In
reporting a sharply lower profit for the December half last month, Southern
Cross Broadcasting CEO, Tony Bell, reverted to type and his reputation as a
cost-cutting tragic. He was quoted as saying:
“Having regard to the difficult trading conditions, the company will continue to
explore meaningful cost reductions in programming and
operations.”

And
then the Federal Government’s latest media ownership and control changes were
released and after a few hours of musing, investors decided Tony Bell’s company
should be number one on the hit parade should the laws go
through. As a result, Southern Cross, shares shot up from around $11 to a
high of $12.50 before settling back. They were a bit weaker this morning on $11.93.

So
there are two reasons to wield the axe: reduce costs because the TV revenue
market in particular is soft; and to re-size the company’s cost base to make
it a bit more attractive for anyone shopping for a
media bargain. But the
media bargain approach is a bit iffy because of the uncertain time delay and
future with the Government.

The
more conventional approach is to rip the guts out of the various businesses to
try and boost second half earnings this year and full year earnings in
06-07. So several
senior management people have been made redundant at SBC HQ, including
directors of marketing, training and radio.

State
managers in their regional television division have either been made
redundant or relocated into other roles, making the management
structure extremely lean. Rumour also has it that there will be changes
at the top of 3AW in Melbourne. More departures are expected. And what
happens at Southern Star, the Sydney-based TV production house,
will be keenly watched as the Nine Network searches for new product.

Bell has reverted to old
ideas in thinning out management and opting for cost savings over revenue
generation: a very short-sighted strategy because in the media you can’t cost-cut your way to growth. The sort of cuts being
talked about will make the SBC regional stations virtual slave operations, while
NWS 9 in Adelaide will not have any fat at all. Will
Bell once again try the regional news centralisation and cutback
fiddle?

SBC,
though its Nine affiliation, is facing revenue pressures because of the impact
of the Commonwealth Games, which sucked a lot of add revenue out of the market,
and because of the poor performance of Nine programs. SBC has
already had to contribute to the costs of Nine’s $56 million in rights.

Peter Fray

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