Fox Shake-Up: Roger Ailes' Future Without Rupert Murdoch in Charge

Roger Ailes and Rupert Murdoch

Despite an initial report on Fox Business Network that he'll be reporting to Rupert Murdoch, 21st Century Fox's official announcement made it clear he'll be reporting to James and Lachlan Murdoch.

A version of this story first appeared in the June 26 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

Minutes after CNBC — not a Rupert Murdoch-controlled outlet — broke the news that Murdoch would set in motion a succession plan that names his younger son James Murdoch the CEO of his media empire, Fox Business Network reported the same — but added a critical detail. Roger Ailes, Fox News chairman and CEO and chairman of Fox Television Stations, anchor Stuart Varney relayed, "will still report to Rupert Murdoch." And then he repeated the news: "Roger Ailes, the founder of Fox News, will still report to Rupert Murdoch." The quick announcement that Ailes will be the 84-year-old Rupert's only direct report turned out to be premature, as 21st Century Fox revealed June 16 that Ailes will report to James and Lachlan Murdoch but will continue his "unique and long-standing relationship" with Rupert.

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This peculiar management structure could pose problems. Ailes told THR in April that he has little interaction with James and Lachlan. "I don't know them very well," he said. "I don't interact with them on a daily or even weekly basis."

Certainly Ailes, 75, has earned a special place at the company. Fox News accounted for nearly 20 percent of 21st Century Fox profits in 2014; Ailes' empire is valued by Wall Street analysts at $15 billion; the division has notched 70 consecutive quarters of profit growth through the first quarter of 2015; and this year it is expected to generate $2.3 billion in affiliate revenue and advertising dollars, according to SNL Kagan. "If history is any guide, then Rupert Murdoch will probably go the extra mile to ensure that Roger Ailes, and effectively his fiefdom, are unruffled by any contemplated executive changes," says Tuna Amobi, analyst at S&P Capital IQ. "Both Fox News and TV stations have clearly been a major part of the shareholder value creation at 21st Century Fox — and will likely remain so."

Ailes gained control of Fox Television Stations in 2005 when Lachlan left the company to return to Australia, in part because of clashes with Ailes and former COO Peter Chernin. James and Lachlan's political views are known to diverge with those of their conservative father. But Ailes always has exhibited ultimate control over the network — known for its right-leaning commentators — that he built from the ground up. And Rupert is expected to remain very much in the picture, which means Ailes could have a buffer from the rest of the family, even as Chase Carey, who has worked closely with Ailes since Carey replaced Chernin as COO in 2009, transitions out in June 2016.

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Meanwhile, Ailes' current contract is up for renewal next summer. He has not signaled that he is in any way restless or unhappy, though if he did ever leave Fox News, he has hinted that a production company could be his next endeavor. He also has not groomed an obvious successor, and many at Fox News believe that he will remain in the role until he retires. So perhaps the real question is not what happens when Rupert finally retires, but what is Fox News without Ailes?

"It will be status quo until such time as Ailes leaves," says TV news analyst Andrew Tyndall. "That will be when everything will be up for grabs and the Murdoch heirs' management skills will be tested."