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Lachlan-isation of Oz media: Murdoch jnr to flex muscle

The forthcoming split in News Corp has confirmed a Lachlan Murdoch-isation of Australian media. Board positions and yet another writedown (around $US1.2 billion) were revealed late Friday night our time in another filing in the US.

As a result of these changes Lachlan Murdoch emerges as a power in his own right, evolving from being a member of the family company’s board to the most pervasive figure in Australian media. He will have board positions on the country’s major newspaper and pay TV group (the about to be re-launched News Corporation), and will chair and own shares in the country’s third free-to-air TV network (Ten) as well as controlling a major commercial FM radio channel (DMG, parent of the Nova and Smooth stations).

Lachlan Murdoch will be a director of the new News Corporation, along with brother James. Dad will be executive chairman of the company, dragging down $US5 million a year or more on top of the $US23 million he will earn chairing the 21st Century Fox Group.

It will be the first time in decades an Australian media baron has played such a dominant role in the Australian media — not since the days when the Fairfax family-controlled The Sydney Morning Herald and The Australian Financial Review (and then The Age in Melbourne) plus the Macquarie radio network and Seven TV in Sydney and Nine in Brisbane. But even then they didn’t control major national operations in three types of media. Not even Rupert, who, at his height, controlled News Corp and two Ten Network stations.

Now Lachlan Murdoch is the man. Kerry Stokes is a major player in free-to-air network Seven but has no presence in pay TV or radio, and his newspaper involvement is via regional West Australian Newspapers. Stokes also controls the second-biggest magazine group, plus a big construction equipment business here and in China. But he is a much smaller player than Murdoch Jnr.

This is all thanks to the Labor Party, which has done more to allow the advance of the Murdochs in Australia than any other party or government. The previous bit of largesse was approval for the takeover of the Herald and Weekly Times, which lifted the Murdoch control of the newspaper market to more than 70% (now 63%, according to News’ filings). The ALP can whinge, moan and groan about the stance of The Australian and other News Corp papers, but they have allowed the near monopoly situations to emerge.

Lachlan Murdoch keeps his seat on the other company, 21st Fox Group, as does dad and brother James. Sister Elizabeth remains off the boards of both companies. The trio of Murdoch males are the only directors of the old News Corp to maintain their board seats.

Having a board seat on the 21st Fox Group also gives him oversight of the Fox and Shine TV production businesses, which are the major content suppliers to the Ten Network in Australia, plus important suppliers to the ABC, Nine and Seven.

The latest impairment charge of $US1.2-1.4 billion will offset the $US1.3 billion revelation of the new company’s interest on Fox Sports Australia, which saw News’ stake rise from 50% to 100% when News Corp bought control of Cons Media in Australia.

The latest impairment charge takes the amount written down on the newspapers here in Australia, the US and UK to $US7 billion since the 2007 purchase of the Down  Jones Co. That’s considerably more than the $US5.7 billion paid for Dow Jones (which gave Murdoch The Wall Street Journal). It also follows around $US2.7 billion in writedowns taken against the print assets in the fourth quarter of the 2011-12 financial year, meaning $US4 billion has been written off in a year. The latest charge means that more than $US3 billion of the impairment charges have been taken against the value of the company’s Australian assets.

Before the news of the goodwill charge, New York analyst Gabelli & Co estimated the value of the newspapers in Australia at $US1.8 billion, while Dow Jones’ value is estimated at $US1.5 billion — down from the $US5.7 billion paid. In the March quarter, News Corp reported a 35% drop in operating income for its publishing division because of lower advertising sales at its Australian newspapers.

And, in the now traditional Murdoch anti-democratic fashion, the company has adopted a so-called “poison pill” to prevent challenges to the family’s control of News Corp and 21st Century Fox Group during the split and for at least a year after (and probably more going on previous form). The poison pill allows existing News Corp shareholders — including the Murdoch family — to buy new shares at a 50% discount if anybody were to buy 15% or more of either new News Corp or 21st Century Fox’s class B voting shares, effective for a year. That would allow any raider’s stake in either company to be diluted.

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