MEDIA JOCKEYING FOR $50 BILLION MARKET
The biggest moneyfest for 2005 will take place in the media market. The $50 billion+ market of media, entertainment and telecoms is going to see changes it has dreamed of for nearly 20 years.
Like the privatisation of Telstra, there is nothing wrong, in principle, with a good media shake-out. After all, a lot is happening in these markets and industry structures should reflect these changes.
However, two important components make up the media and telecoms markets.
Firstly, there is the shareholder issue (maximising profits). And, looking at the barons these industries produce, it would seem that there is nothing to complain about there.
But the national interest is also at stake. The media provides a crucial channel for free speech; it allows access to information; it facilitates the development of independent thought; and it is an outlet for critical comment on political, social and economic issues. Also, in the case of telecoms the infrastructure is an important national asset.
Unfortunately, the commercial and national interests are often diametrically opposed. The best thing for shareholders would be to have a few semi-monopolies, and the best thing for a democratic society is wide diversity and lots of competition.
While the government more often backs those with the vested interests, it is good to see that government organisations such as the ACCC, National Competition Council and Productivity Council support the people. This seems an odd situation, as one would expect the government to be more aligned with its people. But in Australia that doesn’t seem to apply.
This means that those with strong views on these issues need to work a bit harder.
To clarify what is at stake here, it might help to list the position of a few of the interested parties, which could be significant during the reform of the media market.
Telstra wants to buy TV stations and newspapers
News Limited wants to have a TV channel
Nine is interested in the outcome of any wheeling and dealing
Seven needs money to get out of its downward business spiral, and be open to welcome new shareholders to the company
Ten will want to move into any other media markets which are of interest to its target group of 30-40 year olds (most probably radio)
John Fairfax will struggle to survive and needs a great deal of assistance to maintain its independent position.
My major concern relates to Telstra moving into the media, since a combined media/telecoms dominance would certainly be counter to the national interest. Telstra has made a good move in separating Sensis, but I would prefer a total disengagement, through a separate float. In this way we would get an extra media player, which would be a very positive outcome.
There are several options in relation to Foxtel.
It makes sense for Telstra to get out of it, since its broadband activities create a conflict of interest with its other partners as it moves further into broadband TV developments. It already has a DVD rental service and full-blown broadband TV is just around the corner, which would mean head-on competition with Foxtel.
My analysis is that News Corp would take a majority shareholding here by buying Packer out and obtaining a portion of Telstra’s shareholding – and I still believe that this would be the preferred option. The Foxtel model is also used by News Corp to model its DirecTV service in the USA. However, other analysts have suggested Packer might buy the News Corp share, but this doesn’t make sense to me, as his company has little experience in the interactive TV entertainment market.
Paul Budde
See also:
Australia – Analysis – From telecom to media monopoly
Australia – Free-to-Air TV – Regulatory – Content Overview and Analysis
Australia – Free-to-Air TV – Regulatory – Content Overview and Analysis
The topic will also be discussed at our first Roundtable of the year on February 2nd in Sydney:
Planning the year ahead – 2005
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Tagged in: Australia, New Zealand & South Pacific, North America
