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Media shake up – only the moguls will gain

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The Packer deal took everybody by surprise. It coincided perfectly with the media reform announcements, but in fact had more to do with maximising shareholder value than with media reforms.

aa19-dec-jan-2006-07-media-shake-up-only-the-moguls-will-gainThe media reforms had already been pretty well demolished by the Prime Minister in late 2005, and what was left over was just enough for the media moguls to grab some last-minute dollars out of a rapidly declining old media industry.

However, let’s not fool ourselves – the current events have nothing to do with media reforms. Let’s go back to mid-2005…

At that time the Minister for Communications, Helen Coonan, had some excellent plans for media reforms, but she was outmanoeuvred by the Prime Minister. Howard was not the least bit interested in supporting the Minister and her package was thrown to the media pack, which very quickly tore it apart.

Being a true politician she battled on as though nothing had happened and continued delivering her reform message. But it was words only – the package was empty.

There was absolutely no sense of unity or national interest in the media reforms. It was simply a very selfish individual battle – each mogul fighting for himself and, in the absence of any political support, the Minister could do nothing but go along with the moguls.

It became very obvious that there was no way the government could retain control of the media reforms – hence the cheery smiles from James Packer in the weeks running up to the final version of the reforms.

He arguably could have split the company beforehand, but with media ownership changes in the air, this was the ideal opportunity to make money, and he struck at just the right moment.

We can all remember his father declaring that the heyday of commercial TV was over, and that it was time for the Packers to move out. Slowly but surely media monopolies are disappearing – more due to technological developments than to policy changes. But businesses like the Packer empire thrive in a regulated environment. Policy changes occur frequently in such an environment and this creates great opportunities to make money. I truly respect and admire Packer’s business acumen.

However, it has certainly left the Minister looking like the legendary unclothed emperor. She is putting on a brave face but she must be feeling rather miserable and ill-treated. I believe she will find it impossible to convince the Australian public that these media reforms are in the national interest. Rightly or wrongly she will be labelled as the person who handed over a swag of money to the already wealthy media moguls. She will face a serious PR issue with this one. The Prime Minister cleverly manoeuvred himself to the political sidelines of this issue, but it is important to remember that it was his lack of leadership that is the cause of all of this.

It is interesting to note that, on this issue, Rupert Murdoch showed a greater sensitivity to the national interest than our Prime Minister. He at least suggested a true set of reforms, notwithstanding the fact that some of these would damage his business in the short-term.

But what does the Packer deal actually do for media reform? Very little. It has far more to do with freeing up money to invest in another regulated business that will undergo massive changes – the gambling arena.

However, the Packer shake-up may trigger some other developments. The new media company could move in two directions.

The first option is that it could buy up other ‘old’ media, or parts of it. Expect them to concentrate more on the opportunities in this part of the market (as a result of ownership rules). However, old media needs to be run at much lower costs during the impending period of decline.

The second option would be to switch the focus of the Packer empire to new media, creating on the one hand a new media utility arm and, on the other, a media-independent arm that can distribute its products and services.

I think that the new media company will move in both of these directions, in parallel. The reality is that the old media stalwarts are, at the same time, the key players in new media. They will need to jump the S-curve and start generating business models and new revenue streams in the new environment. And the new media company is an excellent vehicle to manage that transformation.

Paul Budde is managing director of Paul Budde Communication (BuddeComm), a global independent telecommunications research and consultancy company specialising in the strategic planning of interactive services.

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