The Packer deal took everybody by surprise. It coincided perfectly with the media reform announcements, but in fact had more to do with maximising shareholders value than with media reforms.
The media reforms had already been pretty well demolished by the Prime Minister in late 2005, and what was left over was just enough for the media moguls to grab some last-minute dollars out of a rapidly declining old media industry. They wouldn’t have been able to do this if the Minister had offered a true reform package – one that increased diversity by allowing for a fourth channel and by having a far more proactive policy regarding the new media.
By limiting the effect of the reform package to the existing media and existing players, the Minister increased the value of the old media, since, under her new rules, very few others are able to enter that space. The media barons were very grateful for this, as they all saw a significant increase in the value of their old media empires.
While the Minister keep, like a broken record, repeating the benefits of digital media, let’s not fool ourselves – the current events have nothing to do with true reforms benefiting the developments of new media.
Let’s go back to mid-2005 …..
At that time the Minister for Communications had some excellent plans for media reforms, but she was outmanoeuvred by the Prime Minister. The Prime Minister was not the least bit interested in supporting the Minister and her package was thrown to the media pack, which very quickly tore it apart.
Being a true politician she battled on as though nothing had happened and continued delivering her reform message. But it was words only – the package was empty.
Minister is embarrassing the new media industry
It’s rather embarrassing to hear the Minister continue to go on about mobile TV. I am sure she knows better, but this is apparently the only part of the new media package that has survived. She simply doesn’t have anything else to offer.
Her problem is that nobody is interested in mobile TV services – not in Australia, and not anywhere else in the world. And, just to make sure that she protects the old media in this business also, she is even allowing them to bid for new government-owned spectrum around such services.
Doesn’t she remember what happened with digital TV spectrum? It was quickly gobbled up by the old media to prevent anybody else from entering the market.
As I reported last year, there was absolutely no sense of unity or national interest in the media reforms. It was simply a very selfish individual battle – each mogul fighting for himself and, in the absence of any political support, the Minister did nothing but go along with the moguls.
Packer’s unique business sense
It became very obvious that there was no way the government could retain control of the media reforms – hence the cheery smiles from James Packer in the weeks running up to the final version of the reforms.
He arguably could have split the company beforehand, but, ever the astute businessman, he jumped at precisely the right time. With media ownership changes in the air this was the ideal opportunity to make money, and he struck at just the right moment.
We can all remember his father declaring that they heyday of commercial TV was over, and that it was time for the Packers to move out. Slowly but surely media monopolies are disappearing – more due to technological developments than to policy changes. But businesses like the Packer empire thrive in a regulated environment. Policy changes occur frequently in regulated environments and this creates great opportunities to make money. I truly respect and admire Packer’s business acumen.
He even got Rupert Murdoch to join the game and take a share in Fairfax.
Prime Minister and not Minister should have end up with egg on his face
However, it has certainly left the Minister looking like the legendary unclothed emperor. She is putting on a brave face but she must be feeling rather miserable and ill-treated. I believe she will find it impossible to convince the Australian public that these media reforms are in the national interest. Rightly or wrongly she will be labelled as the person who handed over a swag of money to the already wealthy media moguls, while at the same time failing to deliver anything that operated in the interests of the consumers and the voters. I am afraid that she will face a serious political issue with this one. The Prime Minister cleverly manoeuvred himself onto the political sideline of this issue, but it is important to remember that it was his lack of leadership that caused it all.
The Minister certainly started off with the right vision and policy mindset, but she had no prime ministerial support for true reforms. I actually suggested she forget the whole idea of reform, as it no longer had anything to do with the national interest.
It is interesting to note that, on this issue, Rupert Murdoch showed a greater sensitivity to the national interest than our Prime Minister. He at least suggested a true set of reforms, notwithstanding the fact that some of these would damage his business short-term. The overall consequences of Murdoch’s plan would have been much better for Australia, and, in the longer term, for Australian media companies as well.
New Packer media company
But what does the Packer deal actually do for media reform? Very little. It has far more to do with freeing up money to invest in another regulated business that will undergo massive changes – the gambling arena.
However, the Packer shake-up may trigger some other developments. The new media company could move in two directions.
The first option is that it could buy up other ‘old’ media, or parts of it, such as Fairfax, mainly for their valuable content. Short-term there is plenty of life left in the -thanks to the government – heavily shielded, declining market old media, and that’s where the money will be for the next few years. So I expect them to concentrate more on the opportunities in this part of the market (as a result of ownership rules). However, this now needs to be based on a utility model, as the old media need to be run at much lower costs during the impending period of decline.
Because these media are at the end of their lifecycle I stand by my prediction that the level of activity, in relation to new media developments, will remain limited.
The second option would be to turn it into more of a new media company, creating on the one hand a new media utility arm and, on the other, a media-independent content arm that can distribute its products and services in various ways through the utility. Old media with good content are, of course, valuable assets for such a new media company.
I think that the new media company will move in both of these directions, in parallel. The reality is that the old media are, at the same time, the key players in the new media. They will need to jump the S-curve and start generating business models and new revenue streams in the new environment. And the new media company is an excellent vehicle to manage that transformation.
As we have seen in previous shake-ups, the reality will be like a poker game.
All the key players have secured a place at the media poker table. Because of the lack of diversity in the media market they control, between them, dozens of smaller media assets such as content, facilities, programming rights, cinemas, Internet sites, portals, entertainment and film assets, and so on.
All these players have an interest in some of those assets owned by the other parties, and that’s where the action will now take place. It will be a game of musical chairs among the barons; there will be a shake-up, but in the end it will be the same old group that will own all the same old bits and pieces.
However, again remembering previous media reform developments, although some less experienced players (such as, for example, Fairfax, Ten, WAN, Rural Press, Austero, etc) may end up with some short-term money gains, their strategic position in the Australian media market will, as a result of this poker game, be diminished And, let’s face it, there are several players who would probably be more than happy to cash in on the extra value that is suddenly added to their media assets and sell out at such premium prices.
All of this, of course, is not a good outcome for Australia, but it’s the price the country will have to pay for the government’s miserable media policy.
The government was the first one to be forced to throw down their cards – who will be the next?
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