Today in Media Files, why the private equity bidders for Fairfax won’t save journalism, and Twitter’s news curators are in need of a subeditor (or some local knowledge).

Bidders can’t save Fairfax’s newspapers. Anyone thinking that US private equity group Hellman and Friedman is the “white knight” in the competition to win control of Fairfax Media because of the clear historical links between certain individuals should think again. A review of the deals Hellman and Friedman have listed on their website clearly follows the private equity pick-and-flick policy so well articulated at Friday’s Senate committee hearing on the future of public interest journalism by Joel Thickins, the local head of rival bidder TPG.

He told the hearing that TPG normally had a four- to five-year turnaround period between buying a company and reselling it. So by 2021 or 2022, Fairfax Media, or what remains of it, will be flicked on to someone else, refloated, or dying (such as the outlook for print journalism), if TPG wins.

And that will also be the timetable for Hellman and Friedman if it wins Fairfax. It is not a white knight riding to the rescue of an embattled company. It will help enrich the current board and management of the company, as will TPG, but it can’t save Fairfax’s newspapers from their looming fate, unless it is willing to lose money for years to come.

And looking at Hellman and Friedman’s track record, four or five years would be its average holding period. For example, Advanstar Communications, an internet and media group, was acquired in 1996 and out the door by 2000. H&F bought Axel Springer — the highest-profile media deal — in 2003, and H&F was out the door in 2010. Eller Media (formerly Patrick Media), a US outdoor ad company, was bought in 1995 and sold to bigger rival Clear Channel by 1997. H&F was involved when Getty Images, the world’s biggest photography group (and indispensable for virtually every media and internet business around the world) was taken private in 2008. The firm was gone by 2012. Internet Brands (a self-evident company) was bought in 2010 and gone by 2014.

And don’t you just love the gratuitous advice from News Corp commentators congratulating Fairfax chair Nick Falloon for getting an auction started between TPG and Hellman and Friedman (such as the latest in this morning’s media section of The Australian from the paper’s former editor-in-chief Chris Mitchell)?

“So while it might be deflating to journalists who don’t understand the economics of the business they are in, I reckon Fairfax is better placed with either bidder than with the string of retailers who have dominated its board for years. And Falloon, a relatively new chair, has done a good job setting up a virtual auction in the interests of shareholders.” 

That might be the case, but the result will be four to five years of private equity ownership with no accountability because the company will be unlisted, debt jumping from the present $242 million at the end of 2016 and falling cash flows. That sounds a bit like the situation at News Corp, where the sliding Australian newspapers are the weak spot, followed by the Australian pay TV assets. If Fairfax’s papers are weakening (as they are), News Corp’s are sliding more rapidly given they account for more than 70% of all Australian papers and therefore are being hit harder by the double digital slide in print ad revenues and the weakening growth on the digital side.

If the board and management (mostly Mr Maserati, CEO Greg Hywood) are really serious about the future of public interest (and on the whole, good) journalism, the best policy would be to reject the two bids, proceed with the partial separation of Domain (the current strategy), make the $30 million in cuts and lose the 125 jobs, and soldier on. A corporate structure similar to that of News Corp would be more successful than either private equity bid. News Corp know that in four or five years the Fairfax papers will have been run deeper into penury and the Murdochs will have total domination of the Australian media — print, free TV, pay TV and radio. — Glenn Dyer

See the Eagles fly up, up! Twitter might need to think about getting in a subeditor to cast an eye over the work of its news curators. In this “moment” from the social network yesterday, the author of the headline and caption about the AFL’s first female field umpire has committed the baffling error — obvious even to Crikey‘s non-Victorians — of confusing the names of Essendon and West Coast’s AFL teams.

Twitter’s Moments feature is a selection of curated tweets on a topic that’s in the news. According to Twitter’s content guidelines for Moments, they make it clear their “curation team” is not made up of reporters. And while they have standards for accuracy in the tweets they use, there are no such standards for the headlines or summaries.

Media downturn hits Southern Cross. The downgrade disease has infected the once solid-looking Southern Cross Austereo, a regional TV and metro radio operator that up till Friday had apparently been resisting the pressures of falling revenue and no growth in legacy media markets. Southern Cross joins the likes of Fairfax Media, Seven West Media, News Corp, Nine Entertainment, Prime Media and of course the Ten Network in revealing weak figures or warning of sharp falls in profit or losses for the 2016-17 financial year.

In a statement to the ASX, Southern Cross has warned that its full-year earnings will be at least $9 million below previous guidance and below last year’s $168 million, news that sent the shares down 5.4% to $1.22, the lowest they have been since last August. But the company said lower debt and lower interest and other cost cuts would push net after-tax profit up on the previous year’s $77.2 million.

The downgrade was issued along with news of the sale of some of its NSW TV assets to rival WIN, which will buy Southern Cross’s northern NSW TV operations in a deal worth $55 million. That deal has been off and on for much of the past year. Proceeds from the sale — which includes $45 million on completion and $10 million on the first anniversary — will help to “further reduce leverage and financing costs, while enhancing future balance sheet flexibility”, the media group said.

Southern Cross warned pre-tax earnings for 2016-17 would fall short of the $177 million to $183 million forecast in December, saying “challenging and short” TV and radio advertising markets would push earnings slightly below the 2015-16 level. The company said the new guidance on its earnings excludes the impact of the profit or loss on disposal of assets during the year — including the TV assets to WIN Television — “and the likely positive impact of the reduction in television and radio licence fees proposed in the federal budget”.

But like its peers, especially in broadcast TV and radio, ad spend is weak to falling. Southern Cross said that it had made a “concerted effort” to reduce net debt over the past 18 months and, “as a result of lower financing costs, trading NPTA [net profit after tax] is expected to show positive year-on-year growth”. But if revenue continues to fall or grow weakly at best, cost cutting and lower interest bills will not provide sustainable profit growth. You only have to look at the Ten Network to know what the end looks like if that’s the future strategy. 

Changes for communications regulator. The government has released a final report on its review of the communications regulator, the Australian Media and Communications and Media Authority (ACMA). The review recommends that ACMA’s remit is clarified, that the government gives clearer advice on its expectations, the governance changes to a “commission” model, and regulator principles be embedded in its legislation. — Glenn Dyer

Outdoor advertisers lose bid to dominate fastest-growing sector. When Australia’s two biggest outdoor advertising groups were forced to abandon their marriage by the competition regulator last week, they lost their chance to dominate the fastest-growing part of the traditional media market. The ACCC said on Friday it would not allow the $1.6 billion merger between APN Outdoor and Ooh Media, as it would have held 55% of the home advertising market, but some commentators could not quite grasp that fact. One of the reasons the companies said they needed to merge was because of the competition from Google for advertising.

And that is a lie — there is no competition for ad dollars between the Googles of the world and the out-of-home industry, which is the legacy media sector still enjoying growth, a point that escaped all commentators, especially John Durie in his Weekend Australian column: “The outdoor market accounts for 5.7% of the $13.7 billion national advertising market and is growing slowly.” And in The Australian’s Media section today, a column by Mark Ritson failed to mention the strong sales growth for the sector in the past seven years. At least Chanticleer in the Weekend Financial Review didn’t make that error and gave the two companies a passing whack for claiming the ACCC decision was too narrow and concentrated on the outdoor market and not the entire ad market (which would have suited the two companies’ arguments).

Out-of-home ads has been growing at double-digit rate for much of the past couple of years, while print and TV ads have been falling as mobile (Facebook and Google) grab everyone’s lunches. But the out of home sector saw 15% plus growth and revenues of nearly $790 million in 2016 — a performance any legacy media company executive would have been glad to have. In fact, 2016 was the seventh consecutive year of growth. 

Longer commutes, greater metro congestion and the rapid growth in cities such as Melbourne, Sydney and Brisbane has helped the out of home sector. Longer car commutes means the potential for greater exposure to billboards and increased reach for ad campaigns.

Data from the Outdoor Media Association tells the story of the strong growth, from annual revenue in 2010 of $477 million to $790 million in 2016 when growth over the year was 15.6%. Now that was far better than newspapers (print and digital). In fact industry data from NewsMediaWorks shows total newspaper revenues fell 7.5% in 2016, with print ads off 11% and digital ads up 9.9%. — Glenn Dyer

Glenn Dyer’s TV ratings. Seven’s House Rules  (1.70 million national viewers) had its best night of the season so far, as did Nine’s 60 Minutes (1.36 million) which a year ago was struggling with the awful publicity from its Beirut adventure. 60 minutes concentrated on the Cassie Sainsbury story, as did rival Sunday Night on Seven, which was watched by 1.30 million people. 

The Voice averaged 1.55 million nationally and, with the resurgent House Rules, flattened Ten’s Masterchef which struggled slightly with 1.09 million national viewers. So far as the viewing audience is concerned, there is only room for two of these programs, when they are on at the same time. Masterchef though deserves better — it is a far more interesting program than the confected nonsense on House Rules (which is now hostage to the growing appeal of UK critic, Laurence Llewelyn-Bowen whose presence has given what was a boring concept a makeover). In the morning Insiders (529,000) on the ABC finished second to Seven’s Weekend Sunrise (546,000).

In regional markets Seven’s House Rules jumped sharply to average 654,000, while Seven News eased to average 579,000, followed by Nine News 6.30 and The Voice with 492,000 viewers each. Nine News was fifth with 474,000. Sunday Night averaged 442,000, in front of 60 Minutes with 399,000. Ten’s Masterchef was well back on 256,000. — Read the rest on the Crikey website

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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