Will Lachlan finally shake up the stagnant Aussie media industry?
It was great to see Lachlan Murdoch launching an attempt to shake up the stagnant media market in Australia. The basics of the current market are still steeped in its 50 years of incumbency, dating back to the great old days of Frank Packer and Keith Murdoch. In the meantime the major effort has been trying to maintain the status quo, a very cosy situation was maintained that saw the two families becoming fabulously rich with little or no innovation for the users of their media.
For more details on the deal see: Australia – Shakeup of the media landscape – 2008
Government was never in charge
Back in the 1970s, Packer successfully stopped the introduction of videotext (the predecessor of the Internet) as well as cable TV and later on pay TV. This of course would not have been possible without the active support of all of the governments that we have had over the last 30 years. In my analysis, I have argued that it was the media moguls who were writing the Australian media laws and policies and certainly not the government. This largely remains the situation at the moment. When the previous Minister for Communications Helen Coonan, proposed a shakeup of this market in 2005, the then Prime Minister John Howard, very rapidly got his red pen out and scrapped any part that Packer didn’t want in it.
Interestingly, it was Rupert Murdoch at that time who urged the then Prime Minister to be bolder and to really reform the Australian media landscape. When the latest media policies were announced James Packer immediately used that situation to add another few hundred million to his family fortune, thanks to the extremely generous conditions embedded in the new legislation (the protection of the old broadcasting assets). But also the new government seems to be more than happy to continue that money making scheme. They are in no hurry whatsoever to make changes and have delayed the introduction of Digital TV until 2013 (or later).
James hasn’t his heart in media
So the new changes in New Media developments will certainly not be driven by the government, at least not with any sense of urgency. However, we do have a new generation of potential new media barons with people like James Packer and Lachlan Murdoch.
Unfortunately (for the media industry), James had already at an early stage indicated that his heart was more in the gambling industry than in the media industry. While he certainly has the resources and the drive, he clearly also was not going to be in the driving seat of any new media developments in Australia..
Australia – Digital Media – Internet Media Companies – M-Z
The Seven Network
While Kerry Stokes of the Seven Network has created an enormous amount of waves in this slow moving inter-glacial period, BuddeComm has questioned the various initiative in relation to Yahoo, TiVO, engin and Unwired. We still remain extremely sceptical about the inter-relationship of these entities within his strategy, as well as about the ideas brought forward by the company on what to do with them. I can’t see a clear way forward here. Again, industry leadership is also not coming forward from this camp.
Australia – Free-to-Air TV – Broadcasters
Telstra has been doing a lot of grandstanding on its New Media ambitions; it’s CEO declared this to be one of his top priorities. They have been talking a lot about buying the Nine Network and Austar, and they have been denigrating Google, and talking up Sensis. But where are the scores on their board?
They have also talked up the wireless revolution with their NEXT G network, but their charges to access doesn’t put forward anything interesting in the media, and are two or three times more expensive than what the other mobile operators are charging. This doesn’t look like leadership activity either.
Telstra Corporation Limited – Company Overview and Operating Statistics
Telstra Corporation Limited – Corporate Strategies Analysis – 2007
Telstra Corporation Limited – Financial Statistics
Telstra – Sensis Pty Ltd
Closely linked to the feat of Telstra, is that of Foxtel – without any doubt, the most underutilised media asset in Australia (if not the world). Whereas other countries have reached close to 100% penetration of their cable/pay/satellite TV services, Australia is still sitting at a paltry 23%. Furthermore in all other countries where such services exist, they have been utilised to move into the brave new world of interactive video, broadband and communication services. Not so with Foxtel under Telstra’s majority ownership of the company.
Whatever arguments the media barons in charge of this are coming up with, it is an appalling result in anybody’s language and can only be blamed on management or perhaps much more in particular in this situation, on the leadership of the major owner of this company, Telstra. We would like to repeat that it is not the management of BigPond, Sensis and Foxtel that are at fault here but the failing Telstra’s leadership.
Australia – Broadcasting and Pay TV Market
Lots of work ahead of him
So the opportunities of industry leadership are wide open and it looks as though Lachlan is willing take that leadership role. He most certainly has his work cut out for him. If anybody can shake up this far too cosy media market, it will be him. He needs to turn the industry around from being in a defensive position to being in an offensive position. So far all players are more interested in protecting their old businesses rather than looking for structural changes to turn their businesses towards the future. There is lot of lip service taking place but so far very little has evolved from that.
While Lachlan as he has very clearly stated, will most certainly bring his own individual personality with him to the table, it should be remembered that he is one of the siblings of the world’s most respected media personality Rupert Murdoch. As an offspring of Rupert and a pupil of the News Corp school; he certainly does come with the right credentials to undertake this mammoth task.
While there are plenty of people supporting his ideas, he also is well aware of the nasty fights that have been, and are taking place within the industry. There are also plenty of people who would love to undermine any initiative that could negatively affect their own old business.
Most profound changes since 1950s
If Lachlan is successful, the (old) media landscape will undergo its most profound change since the arrival of TV in the 1950s. And this will not be one day too early. While the Internet has most certainly created an enormous impact it has not been embraced to such an extent that the old media are on par in the new media world with companies such as Google, YouTube, eBay, Facebook and so on. (News Corp being the exception here with MySpace)
There is, within this new deal, the right mix available for the new team of content, TV and Internet assets as well as the New Media opportunities that are currently totally locked up in Foxtel. Imagine if this last one could be unlocked. It could become a leading New Media organisation with interactive video content, broadband and communications services. You only have to look at similar services owned by New Corp in the USA and the UK to appreciate the potential. Weave into this the Nine network as an ideal national staging platform for all sort of media activities; entertainment, sport, news, quizzes and shows, and the opportunities become endless.
As all the elements are basically in place, all you need is an astute manager who understands all of this, but very importantly, with the intention of not stopping these developments in order to protect old assets, but with the right vision and drive to implement such a new environment.
He will most certainly be supported in this by James Packer. They share the similar visions in this respect, but as indicated above James ambitions are elsewhere. However despite this, he should be a great partner.
Australia – Broadcasting – Digital TV
Australia – Free-to-Air TV – Market Overview and Statistics.
This partnership between Packer and Murdoch, based on good personal relations, was also evident in the One.Tel business. BuddeComm remains convinced that they would have been able to pull this off, if there was not a panic decision from the old guard. Also at that stage also Rupert Murdoch was still not a convert to the new world that started to develop in the mid to late 1990s.
The marketing vision behind One.Tel remains still one of the best there has ever been in the telco industry.
With hindsight one could argue that this was a telco business. The last ten years has clearly shown how difficult it is for a telco company to move into new media. I strongly argued at the time for One.Tel to stay out of the infrastructure business. While this brought me on a personal collision course with the company, I still remained positive at all times about the fact that One.Tel would have been able to become the leading telco retail business in Australia and that, if it would have stayed in that marketing and sales arena, it would have been able to move further from there into Internet and broadband based services. But let’s stop crying over spilt milk.
The way forward
The reason why I elaborated on the previous point about One.Tel is also to show that I believe that even back at that time, Lachlan and James were on the right track and that by renewing their business partnership in this new venture is a good omen for the industry.
Lachlan should be able to use his relationship with News Corp to negotiate a solution for Foxtel. This I am sure will be high on the agenda. It could well be that structural changes in the telco industry will force Telstra to be more cooperative in finding a better solution for Foxtel. They still own the network and could offer more valued added infrastructure to an unshackled Foxtel. But they really should move out of the retail and content side of this business all together, not just on a management level but also on an ownership level.
Analysing the ACCC views on the media market we are convinced that they would welcome a shakeup perhaps as much as anybody else, as within the current structure of the industry, there is very little they can do to create better outcomes for consumers, be it in prices, innovations and choices.
However, the media club in Australia remains small, and Lachlan will have to convince the ACCC that media diversity in this country should be maintained. Would he be so bold as to look at open network models? There certainly are new avenues to explore here that could both suit his business case and the ACCC’s objectives.
For information relating to digital media, see Australia Digital Media