The headlines had the last “dinosaurs” of the Australian media scene about to go head to head.
The stories were cheap and a bit rich coming from the likes of the Fairfax media, where dynastic urges run deep in the boardroom (the company’s current plight has a lot to do with those ambitions). At News Ltd Rupert Murdoch is 78 and ageing fast, supported by son James.
But “young” James Packer has surprised, coming up with an agreement that has effectively locked out Rupert Murdoch from Consolidated Media and any attempt to snatch control of Foxtel and the key supplier, Premier Media Group (Fox Sports).
The so-called truce was revealed in a statement to the ASX last night, just before the filings period for the day closed at 7.30pm.
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Once again all those brokers and media commentators who sniffed a Jurassic Park style brawl should have had a bex and a good lie down.
The sniping and other jousting between local media groups and their owners over the past eight years have been as a result of two things — Kerry Packer’s gradual decline, James Packer’s poor management of PBL and Rupert Murdoch’s growing unhappiness with an Australian base and his move to the US.
That opened a gap which Kerry Stokes has rushed to fill, which he has, with some finesse and patience.
Now its back to business as usual with Stokes and Packer dividing up the juicy bits of the Australia media, just as Kerry Packer and Rupert Murdoch did a decade or so ago, with Kerry Stokes looking on.
Now the outside is the old Packer media empire, the financial strained PBL Media, controlled by private equity group, CVC. It remains the carcass that Packer, Murdoch and Stokes can feast on, if they are of a mind to. It’s likely only Murdoch will, although he could pick up Ten, if he’s of a mind to.
Mr Stokes is now inside the tent and has “arrived”, helped by the man who drafted all the change of control and other legal agreements for Murdoch a decade or so ago is keeping an eye on proceedings from the Seven network board room. He’s Seven’s commercial director, Bruce McWilliam.
It would have been too much of a provocation to News (and to the ACCC) to put Mr McWilliam on the board of Cons Media as a Seven representative. He knows where too many bodies are buried at Foxtel, Premier Media and News.
But News still controls the Foxtel management. Kim Williams is News’ appointee. Other senior managers are there because they have News’ confidence.
That should be enough to keep News and Murdoch at bay.
The Packer family for years have been more fearful of Murdoch and Fairfax than the Seven Network, even when it was controlled by Fairfax.
Kerry Stokes is an outsider in the Sydney media scene, now he’s an insider. He also has a fear of Murdoch and News because he understands the size and clout of the News Corp machine here and offshore.
Kerry Stokes has also done a deal with a company chaired by John Alexander, who, it might be remembered, commissioned an ugly and offensive profile of Stokes (publishes in the now defunct Bulletin) when he was running PBL. Stokes and Seven would say that was all water under the bridge, but the reality is that the profile hurt Stokes with some nasty insinuations and claims about his private life.
The irony remains that James Packer would not have had to be ‘treated’ with Mr Stokes had Cons Media poured $75 million into PBL Media to maintain its 25% stake. That was a decision of Mr Packer and Mr Alexander.
Mr Stokes now has the most diversified media group in the country, but this is just a first, albeit considerable step. Control of Foxtel, with News and or Telstra awaits.
So, all stories claiming that Stokes would bid, or would have to bid by today because that’s when the Cons Media 10% share buyback is due to start, have gone by the wayside.
Mr Stokes and Seven have slipped through the front door of the Packer empire and are now safely inside, “without prejudice” in that they are not bound to any agreement other than not to buy Cons Media shares for another 12 months.
After the buyback, the two camps will control around 67% of Cons Media — that’s more than enough to keep Rupert Murdoch from staging a raid if he wants to snatch control of Foxtel.
The deal provides a counterweight in Foxtel to News for Telstra. Telstra now knows it has two major moguls on its side if there is any move to sell down its interest in the Pay TV business.
The deal also means that Seven’s legendary legal action, the so-called C7 case, (we are still awaiting the Federal Court’s decision on Seven’s appeal), will now be a thing of the past. But if the appeal happens to find for Seven against News Ltd, then that becomes a convenient pressure point for Packer and Stokes to use to their benefit.
This is not a long term situation: just a minimum of 12 months. by then James Packer will have worked out a few things. He will be a father a second time, he should have completed a lot of the renovations on a new Sydney home, the financial situation in the gaming business will look clearer, and Crown might be a better vehicle left listed, rather than taken private, as has been suggested.
He knows he has a certain buyer for his stake in Cons Media: that’s another billion in cash, at least.
Finally, the two Seven representatives on the Cons Media board are not line executives at Seven, but from the Stokes private groups. Peter Gammell is Kerry Stokes most trusted executive, Ryan Stokes is his son.
Last night’s statement said:
“In light of the sensitivity of some information in regard to the Pay TV investments at CMJ Seven and its nominees have also entered into an agreement which provides appropriate information protocols.”
So will Messrs Gammell and Stokes junior sit on the Seven board and remain mute when discussing programming moves that could impact Cons Media by taking business away from Foxtel and Premier Media Group?
One looming issue is how Seven programs its first digital channel, and then the second. It hasn’t made any move to put separate programming on its digital channel, while Nine, Ten, SBS and the ABC have.
That will cost money in terms of content, infrastructure and staff. It could drain viewers from Foxtel and Premier Media’s Fox Sports, depending what Seven decides. It’s a decision more important to Seven than Cons Media, so will Messrs Gammell and Stokes be allowed to participate in that discussion, and then to abstain at Cons Media when talking about how Fox Sports or Foxtel should react?
It’s an absurd situation and the easiest way to handle what the conflict of interest is for both men to stand down from the Seven board.
As Seven Network Ltd is now 48% owned by Mr Stokes and his private empire, the private and public arms are almost indistinguishable. Will Mr Gammell and Mr Stokes not discuss Cons Media and Seven matters in the private empire?
Seven has also ended its current buyback program which paid out around $80 million over the past year to support the Seven share price (it was effective in November of last year as shares generally plunged) and it has allowed Mr Stokes to tighten his control over the company by using its own money.
Nice work, just as entering the Packer tent is equally nice. He and Mr Packer are availing themselves of Cons Media’s money to tighten their joint control on the group. They will just sit back and ignore the buyback and watch their shareholdings rise with every Cons Media share bought back.