Kerry Packer, Rupert Murdoch and Kerry Stokes understood, or understand, the power and responsibility that goes with owning a major media outlet.

The responsibility isn’t a social one, it’s private, and means sticking to the media through thick and thin, cutting your cloth to suit the times, fighting rival moguls and wannabees, trying to crush new and old media competitors, corralling governments and their policies to suit them, and protecting all your business interests. They understood that governments — and rivals — would not take you seriously unless you had a powerful instrument to make your point or get your way.

So Kerry Packer had Consolidated Press, the papers, then the Nine Network and magazines. Kerry Stokes has tightened his control on Seven, rather than sell out, and used it to finance his private empire, and expanded into pay TV. He also has WA Newspapers these days.

Murdoch has the rabid News Ltd papers plus pay TV, and (much more profitable) pay TV content. And that’s just in Australia.

Compare and contrast with James Packer, who had Nine and the magazines, but sold out after undermining their financial strength. He took the money and ran, and then found that no one took a casino billionaire very seriously. He forgot the basic lesson of being a mogul in Australia, which was that to be listened to, you had to have big media stick with which to get your point of view across and to get others in business, the media and in politics to understand what you want.

Free-to-air TV is the best stick to wield. People still rely on it for their news every night. It’s still the only way to reach a mass market for advertisers. And there’s only one metropolitan FTA network available, Ten.

Ten might be best known for reality TV and aiming at younger audiences but it actually broadcasts more news and current affairs each day than any other commercial network, and it plans to add an extra hour a day Monday to Friday and half an hour a day on weekends from early next year. Mr Packer might want to cut costs and drop the extra newscaff content and take Ten back to the old days of being cheap, cheerful and profitable, but that would directly undermine the clout he will wield.

In fact, since Packer left the game, it has changed substantially. The fragmentation long resisted by his father, who personally dictated the digital television regime to a compliant John Howard and Richard Alston, has arrived in spades in the form of FTA multi channels. Packer’s pay TV background should ensure he can come up to speed quickly.

But don’t believe any guff you might read about how Packer ‘gets’ new media. Remember eCorp, the now dead new technology arm of PBL a decade or so ago. That was James Packer’s baby and a failure. And we won’t mention OneTel, will we, as an example of investment and managerial nous.

There are any number of implications of Packer’s move for key elements of our increasingly creaky broadcasting regulatory framework.

First there’s the cross-media rules and the limit on one TV licence per market. Regardless of the rules, cross-media and cross-network ownership is now the norm. PBL’s involvement in Foxtel and Fox Sports always meant cross-ownership between free and pay TV. But Kerry Stokes used Packer’s inattention to media matters to ramp up his presence on the Consolidated Media Holdings share register to 25%, giving him a substantial presence in the pay TV sector he long warred with in the wake of the collapse of C7.

But it has extended into FTA TV. Ten’s biggest existing shareholder is another mogul, WIN’s Bruce Gordon with around 12% (on which he is down a $100 million or more, having paid up to $4 a share a few years ago). And Gordon used to be a big shareholder in PBL when Kerry Packer was alive, and maintained the stake of around 4% when James Packer split the company into Crown and PBL Media. He made money from taking profits on those stakes, but has been a supporter of the Packer interests for years, the occasional spat over affiliation fees apart.

The moguls can hold these cross-ownerships even of free-to-air networks because of the rule that says anything less than 15% ownership isn’t control.

If Packer moves to 19.9%, and Gordon stays on 12%, the two would control Ten (but not in concert, of course). Only in Australia can someone like Gordon control a network (WIN, which is Nine’s major affiliate, and a rival of Ten’s affiliate) and own shares in a rival network, which is about to see the former owner of another network (and a friend of Gordon) arrive on the Ten share register as a major shareholder.

Just as Packer and Stokes struck a deal at Consolidated Media that saw no Seven Network executives on the Consolidated Media Holdings board, so Ten should be able to insist that no Consolidated Media representatives should be allowed on its board to represent the Packer holding. Consolidated Media’s major assets are a 25% stake in Foxtel and 50% stake in Fox Sports, and Packer saw a potential conflict at Consolidated Media between his pay TV stakes and Seven’s interests (as did News and Foxtel, from all accounts).

Ten’s ONE channel is all sport and the only direct FTA competitor to Fox Sports. Ten’s main channel competes across the spectrum with Foxtel, as well as the other FTA channels. That should rule out Mr Packer and Mr Alexander from joining the Ten board. In fact, even Consolidated Press representatives should be barred because Consolidated Media is now a subsidiary of Consolidated Press.

Then there’s the 75% national audience reach rule, which has acted as a de facto divide between regional and metropolitan broadcasters – albeit without affecting content, given the latter licence virtually all their content to the former. Both Stokes and Gordon, who control both capital city and regional networks in various parts of the country, have pushed that limit as far as it can go.

There’s a rumour that the FTAs have been told the 75% rule will be nixed by the Government, allowing Ten to buy its affiliate Southern Cross, potentially making Ten more attractive. But it’s no secret that the Government wants to dump the 75% rule. Stephen Conroy has said as much. And for once it’s not for the benefit of the FTA networks, but simply a reflection of the fact that as more content goes online, the less relevant a national audience cap is. Television – or more accurately audio-visual content – is making a transition away from the historic broadcast licence area-based regulatory system to online delivery. The NBN will complete that transition, giving content providers HD access to every household in the country. A 75% reach rule is meaningless in a post-NBN world.

Moreover, will all due respect to our country cousins, regional television is not the big growth play in media currently. The old broadcast television model may be slowly dying, but with Ten, Packer gets both a content production and purchasing unit and, critically, a well-established brand. In a world awash with content and entertainment options, where an NBN will deliver virtually anything users want, a known and trusted brand will be important for attracting eyeballs and advertising revenue. The brands 7, 9 and 10 are all known and trusted by Australian audiences, and that will last into the era of the NBN, if nurtured properly.

And then there’s anti-siphoning. With Packer buying back into free-to-air TV, he joins Stokes again in having a foot in both camps. That reduces the pressure on the Government for substantial change. That will now only come from one source, News Ltd, which remains seemingly locked out of FTA TV, in a dying asset class, newspapers, and a broadcast sector under serious challenge from FTA multichannelling. Rupert is unlikely to be pleased.

Peter Fray

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