1115.org

I’ve been following rumors of Fox News‘ plan to spin off a business news channel to challenge CNBC for a few months, and now CBS Marketwatch is reporting (reg. req.) that Fox has decided to move forward with their plans.

News Corp. is counting on seeing Fox’s very loyal core of politically conservative viewers embrace a new channel. While Fox has done a terrific job of bringing ordinary viewers to its daytime news and primetime talk shows, it hopes to woo the highly affluent people who watch business news on cable TV — CNBC’s lifeline.

This is the dumbest fucking idea I have ever heard. But to put it in context, we have to take a walk back in time to the late 90s. The American economy was booming, nowhere more than the Bay Area where every secretary had stock options. You couldn’t visit an office lobby without a television permanently tuned to CNBC so that workers and guests could keep a running tally of the approximate number of days they had to work until their stocks went high enough that they could retire to follow their dream of writing screenplays.

Even though I didn’t trade at the time (after all, Vegas was a 45-minute flight away) I admit to indulging in the same behavior but for different reasons. Because the clientele at the clubs I ran was so invested in the market, both for their jobs and their financial security, CNBC’s coverage of market sentiment, IPOs and earnings reports allowed me to accurately predict how successful each weekend would be. The combination of direct market participants and interested bystanders pushed CNBC’s ratings to incredible heights.

Fast forward to the present day. The stock market correction and ensuing recession destroyed trillions of dollars in wealth. Companies either disappeared or drastically downsized, leaving employees without their jobs. The stock options they thought would make them wealthy were now virtually worthless. No one wants to be reminded of this massive reversal of fortune, and CNBC’s ratings paid the price. Just half as many people watch the network today compared to the peak in 2000. Even as the market rallied off of its lows, ratings fell as the chastened investors sat on the sidelines.

Out of this history, Rupert Murdoch’s News Corp has decided that it’s time to enter a vastly reduced market to challenge an entrenched competitor. Now Murdoch didn’t get to be a multi-billionaire by taking my advice, but this move certainly isn’t one they teach in college. And beyond simple business theory, there are challenges of ideology and demographics to consider.

To avoid cannibalizing current Fox News viewers, Murdoch’s business channel will have to offer CNBC viewers a reason to switch. Fox News is a strong brand that is crushing it’s competition in the 24-hour news game. But when your brand is most notable for misinforming viewers (PDF), the success might not be transferable to financial reporting. Ratings won’t hold up when viewers start to lose money based on reheated administration talking points about our stupendously smashing economy. People say that there are no atheists in foxholes, and you won’t find ideology in trading pits.

Fox News took on CNN and MSNBC because they didn’t like what they perceived as liberal bias and figured they could make money offering a right wing viewpoint.

The problem for Murdoch and company is that CNBC is hardly liberal. In fact, watching Squawk Box with Mark Haines, Joe Kernen and David Faber already seems like watching Fox News, and when prime time rolls around, Larry Kudlow and Dennis Miller get away with even more administration cheerleading than anyone on Team Murdoch.

And speaking of cheerleading:

CNBC began airing a series of promotional spots that featured network reporters and anchors making can-do declarations about the economy.

“People are battling back. . . . Business is coming back, slowly but surely,” declared Maria Bartiromo in one spot. In another, Ron Insana assured viewers that “most people don’t realize that by the time you figure out you’re in a recession, it’s almost over.” Reporter David Faber went even further, saying, “We know who our enemies are. We’ve identified them, and we’re going after them.” According to Dow Jones, Faber went on to suggest that as a result of this new resolve, the post– September 11 world is “less risky.”

…it’s ethically suspect to place journalists whose job is reporting economic developments in the role of predicting them. And, as Steinberg suggests, the network may be motivated by something other than faith in the U.S. economy: CNBC’s ratings tend to rise—and fall—with the market.

CNBC’s other on-air personnel range from conservative to down-the-middle. Only senior economics reporter Steve Liesman is seen presenting an opposing view with any regularity, and he is often counterbalanced by the unbalanced Kudlow. And there is no balance when CEOs are invited to shill their company’s stock in the face of softball questions. It’s hard to imagine conservatives not getting everything they want from CNBC already.

The reason that CNBC is still in business is that despite their falling ratings, the people still watching are very attractive to advertisers. Financial professionals and active investors tend to have the kind of disposable income that marketers chase. While advertisers are willing to pay a premium to advertise on CNBC, they demand a discount to advertise on Fox News because their audience is seen as less desirable.

So Murdoch’s choices boil down to playing it straight to win serious business viewers and the high ad rates they attract, or try to convert some of the Cletus the Slack-Jawed Yokel crowd from Fox News groupies into business channel viewers. The choice couldn’t be more stark: financial pros won’t stand for trumpeting whichever employment report flatters the administration while sweeping the others under the carpet, and the Fox News groupies don’t want to hear about the latest darling of the French or German economy.

Choose wisely, Rupert.