Fox could likely survive a nine-figure loss to Dominion, media analysts say
Fox Corp. can most likely weather even the harshest financial penalty that could come from Dominion Voting Systems’ lawsuit, analysts say.
The blockbuster trial — originally set to begin in a Delaware court on Monday before being unexpectedly delayed by one day — will determine whether Fox Corp. can be held liable for false claims made on Fox News, the media company’s namesake cable TV property, that Dominion’s voting machines were used to rig the 2020 presidential election.
Dominion’s lawsuit seeks $1.6 billion in compensatory damages, an amount that experts said would likely be whittled down substantially depending on the jury’s judgment or in an out-of-court settlement. Fox said in a court filing Sunday that it believed Dominion had lowered its requested damages to around $1 billion, but the voting machine company disputed that, saying it had not reduced its claim.
The media giant contests any claims of liability or damages sought by Dominion, with a Fox spokesperson calling the lawsuit “a political crusade in search of a financial windfall, but the real cost would be cherished First Amendment rights.”
In the event Dominion wins its case, said Lyrissa Lidsky, a constitutional law professor at the University of Florida, the jury is highly unlikely to award Dominion all the money it’s seeking for what it says is the reputational damage exacted by Fox News’ broadcasts.
In theory, Lidsky said, the jurors could also impose punitive damages to punish Fox for “extremely wrongful conduct” and award an even higher financial penalty than Dominion asked for. But she said she had seen no evidence “thus far that suggests there are going to be damages at that magnitude, even though the damages may be very large.”
“There’s a litigation strategy to ask for more than you think you can really get to anchor the number high,” Lidsky explained.
With more than $4 billion in cash on its balance sheet as of the end of 2022, Fox could probably cover even the maximum amount that Dominion is seeking without having to sell any of its existing assets to do so. In its most recent quarterly earnings report, Fox said it did not expect the “ultimate resolution” of any claims from the suit to have a “material adverse effect” on its business.
Wall Street analysts say the publicly traded company’s stock is likely to take a hit as a result of the suit.
Bank of America Securities estimated in a March 28 note that for every $500 million in damages, shares of Fox Corp. would lose about $1 per share. The company’s stock, which was trading at $33.62 late Monday morning, has fallen by more than 10% since Dominion filed its lawsuit in March 2021, a period in which the Dow Jones Industrial Average rose more than 2%.
BofA Securities suggested that the lawsuit was likely to keep Fox’s stock from moving substantially over the course of what is expected to be a six-week trial as legal proceedings continue to unearth details about debates inside Fox over its airing of falsehoods about Dominion.
“At a minimum, the constant barrage of negative headlines should be an overhang on near-term investor sentiment,” the BofA Securities analysts wrote.
The Fox spokesperson didn’t comment on the business impact of any damages it might have to shoulder or on its stock outlook.
The case has also raised scrutiny on the media company’s editorial strategy as signs have emerged of gaps between what was reported on air and what some insiders — apparently with an eye on Fox’s business — indicated they knew to be true.
Details from the case show Fox News personalities growing increasingly concerned about losing viewers to competing network Newsmax in the days following the 2020 election. Texts and emails disclosed in Dominion’s filing suggest that Fox hosts then pushed back against efforts to set the record straight on the outcome of the election — allegedly to keep viewers from changing the channel.
Following an instance in which a Fox reporter noted that there was “no evidence” of voting system fraud, prime-time host Tucker Carlson texted fellow Fox anchor Sean Hannity calling for the reporter to be fired.
“It’s measurably hurting the company. The stock price is down. Not a joke,” Carlson texted on Nov. 12, 2020.
The company’s 2019 decision to exit its TV and movie businesses may have added pressure to hang on to viewers, said Gabriel Kahn, a journalism professor at the University of Southern California. After Disney purchased the entertainment assets of 21st Century Fox for $71 billion in 2019, the remainder of Rupert Murdoch’s media company — known henceforth as Fox Corp. — became focused on its news, sports and business broadcast operations.
After the deal, Kahn said, “they doubled down on polarization and audience fragmentation,” adding that it became “absolutely, existentially important to keep that audience engaged.”
Still, Fox News dominates the cable news rankings. According to Nielsen live plus data, “The Five,” “Tucker Carlson Tonight” and “Jesse Watters Primetime” were the three most-watched cable news shows in 2022. Over that time, Fox’s advertising revenue grew by almost 9%.
The relationship between editorial decisions at Fox and the company’s business strategy, Lidsky said, could be relevant in the case as Dominion tries to prove that Fox aired false information with “reckless disregard” — part of the legal standard that will be key in determining whether Dominion was defamed.
“A business incentive to ignore the truth or falsity of what they were putting out there, that might tend to show reckless disregard,” Lidsky said.