Just as the UK commercial TV industry is imploding with ITV proposing a three-way merger with Channels 4 and 5, Australia has the chance to expand competition in the business.
The merger proposal in the UK comes as both ITV and Channel 4 are cutting costs and staff in a valiant effort to combat a sharp drop in advertising, and some nasty cost blowouts.
ITV has Rupert Murdoch’s BSkyB as a major shareholder (which it has to sell, according to UK regulators), 4 is government-owned, but a commercial channel, and 5 is commercial and owned by RTL, which in turn is owned by Bertelsmann of Germany.
In Australia, on the face of it, there’s no way a fourth commercial network could happen: TV revenues are sinking and the industry is depressed.
But with his internet monitoring policy in tatters and not going forward, Senator Stephen Conroy needs a new idea. Here it is: Give the country a fourth commercial TV network.
Yes there’d be screams from the existing players and its mouthpiece, Wayne Goss, at Free TV Australia, but for all intents and accounting purposes, the existing three players are worthless.
This was emphasised by the move from Kerry Stokes’ Seven Network (he owns around 46%) to write-down the value of the Seven Media Group (which owns the Seven Network and Pacific Magazines) to nothing. That means there are now no shareholders in the Seven TV network, whose interests would be damaged by the introduction of a fourth commercial network.
Meanwhile, the Nine Network also has no value because its owner PBL Media has none either due to too much debt and not enough equity. PBL Media also owns ACP Magazines which is cutting jobs faster than the sales of its key magazines fall.
Both PBL Media and the Seven Media Group only have bond holders to worry about and they think so highly of their investments that they are selling off the bonds. Seven bonds trade infrequently around 60% of face value; PBL Media around 50%.
It’s all accounting, but all the big shareholders, Kerry Stokes and James Packer, reckon there’s no money to be had in TV, so they have exited, one way or another. The bunny left holding the ball at PBL Media is CVC, a private equity group that has no interest in the long-term value of Nine, just getting out at a profit at some now distant time in the future. It loaded the company with debt, which has crippled it and made it more vulnerable to the impact of the downturn. No, no-one should worry about their moans.
Only the Ten Network might be upset, but its future as a listed company is clouded and linked to the fate of its 56.6% owner, Canwest of Canada. It has to do a deal tonight on a $C100 million loan with the Bank of Nova Scotia, otherwise it may be in default.
If it is in default, it could go into administration as a consequence. That seems to be a way off, but it could happen. That would leave the position of the Ten Network in some doubt. It may have to be suspended here and the shareholders could see their investments further undermined.
There are shareholders in the Prime Media Group and in Macquarie Media, but they are regional operators and have other businesses as well.
A fourth commercial network could be created fresh, or SBS could be merged with the ABC and at least two of the available channels made available to the new channel. There’s all the analogue spectrum that will become available when we go digital in five years’ time: that could also be sold to a new network.
The Government could also finance the hiving off of the public service part of SBS into a separate business (non-commercial) with the fourth commercial network created out of the rump of SBS, perhaps with involvement from regional broadcasters, such as WIN (Nine), Prime (7) and Macquarie (Ten). Abandon the idea of metro and regional markets and allow some open competition. WIN already reaches 42% of the national audience through its regional network and owning the Nine stations in Adelaide and Perth.
Prime Media Group, which supplies the Fox Sports to Foxtel, could take over some of the free-to-air businesses of SBS or a regional channel to emerge as a hybrid broadcaster, able to compete in the free-to-air space and against Foxtel and Austar.
It’s 50% owned by News Ltd, which doesn’t have the money, and 50% owned by James Packer’s Consolidated Media, which doesn’t have the inclination. Both could sell off some of their holdings into the market or to big investors to raise much needed funds (especially Packer with his Crown gambling business under pressure).
All things are possible, but the surprise write-down of Seven by Stokes and the virtual abandonment of value in PBL Media (James Packer allowed CMH’s stake to be watered down from 25% to 0.74% in last year’s recapitalisation), mean there are fewer people to bitch and moan about the impact of a new fourth commercial player.
I wouldn’t hold my breath waiting for this to happen: Steven Conroy doesn’t have the guts, nor does his boss. Don’t they realise there are no media proprietors left in this country? They are out of the industry, broke, or out of the country.
An opening is there.