NEWS ANALYSIS : How Diller Accomplished the Impossible at Fox : Entertainment: His 5-year-old network is an unusual success story in an industry that is losing money.

Barry Diller’s resignation as the chief executive of Fox Inc. set off a temblor through the 5-year-old Fox TV network.

Diller--the sometimes brutish but brilliant TV executive widely acknowledged as the prime mover behind the fourth network--defied broadcasting’s conventional wisdom when he launched Fox in 1986 with a late-night talk show starring Joan Rivers.

The show quickly became an embarrassing flop. But Fox went on to capture a growing number of the 18-to 34-year-old audience so desired by advertisers with its mix of brash shows such as “Married . . . With Children,” “The Simpsons” and “Beverly Hills 90210.”

In an industry that has gone through tortuous changes in the last decade, Fox has been an unusual success story. Virtually invisible in prime time only five years ago, today it regularly comes in second on Thursday nights and beats at least one of the established networks on Sunday.

“The man did an incredible job,” said Kevin O’Brien, president of Fox affiliate KTVU-TV in Oakland. “He has left a very strong staff in place and saw this as an opportunity to leave.”

Broadcasters such as O’Brien are eternally grateful to Diller and Fox for turning their sometimes rickety UHF stations into more profitable affiliates, letting them attract larger audiences than they used to with reruns of old sitcoms.

“He might be the first guy ever to voluntarily leave a job like this,” said producer James Brooks, who made such shows as “The Simpsons” and “The Tracy Ullman Show” for Fox. Assessing the future of Fox without Diller, Brooks said: “If you really do your job, life can go on without you.”

Where Fox goes from here is the question on many minds. Diller was an executive known for a tendency to micro-manage--even picking news anchors for the Fox-owned TV station in Los Angeles, KTTV-Channel 11.

“Barry made a great contribution to the fourth network,” said analyst Richard J. MacDonald of Wasserstein Perella. “But you can only take it so far.”

Indeed, some observers suggested that News Corp. Chief Executive Rupert Murdoch now needs a different kind of executive to run his Fox subsidiary and its emerging fourth network.

Diller, an entrepreneur, would have faced the prospect of slower growth in the future as News Corp. continued to emerge from its debt refinancing and as cable became ever more competitive. Both considerations are likely to crimp the pace at which Fox can expand.

Murdoch will take over the role held by Diller. All Fox operating heads, including the chief of the network and its programming department, will now report to Murdoch. Murdoch said the arrangement is “permanent,” but others--including some Fox executives--believe that Murdoch will appoint a chief operating officer to run the company, perhaps within a year.

The Fox network became successful early in its development because Diller and Murdoch hit upon a novel formula of low-cost “reality programming,” exemplified by such shows as “America’s Most Wanted” and “Cops.”

After losing more than $100 million its first two seasons, Fox is expected to turn a profit of about $40 million for the fiscal year ending in June--making it the only network other than ABC to be profitable this season.

But Diller’s record is not without shortfalls.

Last year, Fox trumpeted an unconventional plan to do away with the traditional fall launch of new prime-time TV programs. Fox executives excitedly talked about how the explosive growth of cable had turned television into a year-round business, erasing the October-to-April cycle viewers had come to expect.

That plan, however, never lived up to its billing. Fox had intended to premiere a new series every month. Instead, only a handful of new shows made it on the air. Some of the planned shows were scrapped after Fox executives got a closer look at them.

Still, Murdoch said expansion plans for the Fox network will move forward--even as NBC, ABC and CBS continue to contract.

The network has stayed away from traditional money-losing operations such as news and sports, where fixed high costs make profits nearly impossible--especially in a recession.

In fact, one reason the Fox network is successful is that it sounds a lot bigger than it actually is.

The “network” is on just two hours a night three days a week, and three hours on Sunday. Once a month, it runs a movie on Monday night. And it airs cartoon blocks in the morning and afternoon on weekdays and Saturday morning.

But Fox--intent on maintaining low overhead--has stayed away from the other networks’ round-the-clock operations. News Corp. can’t afford that.

“We want to do a lot more news,” Murdoch said. The goal for Fox’s prime-time programming is “to be at seven nights within 18 months, hopefully within 12.”

A sixth night should be on the air, he said, “this summer.”

Times television writer Rick Du Brow contributed to this story.