Although the $787.5 million settlement between Fox Corp. and Dominion Voting Systems on defamation claims is staggering, the actual cost to the media company is probably much smaller.
Fox and Dominion reached a settlement on Tuesday on allegations that Fox News falsely accused the organization of manipulating its voting equipment in 2020 to the detriment of former president Donald Trump.
The media libel lawsuit garnered the most attention in decades.
As of December 2022, Fox has nearly $4 billion in cash, and MoffettNathanson analyst Robert Fishman anticipates the corporation will pay the penalty during the current quarter.
Fox has options to offset some of the cost, principally through insurance and the use of tax, so it’s uncertain how much the case will cost the company.
The Dominion settlement is a cost of doing business charge that Fox may deduct from income taxes. Brian Nick, the chief communications officer for Fox, has verified that the payment is deductible.
Large corporations frequently deduct large settlements to help cover part of the costs, but it is difficult to determine precisely how much they gain as settlement amounts are typically private. Payments that are considered to be reparation or compensation may be tax deductible.
However, payments made to the government or under its direction generally are not.
Fox will incur around $590 million in costs after the tax write-off, according to Robert Willens, a tax professor at Columbia University School of Business.
Twenty firms admitted withholding some or all of their settlement payments from 34 agreements totaling more than $1 billion, according to a 2005 study by the Government Accountability Office.
According to reports, large banks, including Bank of America and JPMorgan Chase, also deducted sums from their settlements for claims related to the 2008 financial crisis.
Additionally, if Fox has insurance, the insurance will probably pay for some of the compensation. According to Chad Milton, a partner at Media Risk Consultants, a significant media organization like Fox may have coverage ranging from $100 million to $500 million, including media liability insurance and other types of insurance.