Fox Corp.’s $787.5 million settlement with Dominion Voting Techniques over defamation costs is eye-popping, however the final price to the media firm is prone to be a lot decrease.
On Tuesday, Fox settled with Dominion over costs that Fox Information baselessly accused the corporate of rigging its voting machines in opposition to former President Donald Trump in 2020. It was the most-watched media libel case in many years.
Fox had about $4 billion of money readily available as of December 2022, and MoffettNathanson analyst Robert Fishman expects the corporate to pay the settlement through the present quarter.
How a lot the lawsuit will really find yourself costing Fox is unclear as a result of there are methods it could possibly defray a number of the expense, primarily by way of insurance coverage and the usage of tax deductions.
Fox can deduct the Dominion settlement from its earnings taxes as an expense obligatory for the price of doing enterprise. Fox Chief Communications Officer Brian Nick has confirmed the deductibility of the settlement.
Massive firms usually deduct massive settlements to assist offset a number of the price, however since settlement quantities are normally confidential, it’s troublesome to pin down precisely how a lot they profit. Funds which are seen as restitution or compensation might be deducted, whereas funds made to the federal government or on the course of a authorities are normally not deductible.
Robert Willens, a tax professor on the Columbia College Faculty of Enterprise, estimates that after the tax write-off, Fox will incur about three-fourths of the settlement quantity, about $590 million.
“The bottom line is that if the funds are being made to non-public events and never on the behest of the federal government then you’ll be able to just about conclude with none concern of contradiction that the cost will probably be deductible,” he stated.
A research by the Authorities Accountability Workplace in 2005 discovered that of 34 settlements totaling over $1 billion, 20 firms reported deducting some portion or all of their settlement funds. Massive banks similar to Financial institution of America and JPMorgan Chase reportedly additionally deducted parts of their settlements of costs tied the monetary disaster of 2008.
Additionally, if Fox is insured, insurance coverage is prone to cowl a number of the settlement. Chad Milton, a accomplice at Media Threat Consultants, stated a big media firm similar to Fox may have anyplace between $100 million to $500 million in protection, together with media legal responsibility insurance coverage and different sorts of insurance coverage.
“It’s not onerous to stack up $100 million however as you go larger than that, it will get more durable and more durable,” Milton stated.
Normally, there’s a specific amount a media firm has to pay, which may very well be within the hundreds of thousands, earlier than insurance coverage kicks in. Nonetheless, the deductible incudes lawyer charges, which in a high-profile case like Fox-Dominion may very well be tens of hundreds of thousands of {dollars} or larger, so the deductible may very well be swallowed up simply by lawyer charges.
One wrinkle: even when an insurance coverage firm pays a considerable a part of the settlement, there may very well be an annual combination restrict of legal responsibility, which may imply that insurers wouldn’t cowl one other big-money settlement.
And media firms and insurers don’t all the time agree on who ought to cowl what, since there are caveats written into contracts that permit insurers to keep away from paying beneath sure circumstances. In 2017, Disney settled a defamation go well with that was filed in 2012 after ABC aired a phase that questioned the protection of a meat producer’s merchandise that critics dubbed “pink slime.” However one among its insurers, AIG, ended up suing Disney so it wouldn’t need to pay a part of the settlement, though AIG ultimately misplaced.
Fox has additionally stated it doesn’t anticipate the settlement to have an effect on its operations.
“We don’t anticipate vital operational results or modifications to our enterprise given our money circulation, robust steadiness sheet and the well being of our enterprise,” the corporate stated in a press release after the settlement was introduced.
MoffettNathanson’s Fishman stated every little thing signifies the corporate will have the ability to run its enterprise as common.
“It isn’t clear there was a lot, if any, affect of those lawsuits on Fox Information’ viewership and enterprise,” he stated.
Fishman stated he doesn’t anticipate the settlement to hamper Fox’s capability to return cash to shareholders, together with a $1 billion accelerated share repurchase program introduced in February.
Fox has the same lawsuit looming with one other voting machine firm, Smartmatic, however no date has been set and the case won’t go to courtroom for a few years.
