How the Head of Fox News Is Making Americans More Right-Wing, More Ignorant and Ever More Terrified

At the Fox News Chrismas party the year the network overtook arch-rival CNN in the cable ratings, tipsy employees were herded down to the basement of a midtown bar in New York. As they gathered around a television mounted high on the wall, an image flashed to life, glowing bright in the darkened tavern: the MSNBC logo. A chorus of boos erupted among the Fox faithful. The CNN logo followed, and the catcalls multiplied. Then a third slide appeared, with a telling twist. In place of the logo for Fox News was a beneficent visage: the face of the network's founder. The man known to his fiercest loyalists simply as "the Chairman" – Roger Ailes.

"It was as though we were looking at Mao," recalls Charlie Reina, a former Fox News producer. The Foxistas went wild. They let the dogs out. Woof! Woof! Woof! Even those who disliked the way Ailes runs his network joined in the display of fealty, given the culture of intimidation at Fox News. "It's like the Soviet Union or China: People are always looking over their shoulders," says a former executive with the network's parent, News Corp. "There are people who turn people in."

The key to decoding Fox News isn't hosts Bill O'Reilly or Sean Hannity. It isn't even News Corp chief Rupert Murdoch. To understand what drives Fox News, and what its true purpose is, you must first understand Chairman Ailes. "He is Fox News," says Jane Hall, a Fox commentator for 10 years, who defected over Ailes's embrace of the fear-mongering Glenn Beck. "It's his vision. It's a reflection of him."

Ailes runs the most profitable – and therefore least accountable – head of the News Corp hydra. Fox News reaped an estimated profit of $816m last year – nearly a fifth of Murdoch's global haul. The cable channel's earnings rivalled those of News Corp's entire film division, which includes 20th Century Fox, and helped offset a slump at Murdoch's beloved newspapers unit, which took a $3bn writedown after acquiring the Wall Street Journal. With its bare-bones newsgathering operation – Fox News has one-third of the staff and 30 fewer bureaus than CNN – Ailes generates profit margins above 50%. Nearly half comes from advertising and the rest is fees from cable companies. Fox News now reaches 100m households, attracting more viewers than all other cable news outlets combined, and Ailes aims for his network to "throw off a billion in profits".

The outsize success of Fox News gives Ailes a free hand to shape the network in his own image. "Murdoch has almost no involvement with it at all," says Michael Wolff, who spent nine months embedded at News Corp researching a biography of the Australian media giant. "People are afraid of Roger. Murdoch is, himself, afraid of Roger. He has amassed enormous power within the company – and within the country – from the success of Fox News."

Fear, in fact, is precisely what Ailes is selling: his network has relentlessly hyped phantom menaces such as the planned "terror mosque" near Ground Zero, inspiring Florida pastor Terry Jones to torch the Qur'an. Privately, Murdoch is as impressed by Ailes's business savvy as he is dismissive of his extremist politics. "You know Roger is crazy," Murdoch recently told a colleague, shaking his head in disbelief. "He really believes that stuff."

To watch even a day of Fox News – the anger, the bombast, the virulent paranoid streak, the unending appeals to white resentment, the reporting that is held to the same standard of evidence as a political campaign attack ad – is to see a refraction of its founder, one of the most skilled and fearsome operatives in the history of the Republican party. As a political consultant, Ailes repackaged Richard Nixon for television in 1968, papered over Ronald Reagan's budding Alzheimer's in 1984, shamelessly stoked racial fears to elect George Bush in 1988, and waged a secret campaign on behalf of Big Tobacco to derail healthcare reform in 1993. "He was the premier guy in the business," says former Reagan campaign manager Ed Rollins. "He was our Michelangelo."