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Tuesday, February 28, 2023

February is in the books! Former Showtime boss David Nevins tried to purchase the channel, Axel Springer refocuses on U.S. growth, Kevin McCarthy gets pressed on his decision to partner with Tucker Carlson on the 1/6 tapes, Mark Zuckerberg says he wants to "turbocharge" AI at Meta, and more. But first, the A1.

THE A1

'Complicity Through Complacency'

CNN Photo Illustration/Drew Angerer/Getty Images

The Fox Corporation board has a huge mess on its hands — and it needs to work quickly to clean it up.

That's according to Jeffrey A. Sonnenfeld, the renowned professor and senior associate dean for leadership studies at the Yale School of Management. Sonnenfeld told me on Tuesday that the dramatic revelations brought to light by Dominion Voting Systems' $1.6 billion defamation lawsuit against Fox News — showing it knowingly peddled election lies to its audience — are cause for serious concern that could threaten the parent company.

The filings, he said, showed members of the Fox Corp. board had failed to act to prevent misconduct by Fox executives, and warned the disclosures will result in "likely" shareholder lawsuits, a possible SEC investigation into "deceptive practices of the board for conspiring to conceal known misconduct with material adverse impact," and the potential loss of insurance protection for the company's directors and officers.

Sonnenfeld, who has advised hundreds of CEOs and recent U.S. presidents, said the board should take immediate action, including the removal of high-ranking personnel, such as Fox News chief executive Suzanne Scott, from their roles.

"The board has a duty to remove such officials for proven misconduct," Sonnenfeld told me by email, explaining that peddling known election lies — as "acknowledged in the company's own sworn testimony" — damaged the outlet's corporate reputation.

"If the board does not act appropriately," Sonnenfeld added, "it shows a failure of management oversight and jeopardizes their own directors and officers insurance protection with such gross conscious failure of diligent management oversight."

A lack of action by the board could result in additional legal exposure to Fox, Sonnenfeld warned. "Murdoch 'only' controls 39% of the company so any of the 61% of the shareholders can sue for misconduct, failure of management oversight, and conscious inadequate diligence," he explained.

In the latest Dominion legal filing, it was revealed that behind the scenes, Fox Corp. board member Paul Ryan pleaded with Rupert and Lachlan Murdoch to prevent Trump's bogus election claims from being broadcast to Fox News' audience of millions. The former House speaker said that Fox News should "move on from Donald Trump" and "stop spouting election lies."

But Sonnenfeld said Ryan's actions were not enough. In fact, he said Ryan's "quiet dissent" was "cowardly, ineffective, and immoral," and pointed out that board members have certain responsibilities under corporate governance law in Delaware, where Fox is incorporated.

"The duties of loyalty and diligence are NOT to the management but to the owners," Sonnenfeld said. "By silently going along with misconduct about which they are aware, all directors, including Paul Ryan, are guilty of complicity through their complacency."

Sonnenfeld said that if he were advising Fox's board members, he would recommend an immediate investigation into "how far, wide, and deep the misconduct ran – with an outside, independent law firm reviewing the sworn testimony, now public, and conducting follow-ups." Sonnenfeld said that Viet D. Dinh, Fox's chief legal and policy officer, and Kevin Lord, chief human resources officer, "should share whistleblower complaints and exit interviews with the board."

"The investigation should be completed with a report to the shareholders by May 1 indicating what disciplinary actions will be taken," he said. Sonnenfeld also said the directors and officers insurers "should be contacted to see" if board members "are still protected."

Nell Minow, vice chair at ValueEdge Advisors and expert on corporate governance, told me she agreed with everything that Sonnenfeld said. Minow said that she would tell concerned board members to "contact their largest shareholders to hear their suggestions for new independent directors."

Minow also recommended Fox News immediately move to settle its case with Dominion, "even if it means changing the name from News to Not News and daily free ads 10 times a day in prime time for 10 years about the integrity and reliability of Dominion."

Spokespeople for Fox Corp. and Fox News, which have claimed Dominion has cherrypicked quotes to use against them, did not respond to requests for comment. Fox News has previously said it was "proud" of its 2020 election coverage, which is a statement that only grows more remarkable by the day.

THE SIDEBAR

It wasn't just Paul Ryan on the board who privately voiced concern about Fox News' coverage to the Murdochs. Jeremy Peters notes the Dominion filing revealed Anne Dias also reached out and said the nation faced an "existential moment" after the January 6th attack. (NYT)
Fox Corp. faces an "existential threat" from the Dominion lawsuit, law professor Lyrissa Lidsky tells Allison Morrow. (CNN)
Sara Fischer: "I have sources inside Fox in the C-suite level; they tell you they think it is likely that they will lose this case." (Mediaite)
A caller confronted Sean Hannity on his radio show over the Dominion revelations: "You knew the election wasn't stolen from Trump, and you guys lied about it anyway." (MMFA)
"It seems Fox has decided it can no longer quibble with the idea that its hosts were irresponsible," Aaron Blake points out. (WaPo)
"In some ways, it's comforting to realize that Fox's malfeasance was based on pure greed, overwhelming venality, and a frantic desire to maintain its audience. Those at least are motivations we can all understand, rather than some unfathomable, twisted ideological dementia afflicting an entire television news network," Charles Pierce writes. (Esquire)
Matt Gertz's excellent point: "It's not exactly news that Fox is a GOP propaganda outlet devoted to the party's political success. ... But Fox's business model requires the network to deny that obvious point: It needs to prop up its reputation as a credible journalistic organization in order to retain advertisers and other business partners, and to book guests who might not want to be associated with an openly partisan outfit." (MMFA)
Amanda Carpenter: "Fox News loves to project bravado, but the Dominion Voting Systems defamation lawsuit shows how deeply threatened the network is by flimsy, fringe competitors." (Bulwark)
Meanwhile in Australia: Crikey, the small outlet being sued for defamation by Lachlan Murdoch, is paying close attention to the revelations coming out of the Dominion lawsuit to possibly use in its own case, also set for trial this year. (Guardian)

——— BELOW THE FOLD ———

It's Not News: Words matter. Which is why it has been particularly striking to see actual news organizations fail to acknowledge Fox News for what it is: a right-wing talk channel that profits off Republican propaganda. This isn't an opinion. It is a fact laid bare via the hundreds of pages of legal documents in the Dominion lawsuit. And yet, credible newsrooms continue to describe the outlet as a "news" network. This is not only inaccurate, but it does a disservice to the readers who rely on news organizations to be direct and clear-eyed with them. Fox News' business model is not predicated on informing viewers. It's dependent on feeding them content — even lies — that validate their views. Reporters and editors who are covering this story should know better.

► A final point: News organizations seem to be a lot more open to calling smaller outlets with less robust PR operations, such as Newsmax, "right-wing." That is, of course, accurate. Newsmax is a right-wing channel. But it's really not too different from Fox News, sans the fact that the latter looks more polished and is more established. Calling Newsmax "right-wing" and declining to do so when covering Fox News is actually rather unfair to Newsmax. When describing outlets, the same standard should be applied equally.

THE BUSINESS

CNN Photo Illustration/Mary Kouw/CBS/Getty Images

Showtime for Sale?: Former Showtime boss David Nevins offered to buy the premium television channel "for more than $3 billion in recent weeks but was turned down by Paramount executives," The WSJ's Jessica Toonkel reported Tuesday, who cited sources. The acquisition attempt was backed by private equity firm General Atlantic and was "the latest in a number of offers Paramount has received over the past few years for Showtime," Tookel added. Read the full report here.

🔎 Zooming in: "Paramount's decision not to sell Showtime indicates the tough calls entertainment companies are making as they decide what scale and portfolio they need to compete in the quickly changing media landscape," Toonkel wrote. "Paramount is betting the plan will result in cost savings and revenue generation that exceed what the company could get by selling Showtime."

Axel Springer's Adjustment: The German parent company of POLITICO and Insider on Tuesday "unveiled plans for a new headquarters in New York City as it shifts its focus to the U.S.," The WSJ's Bojan Pancevski reported. Axel Springer said that the move would mean it would scale down its operations in Germany, including ending print editions of publications such as Bild. CEO Mathias Döpfner told Pancevski that he believed AI will replace humans for some news coverage, allowing reporters to focus primarily on delivering scoops and deep-dive investigative reports. More here.

IN THE INDUSTRY

Jonathan Capehart "quit the Washington Post editorial board after a dispute over an editorial about 2024 politics, leaving the paper with an all-white editorial board," Sara Fischer reports. (Axios)
Savannah Guthrie abruptly left the "Today" show after testing positive for Covid: "Savannah left early, she wasn't feeling great, so she took a COVID test." (Variety)
Nexstar's The Hill will host a show on the company's NewsNation network. The show will debut in April. (Variety)
CNN on Tuesday night aired its first one-on-one interview under the "CNN Primetime" banner. It featured Jake Tapper interview Bill Maher. (CNN)
DISH confirms it has suffered a ransomware attack that is responsible fou outages and resulted in the theft of data. (TechCrunch)
There are now more than 2 million paying subscribers to writers on Substack, Sara Fischer reports. (Axios)
The BBC believes "it will stem the flow of its presenter exodus by signing a new deal with" Huw Edwards, Jake Kanter reports. (Deadline)
Jesse Walden, the Florida TV photojournalist who was critically injured in a shooting that took the lives of reporter Dylan Lyons and a 9-year-old girl, has been released from the hospital. (Twitter)
Irv Cross, the former NFL star and broadcasting pioneer who died exactly two years ago at the age of 81, had stage 4 CTE. (CNN)

IN THE MARKET

Shares in AMC Theatres sank more than 6% Tuesday after its revenue fell 15% in Q4 — even despite a major boost from "Avatar: The Way of Water." (Variety)
Shares in Endeavor are up about 1% in after-hours trading after the company posted solid Q4 earnings. (Variety)
Endeavor boss Ari Emanuel said the company is "well positioned" even if there is a writers strike. (THR)
Shares in Nexstar ended Tuesday down 3% after the company reported Q4 earnings as core advertising declined 3% and The CW posted a $94 million loss. (THR)
Nexstar CEO Perry Sook, however, argued to investors that the company's acquisition of The CW has already paid for itself by giving it more negotiation power. (Deadline)
Penguin Random House has announced a corporate reorganization. (Publishers Weekly)

MEDIA MOVES

Disney TV announced John Landgraf and Simran Sethi will expand their duties. (Variety)
Variety promoted Michelle Fine-Smith to SVP of global consumer partnerships. (Variety)

THE INFO WARS

CNN Photo Illustration/Graeme Sloan/Sipa USA/AP

Kevin and the Kingpin: House Speaker Kevin McCarthy on Tuesday defended giving Jan. 6 truther Tucker Carlson exclusive access to the thousands of hours of security camera footage documenting the attack on the U.S. Capitol. "Have you ever had any exclusive? Because I see it on your networks all the time," McCarthy told reporters. "So we have exclusive, then I'll give it out to the entire country." The AP's Lisa Mascaro and Farnoush Amiri have more here.

🔎 Zooming in: As McCarthy knows, giving the footage to a conspiracy theorist who has repeatedly mocked the severity of the Capitol attack is not the equivalent of releasing it to a legitimate news organization. Which is perhaps why he wouldn't respond when Manu Raju grilled him over the matter on Tuesday. But GOP lawmakers operate in fear of Carlson, who is effectively the Republican kingpin. So perhaps McCarthy believes that playing ball with the Fox News extremist will curry favor with him and put an end to the prime time lashings he has received over the last few years.

IN THE BATTLEFIELD

Jonathan Chait tackles Florida Gov. Ron DeSantis' war on Disney: "DeSantis established the principle that he can and will use the power of the state to punish private firms that exercise their First Amendment right to criticize his positions." (NY Mag)
DeSantis' practice of "reviewing" public records before release has added months of delays, documents show. (WKMG)
Rep. Matt Gaetz unknowingly cited the Chinese Communist newspaper Global Times during a hearing on Ukraine military funding. (Insider)

THE VALLEY

CNN Photo Illustration/Matt Rourke/AP

Twitter in Tumult: It's not just you. Twitter "outages, bugs and other glitches are increasingly piling up," The NYT's Ryan Mac, Mike Isaac, and Kate Conger reported Tuesday. The trio noted, for instance, that the social media platform experienced four widespread outages in February alone, compared to nine in all of 2022. "Twitter's reliability has deteriorated as Musk has repeatedly slashed the company's work force," to fewer than 2,000 employees, Mac, Isaac, and Conger wrote. Here's the full story.

🔎 Zooming in: "Twitter is unlikely to go kaput, but its technology operations have become more precarious since November," The NYT report said, adding that mass layoffs "have exacerbated fears that there are not enough people or institutional knowledge to triage Twitter's problems, especially if the service one day encounters a problem its remaining workers do not know how to fix."

TOO MANY TABS

Twitter is tightening its violent speech policy to ban "wishes of harm," that the company had previously allowed. (Engadget)
Elon Musk has "approached artificial intelligence researchers in recent weeks about forming a new research lab to develop an alternative to ChatGPT," Jon Victor and Jessica Lessin report. (The Info)
A House panel is set to vote on a bill making it easier to ban TikTok from the US and crack down on other China-related economic activity. (CNN)
Mark Zuckerberg wants to "turbocharge" Meta's foray into AI. (CNN)
Zuckerberg said Meta will create "AI personas" people can chat with on WhatsApp and Messenger. (Mashable)
Good news for fellow YouTube TV patrons: The service is improving its picture quality. (Cord Cutters)

CURTAIN CALL

CNN Photo Illustration/New Line Cinema/Everett Collection

Lord of the Studios: Exactly how big is Middle Earth and does it have room for both Amazon and Warner Bros? That's the question THR's James Hibberd sought to answer in a story published Tuesday. "The David Zaslav-led studio hopes to woo back Peter Jackson for more installments," Hibberd wrote. "But as Amazon bets big on its $1 billion series, insiders worry that Tolkien's franchise isn't big enough for two rival visions." Hibberd has more here.

OFF STAGE

LIV Golf, the PGA's controversial Saudi-backed rival, struggled for viewers in its US broadcast debut on the CW Network. (WaPo)
Damian Lewis is heading back to Showtime's "Billions." (THR)
Season three of "Outer Banks" dominated on Netflix's charts during the Feb. 20-26 viewing window. (Variety)
"Super Mario Bros. Movie" will now open two days earlier, hitting the box office on April 5, not April 7 as previously planned. (Deadline)
A musical based on the bestseller "Midnight In The Garden Of Good And Evil" is in the works. (Deadline)

Thank you for reading! This newsletter was edited by Jon Passantino. Have feedback? Send us an email here. We will see you back in your inbox tomorrow.