money. So far, we appear to be in the hunt and in that game, and I think that’s why I say that in five years, I’m not sure whether the Web site will be more valuable than the TV or the other way around. I think both of them are going to be pretty valuable and certainly the asset value will be great. But I think the operational cash flow on it will be impressive.

Digital-video-recorder penetration has hit 20% this season. Networks are streaming episodes of shows online and giving away downloads. So while more people are watching more television than ever, they are consuming it in different, sometimes ad-unfriendly ways. What does that mean for the future of traditional television?

It really is still a passive medium to a large degree. I mean, it is what I put up there. That’s if you’re going to watch this channel, you’re going to have to watch what I choose for you, whereas on the Internet, you get to choose. And I think generationally, people are looking for more choice. I think the actual convergence that people talked about 10 years ago is now beginning to happen. So I think the Internet will be more interesting and more creative. As long as there are guys like me who just want to turn on the TV set and open a beer.

Do you have a DVR?

I do but I don’t know how to use it.

How do you think the media is covering the presidential race?

I don’t pay much attention to the politics of it. I think the media is addicted to winners, losers, mistakes, pictures and attacks. As long as they get one of those, they’re happy people because they don’t have to deal with the substance. And if they don’t get one of those, they’ll make one up and say, ‘Well he fell down the stairs, that’s it, we’re going to cover that.’ I’ve always been a little bit discouraged by the way media covers politics.

What about the Sunday-morning political shows: Do you watch any of them?

Yeah I watch [NBC’s] Tim [Russert]. [Fox News’] Chris Wallace is my favorite. He’s a very good questioner. I think he’s probably the best questioner. Tim is pretty good. I liked [CBS’] Bob Schieffer when he did it.

But you have to start with everybody who’s a guest on television wants to be a guest on television because they have a spin. They have an answer. Whether you have a question or not they have an answer, that’s why they’re there. And so the whole trick is to try to get them off their position paper. And occasionally, that happens, and then you get something interesting. And most of the time you get what you could get by calling their campaign headquarters and asking them to send over their positions on the issues.

So it doesn’t make it that fascinating to be honest with you. The trick of the business is, the longer the guests can talk and stay on their message, the better off they are. That can get really, really boring.

Who do you like in the Republican field?

I don’t have any horses in it. I got out of politics 14, 15 years ago. I have my own personal views about politics, but I don’t look at it from that standpoint. I’m pretty agnostic. I think every issue can be fought out and negotiated between the 40-yard lines except the sovereignty and security of the United States of America. That is nondebatable and should be. That should be agreed upon by both parties. And if they don’t do that, we’re not going to be here and we’re not going to affect the rest of the world, and the rest of the world will go down if we go down.

So it’s all pretty simple to me: Whoever’s going to be the toughest on the sovereignty and the security of the United States, Republican or Democrat, I think probably has the right idea, and the rest of them ought to get in a room somewhere and negotiate how much spending you want for education and health care and everything else because there’s no big room full of money in Washington. All the money comes out of working people like you. And you have to decide how much of your check do you want to send in every week. And that’s the only question in American political life, every American has to sit down and say, ‘OK, here’s how much I want to send to Washington.’ And that determines how they vote.

How have your views or attitudes about journalism changed?

There are better individual journalists in the game than I suspected before I got into it because I was getting pretty discouraged by some of the stuff. I sat in meetings and then I’d read about them in the paper and that’s not what happened in the meeting. I mean it was frightening, actually.

And I think the journalists have gotten their opinions in. And it used to be that you went to the editorial page of a paper to get the opinions and you read the journalistic pages to get the facts. Now it’s the opposite. You can get the facts in The New York Times editorial page. You may not like their spin because they’re very liberal, but the facts are probably accurate on the editorial page, and many of the facts in the journalism pieces are just not accurate. Same thing with most papers today.

I find it astounding that so many people hate the idea that [Fox News] want[s] to be fair and balanced. I find that astounding that it irritates them, it frightens them, it makes them attack. It makes them go crazy. And yet we haven’t had to take down a major story in 11 years because they can’t attack our journalists.

Well why do you think people get so infuriated by that?

Because they graduated from journalism school where their journalism professor was a left winger who told them that’s the only way they’re going to get a good grade and they got addicted.

So it’s institutionalized liberalism …

Look, these professors never had a job. They couldn’t work in the real world. So they teach this kind of drivel. And the only way they can have any power is over a bunch of college kids that are paying them to be there to get a certificate. You think they’d have any power in the real world?

Do you think the media has become too snarky?

It’s ugly. I wouldn’t care about the snarkiness. I care about the corruption. There’s a fundamental corruption to it that’s wrong, that in the end, it’s the reason I stay in this job and it’s the reason I fight everyday.

Dan Rather says he’s taking a stand for journalism with his $70 million lawsuit against CBS. What do you think about his lawsuit?

Well I thought it was a little nuts for him to come out and say I only had a supervisory role. Well if you use the term supervisor, that sort of puts you in charge of it. So I thought that was a little whacky.

Look, their news division imploded because they tried to throw a president out of office on faulty information that they knew was faulty. Gee, that’s bad. And if they had one person in the loop who didn’t agree with them politically, they would’ve said, ‘Oh are we doing the right thing here?’ You know.

God bless the fact that we get different views in our newsroom. ‘Cause I honestly don’t think that would happen. I think a conservative would step forward or a liberal would step forward and say, ‘What the fuck are you guys doing?’ But because they all think alike and because they all hated Bush and because they all thought the same way, not a single person stood up and said, ‘Hey, guys …

But what do you think about his underlying reason for his lawsuit, that he’s taking a stand for journalism against corporate avarice?

Look, I have mixed feelings about Dan because he can be a gentleman; he’s had many successes in his career. On a personal level, I really like Dan and I think he’s done some fine journalism in his career. It’s like I don’t want to see [Don] Imus’ career screwed up over a mistake, I don’t want to see Dan’s career blown up.

What about Don Imus? He’s looking for a job in TV.

I had lunch with him. I’ve known Don for years and he knows he made a mistake, but my own view of the world is that when people are in trouble, you don’t move away from them. I have always hated that about our business. There’s a sort of unwritten rule in the business that as soon as somebody is in trouble, man, don’t take their calls, shun ‘em, stay away from them, you’re liable to catch it. And I just don’t operate that way.

So Don will come back, he’ll get a job somewhere and so on. I won’t comment more. But apparently he’s very close to a radio deal [with WABC]. I think eventually he’ll be back on television. I think he’s sorry for what he did and I think he realizes it was wrong and bad and terrible. But there are many people out there who are doing things like that everyday and not being called on it and that’s not fair either.