Fox Corporation’s $787.5 million settlement Tuesday with Dominion Voting Systems is a landmark payout in a lawsuit that has sparked debate over issues ranging from free speech to the health of democracy. But for the two companies involved, the deal means very different things for their respective businesses.
“Settlements of this magnitude are rare in defamation cases,” said Lyrissa Lidsky, a constitutional law professor at the University of Florida.
While Dominion initially sought $1.6 billion, even nine-figure payments are unheard of in high-profile media cases. In October of last year, a Connecticut jury ordered conspiracy theorist Alex Jones to pay $965 million to the families of the Sandy Hook shooting victims for defamation.
That ruling also involved claims of intentional infliction of emotional distress and violations of the state’s trade ethics law and damages were calibrated to the number of families involved in the case. The jury ultimately made 15 individual awards ranging from $28.8 million to $120 million, plus various punitive damages.
Infowars was a fraction of the size of Fox News, and even the $965 million judgment didn’t sink it. While InfoWars founder Alex Jones filed for bankruptcy late last year, he continues to broadcast daily from his studio in Austin, Texas. Jones’ InfoWars Store, which sells supplements and survival kits, has also continued to operate since the case.
Fox Corp., which had more than $4 billion in cash on its balance sheet at the end of last year, was in a position to shoulder the settlement without selling the assets. Before the deal, analysts at Bank of America Securities projected that for every $500 million in damages, Fox shares would lose about $1 each.
The $787.5 million payment, based on BofA projections, means a $1.58 impact per share of Fox stock, which was trading at $34.00 per share at the time the settlement was announced. The company’s stock price fell slightly in Wednesday’s trading, closing 16 cents lower.
Fox News acknowledged as part of Tuesday’s settlement that the court found “some claims about Dominion to be false” and said it hopes the agreement “allows the country to move on from these issues .”
But the company also emphasized its strength, size and reach, noting in its statement that it is “now the number one network in all of cable. [and] is also the most-watched news channel on television for over 21 consecutive years,” reaching nearly 200 million people per month.
For Dominion, the settlement is significant — possibly more than the company is worth.
Private equity firm Staple Street Capital valued the voting-machine maker at $80 million when it bought Dominion in 2018. Staple Street co-founder Hootan Yaghoobzadeh told CNBC on Wednesday that whatever would be left of the $787.5 million after legal fees and corporate taxes will be distributed to shareholders, including Staple Street, as well as management and employees.
“The number must be correct to compensate us for the extensive damage and harm they have caused to the company, its employees and management,” Yaghoobzadeh said.
It’s unclear how much is left for Dominion itself, but the cash infusion could further strengthen the company’s already large position in the election technology sector.
Researchers at the University of Pennsylvania’s Wharton business school estimate that by 2021 the industry will generate an estimated $300 million in revenue annually, with Dominion capturing about 37% of the vendor market among qualified voters.
In theory, Dominion could use the funds from the settlement to overhaul the voting infrastructure it operates. The Brennan Center for Justice, a nonpartisan law and policy institute, flagged in a report last year that many voting machines in the US need upgrades, estimating that they would cost $580 million to replace. all the old voting equipment in the country.
Fox, for its part, has weathered high-profile criticism of its broadcasts in the past.
A leaked Fox News-focused presentation from 2020, first obtained by industry watchdog Check My Ads and reported by the Daily Beast, detailed how the network survived ad boycotts pushed by activists. The presentation shows charts that show “number of conversations [about the boycotts] immediately decreased to normal levels regardless of response” among brands — those that pulled their ads and those that did not.
Because the settlement helped the company avoid a lengthy trial and on-air apology, Fox News does not face the kind of public advertiser boycott it did in the past.
In 2021, top advertisers walked away from the company’s highest-rated show, “Tucker Carlson Tonight,” because of racist comments, and most never returned. But the show’s high ratings helped boost the network’s overall market power, and big brands still aired ads on lower-rated and often less controversial programs.
Check My Ads co-founder Nandini Jammi said Wednesday that the cable network’s lineup likely depends more on its ability to recover carriage fees than on the decisions of certain brands whether to run ads on certain shows on Fox. Carriage fees are the rates cable providers such as Comcast (which owns NBC News’ parent company) and Verizon pay TV networks to offer them to subscribers.
During an earnings call in November 2022, the CEO of Fox Corp. Lachlan Murdoch said that in the next few years two-thirds of the company’s distribution deals with cable companies are up for renegotiation.
As Jammi sees it, the settlement leaves Fox more exposed to business risks than ever before.
“They are walking in these negotiations [with cable companies] without their usual leverage and with a whole lot more responsibility” after being hit with a huge cost of airing some content, he said. “I think that makes them unusually vulnerable to an organized push for today’s consumers.”
Meanwhile, another voting machine maker still has Fox in its crosshairs. Smartmatic is suing the cable network for more than $2.7 billion over the same claims raised by Dominion: false reports that its equipment was part of a 2020 election conspiracy.
Smartmatic said in a statement that Dominion’s litigation “reveals some misconduct and harm” caused by Fox, adding that its own lawsuit “will reveal more.” Fox said Wednesday that Smartmatic’s complaint is “facially intended to chill First Amendment freedoms,” adding that the case is likely to go to trial in 2025.
Fox, as well as members of the Murdoch family who founded the organization, are also facing shareholder lawsuits seeking to prove that management breached fiduciary duties in broadcasting election conspiracy theories.