Media companies enjoy more political power in a democracy than anyone else through their ability to shape public debate, lobby for policy outcomes and swing elections. This explains why the industry globally is more family controlled than any other.
The Murdochs have become the most powerful family in the world through their ability to exert power over Western democracies, especially in the US, UK and Australia. For instance, Rupert Murdoch himself has been engaged in a vicious war with Silvio Berlosconi in recent years, so the 75-year-old media mogul’s departure as Italian Prime Minister is a major win for the 80-year-old News Corp boss.
News Corp’s Italian pay-TV monopoly can now get on with fighting Silvio’s free-to-air TV oligopoly with less fears of suffering sudden tax hits from a conflicted and hostile Italian prime minister.
That said, Murdoch political power has taken a big hit courtesy of the phone-hacking scandal. Tom Watson’s provocative Mafia question to James Murdoch last night and the failure of Tory committee chair John Whittingdale to intervene was just the latest example of the aura fading.
News Corp’s great strength over the years has been leveraging political power into commercial gain through regulatory approval for takeovers that create a dominant market position that can be further exploited. But phone hacking has meant extending that strategy is no longer viable as the aborted BSkyB takeover demonstrates. Similarly, Foxtel’s bid for Austar has also run into regulatory grief.
After the Murdochs, Kerry Stokes is easily the second most powerful media mogul in Australia and yesterday’s $200 million Fairfax Media sale by the Fairfax family is a key moment in the shifting sands of political power. Control of Fairfax Media’s sprawling newspaper, online and radio operations is suddenly available for as little as $500 million and with the company’s debt coming down courtesy of the Trade Me float, the risks aren’t too high.
We’re still waiting to see who picked up the Fairfax family’s stake, but the latest substantial shareholders in Fairfax Media were as follows:
- CBA: 12.37%
- Maple Brown Abbott: 8.95%
- AXA SA: 7.07%
- NAB: 6.24%
- Orbis Investments: 6.23%
While Stokes’s Seven West Media is loaded up with too much debt, Seven Group Holdings is in a much stronger position. It has $500 million of undrawn credit facilities and could easily switch some of its $650 million share portfolio into Fairfax stock.
It would be very easy for Seven Group Holdings to spend $500 million taking out CBA and one other institutional investor at a small premium to secure 19.9% of Fairfax and effective control. If that happened, the ego-driven Stokes would rival the Murdochs for political power in Australia, especially given the dominant position of his Seven Network nationally.
There may be regulatory issues around Stokes taking board control of Fairfax but that could easily be negotiated through a potential sale of radio assets or an exit from his minority positions in Foxtel and Fox Sports.
The other sleeper on the Fairfax share register is Gina Rinehart who is still below 5% but has demonstrated an appetite to spend hundreds of millions buying political power. However, having dropped more than $50 million on her Network Ten investment, which failed to help defeat the carbon pricing scheme, Gina’s appetite for high-profile political skirmishing through media investments may be diminishing.
This may become a lot clearer after some sharp questions are asked at the Network Ten AGM in Sydney on December 9.
Gina has friendly relations with James Packer, the other billionaire whose family has long featured in Australia’s media power games. Packer has already dropped plenty on his 9% stake in Network Ten but will be closely watching any potential bank-driven fire sale of his old PBL Media assets, as well as the proposed Foxtel bid for Austar.
As the third largest investor in Australian pay-TV after Telstra and News Corp, the key question is whether Packer would be interested in selling out to either Stokes or News Corp.
I could only see this happening if he decided to pick up a cornerstone shareholding in a float of Channel Nine, but his financing is limited by an over-commitment in casino assets, which he appears if anything to want to extend .