ADELE FERGUSON June 25, 2012
It will be another big week in media land as the game plans of billionaires Gina Rinehart, James Packer, Kerry Stokes and Rupert Murdoch continue to unfold.
At the centre of it all will be the competition regulator's boss, Rod Sims, who will need to take a stand on behalf of the Australian Competition and Consumer Commission in terms of how the media industry should be viewed from a competition policy stand.
For now, the spotlight will be on Rinehart and Stokes. In terms of Rinehart, the focus will be on her next move at Fairfax.
She has several options. She can either get a board seat by backing down on her requests of three board seats and no agreement to sign a charter of independence; she can increase her resolve by calling an extraordinary general meeting to push forward her requests, which if she got them would create two classes of directors; she can make a takeover bid; or she can dump her stake.
In the case of Stokes, who owns Seven Network and a 24 per cent stake in Consolidated Media - a company that houses a 50 per cent stake in Fox Sports and 25 per cent in pay television group Foxtel - he has been placed in an interesting situation following James Packer's decision to sell his stake in ConsMedia to News Limited, assuming there are no counter-offers.
Stokes can block the bid and wreak havoc with News's takeover offer; he can sell into it and look really smart by doubling his money in two years; or he can do something himself.
Six months ago Stokes lodged an application with the ACCC to review a proposal for an acquisition of all of the shares in ConsMedia. At the time, the ACCC notified him that it would do some market inquiries. Stokes asked the ACCC to hold off.
When News Limited announced it had made an offer for ConsMedia, the ACCC was told by Stokes to conduct market inquiries into its application. That decision prompted a wave of media speculation that Stokes was about to block News Limited and create a messy situation between the media moguls. It will be a surprise if this indeed is his intention. The more likely explanation is that he is weighing up his options and will most likely try and improve an already strong position. For News, it is a no brainer to increase its foothold in pay TV and content, to bring it into line with its operations in the rest of the world.
For Packer, it means he is out of media, except for his stake in Ten Network, as he continues to focus on his gaming interests, specifically strengthen his grip on Crown and Echo. It will be interesting to see whether he stays or goes at Ten.
The next big story in media is free-to-air television.
Newspaper publishers have felt the brunt of the shift of advertising to the web and free-to-air TV is next. Online video advertising is growing incredibly fast globally as a function of two simple facts.
Firstly, people are watching less TV as they spend more time on the web watching video sourced via internet protocol connections and video ads on the web can be better targeted than free-to-air TV. This means that free-to-air TV will start to show revenue declines that will not turn around. It will be slow to start, as with print, and then accelerate, as it did with print.
That's not to say free-to-air TV won't exist in the future, it will. But the slice of the advertising market it gets will continue to deplete.
Against this backdrop fellow billionaire Bruce Gordon, who owns Win Television and has a 14 per cent stake and a board seat on Ten Network, has made it clear he is interested in buying Nine Entertainment Company - at the right price.
Nine is owned by private equity but is struggling under a mountain of debt. There is also talk that Telstra, which owns 50 per cent of Foxtel, is interested in Nine when it officially comes on the sales block.
It will give the ACCC some challenges as it wades through the possible takeover bids and strategic stakes that will continue to emerge in the coming months.
But it won't be clear cut for the ACCC as a morass of uncertainty exists in both the telecommunications sector and the media industry as technological changes and audience fragmentation evolve at an ever increasing rate.
Uncertainty is the bane of the ACCC's life, as recent cases show that theoretical speculation on what might or might not happen won't wash when it is making decisions on mergers and acquisitions. The most recent example of this was the ACCC's smack around the head by the courts over a decision to block the proposed acquisition by Metcash of the Franklins supermarket business.
The ACCC's decision was based on a belief that such an acquisition was likely to result in a substantial lessening of competition in the wholesale supply of packaged groceries to independent retailers in NSW and the ACT. The Federal Court ruled that this was not established on the evidence before the court.
It was a clear message that Sims heard loud and clear. But it won't make his job easy during a period of unprecedented upheaval where the new world of telecommunications and media is wrapped in uncertainty and in the case of Telstra, even more uncertainty depending on which government wins office in the next federal election.
In the meantime, Telstra will continue to operate in a transition position where it will remain the network carrier for a huge volume of traffic, at a time when demand for IPTV explodes, and with it content.