Management is key in business. Whether it’s BHP Billiton, Woolies, Westpac or the media. Yes, market conditions, interest rates, products, cash flow and revenue streams and the like all play a huge part, but management is the final ingredient in turning those raw materials and ideas into success. Nowhere is the quality of management more vital than in the media, where the raw materials are ideas. This week we have seen two appalling examples of weak management in the media.
The first was the Ten Network where, as expected, we saw a loss and no sign of any improvement. On top of this, the network will cut jobs for the second time in 18 months. This time up to 100 staff, mostly in the newsroom, will be the sacrificial lambs for incompetence and poor judgment at the very top of the struggling network. The after-tax loss of $12.9 million is the figure to concentrate on, not the $84 million profit figure the analysts look at on an “earnings before interest”, tax depreciation and amortisation (EBITDA) basis. Compared to Seven West’s near-$500 million figure and Nine’s figure of just over $350 million (still to be finalised), Ten’s EBITDA figure was atrocious; the loss was even more galling.
All three network compete in the same market for the same advertising. Ad market conditions are weak, but the actual ratings performance of Seven and Nine were very different to that of Ten. The difference was the quality of decision-making at Ten which was weak to non-existent as a slate of poorly-thought-out programs bombed and the network floundered week after weak. So bad has been the performance (and hence the management of the network) that most analysts reckon the EBITDA will fall to as low as $54 million in 2012-13, meaning the after-tax loss will jump to more than $40 million, hence the need for retrenchments.
Ten can’t blame audiences, the weak ad market or the internet and downloading for that. Like in so many companies and industries, it’s the quality of management that determines success. That is Ten’s weak spot.
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But Ten’s annual result reveals CEO James Warburton received $1.75 million for eight months work and chairman Lachlan Murdoch $1.3 million for four months work (an annual rate of a huge $3.9 million; has the man no shame?). Former programming chief David Mott was paid a total of $2.9 million and former chief operating officer Kerry Kingston $1.5 million. Both Mott and Kingston received termination payments in addition to their salaries. All made more than the company did. Collectively they were paid more than $7.4 million. Is that justified?
But don’t tell anyone at News Limited, such as The Australian, because we might have to mention Murdoch and his appointee in a less than flattering light — along with Lachie’s right-hander, fellow board member Siobhan McKenna who is his key exec at Illyria Investments. All have contributed to the stunning under-performance of Ten in the past 18 months; Murdoch because of his role as executive (interim) chairman which set the programming and operational course for the network this year. He also hired Warburton, and McKenna is a key offsider for Murdoch on the Ten board in a role that contributed to the poor ratings performance and the departure of Mott from programming.
Focus also on the role of those billionaires, Gina Rinehart and James Packer, and the not-a-billionaire Bruce Gordon of WIN, who is bleeding badly at his regional Nine affiliate and at the Nine Network stations in Adelaide and Perth. The board of Ten isn’t working, otherwise it would have asked how the company’s ratings performance was allowed to worsen.
So now to save money, Ten will strip staff from its newsrooms around the country and will broadcast tokenistic local bulletins, with local hosts and news coming from a central newsroom in Sydney, with minimal input from newsrooms in other cities (great in Perth, Brisbane and Melbourne!). It’s a great move by Warburton and Anthony Flannery, the network’s news boss who came to Ten from TVNZ where he shrank newsrooms. Before that he was at the Nine Network in the Sydney newsroom. Ten will have to be careful not to gut its newsroom, otherwise the regulator might start asking awkward questions about the commitment to news.
But if a collection of mega-rich people on the Ten board can’t run the business in an economic manner, what about a media company where there is just one mega-rich owner, such as the Macquarie Radio Network and its 70% owner John Singleton? Yesterday’s announcement from ACMA regarding Alan Jones and the imposition of fact-checking training and standards is an unspoken condemnation about the lack of oversight by management at 2GB and Singleton (who remains silent on Jones, the “died of shame” controversy and the ACMA statement).
In June ACMA warned 2GB owners Macquarie Radio that another inaccuracy finding could result in it having a special condition imposed on its licence. It had been the subject of 17 ACMA complaint investigations resulting in nine findings of breaches since 2005. ACMA also found that 2GB had on several occasions failed to properly handle complaints.
While there had been other accuracy breaches at 2GB and MRN, ACMA found Jones was the first person to have failed to canvass a range of views as required under the Commercial Radio Codes of Practice. Now that is a failure of management, as well as incompetence on the part of Jones. 2GB also admitted to ACMA that “no research was conducted by staff and that Mr Jones researched the figures himself”. A 2GB review subsequently found the station does have fact-checking measures in place, but that Jones’ editorial pieces do not always include that.
Management and Singleton appear to have contempt for the audience and regulator. They just didn’t care and there’s no certainty they will lift their game from now on. 2GB, MRN and Singleton seem oblivious to what message ACMA is sending. Is this part of Singleton’s rumoured desire to be rid of Jones and to force him out by isolating him? If it is, it’s grubby.