Old-school TV looked like a good grab

by | Nov 6, 2010 | Business

CLOUT, sheer clout, seems to have been overlooked as a reason for the Packer raid on Ten. Notwithstanding the challenge from new media, owning a TV station still carries clout, more so in recent times with the introduction of new free-to-air digital channels.

And James Packer, with his foot now firmly planted on 18 per cent of Ten – and effective control for the bargain price of $280 million – now has more clout than a mere casino operator; enough clout to see off the Ten chairman, Nick Falloon, this week. Falloon had been concocting a management buyout of the network before the Packer share raid.

Clout comes in handy when one wants to sway a government, especially at a time when a key regulatory decision draws near, such as the impending decision on the anti-siphoning list – that is, the matter of giving free-to-air networks first dibs to broadcast popular sports such as NRL and AFL.

A decision is expected shortly, and one that should favour the free-to-air networks and the status quo, perhaps with the odd concession for pay TV. Then there is a ruling on market power and audience reach, expected early next year.

Or is this deal already done? Senator Stephen Conroy, the Communications Minister, told the ABC the other day that James Packer was ”a very, very savvy businessman”. Indeed, his raid on Ten was ”a very clever move”, Conroy surmised, as if a Chinese Wall separated his left brain from his right.

If James Packer is a man who clearly relishes his clout, then Lachlan Murdoch, Packer’s putative partner in the play for control of Ten, seems more like a man born into clout of such colossal proportions that he has tired of it. Still, the clout-weary Murdoch junior has quietly amassed a media reach in this country even broader than that of his father.

Presuming Packer deals him into Ten, Murdoch will have a board seat and a say in a major metropolitan TV station to add to his 50 per cent stake in DMG Radio, the operator of the stations Nova and Classic Rock.

Then there is the 9 per cent holding in Paul Ramsay’s Prime Media Group, which delivers an audience in regional Australia. And the piece de resistance is Murdoch’s connection with News Corporation, which arguably brings ”associate” status.

News Limited, the local arm of News Corp, owns about 75 per cent of the country’s newspapers by circulation, their online operations, plus 25 per cent of the dominant pay TV player, Foxtel, and half of the lucrative Fox Sports producer, Premier Media Group.

No mean reach. No doubt Murdoch, having left the News nest to carve out his own niche, would say he had little to do with the family business now. Though, as the bulk of his wealth is tied to the fortunes of News Corp, he could be expected to act rationally in any business decision involving its local operation, News Ltd. It is the family shop, after all.

HOW do the interests of the family shop, then, collide with the sudden appearance of the two media scions at Ten?

News and its associates have had no interest in free-to-air TV for many years, only in the pay TV player Foxtel.

Yet, despite the financial crisis carving up the ad revenues of the TV networks – at a time when pay TV around the world has proven nearly immune to recession – the worm is turning.

After 15 years, Foxtel is now a mature asset. Pay TV subscriber numbers in this country are plateauing at about one in three households, or 1.6 million subscribers for Foxtel.

At the same time as this subscriber take-up slows to low single-digit growth, Foxtel faces an incursion from internet service providers such as iiNet and content aggregators such as FetchTV in the pay TV market.

News Ltd’s own Foxtel partner, Telstra, is hopping into internet TV with its T-Box video recorder. The Seven Network has TiVo. In the US, an online TV operator, Hulu, flourishes by aggregating content pooled from all the networks. The technologies for this new wave of TV are up and running. Faster broadband speeds will only help their cause.

And so it is that the News Limited newspapers have been wailing long and hard about the government’s national broadband network. If you are already troubled by too many TV channels filled with too much inane content, just wait for the NBN.

So why are all these media scions and barons milling about in free-to-air TV like schoolyard heavies eyeing their next high jinks? Let’s not forget Kerry Stokes, the proprietor of Channel Seven, who also has both a free-to-air network and a stake in Foxtel (alongside James Packer via Consolidated Media Holdings, which holds 25 per cent).

The answer is, firstly, clout. Secondly, they are a hedge against pay TV.

If pay TV fails against the seemingly unstoppable internet, its principals have a hedge in their free-to-air networks and their new digital stations. In the meantime, they have a powerful platform to lobby the government to their cause: that is, keeping the most valuable TV content safely in their hands.

Even if they can force the government to ban competition – and forcing the hand of government to act in their interests is a core activity of media barons – they will struggle to control what a family can view in its own living room. Though they are sure to give it a red-hot go.


Michael West

Michael West

Michael West established michaelwest.com.au to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences. You can follow Michael on Twitter @MichaelWestBiz.

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