How times change
Townsville THE coincidence of the Government’s proposed sweeping changes to the media rules and the move by some of “the smartest guys in the ( Wall St) room” to buy Fairfax Media might appear to be a “Back to the Future deja vu all over again” moment.
Nothing could be more wrong. This is not the 1980s revisited – when then- treasurer Paul Keating unleashed a frenzy of media takeovers with his “princes of print and queens of the screen” media rule changes.
How the world has changed, incidentally: I doubt that even such a darling of the media elite could get away in 2017 with only two gender characterisations and certainly not that second one.
Three decades back, when the dust settled, ownership of two of the three biggest print media groups had changed hands – the only exception was Rupert Murdoch’s News Corp ( owner of this paper), which was doing a bit of the acquiring – along with that of every single one of the three TV networks.
More potently, they were doing so at very high prices.
The two most infamous were the $ 1 billion the late Kerry Packer got for the Nine Network from his “one ( also, now late) Alan Bond”; and the $ 2 billion Young Warwick Fairfax paid for, what else, Fairfax.
The Fairfax equation sort of cap- tures it all as that $ 2 billion is close to what TPG is offering for today’s Fairfax. But back then a billion dollars was really worth $ 1 billion.
Here’s the telling crude comparison. A house in Melbourne and Sydney that today would cost you $ 2 million, in the late- 1980s you could probably have bought for not much more than $ 200,000. That would suggest an equivalent price for Fairfax today would approach $ 20 billion.
Further, the $ 2 billion, such as it was – Young Warwick clearly paid too much even without anticipating the future that would come rollicking, rolling and disrupting down an internet that didn’t yet exist – was for the papers.
Yes, most of that value was based on the “rivers of gold” classified advertising in the paper, but it was in the papers – it had to be in the papers – and there was a critical symbiotic relationship between the ad revenue and the readership.
Almost all of the dollars in today’s $ 2 billion- plus offer for Fairfax is for and only for the classified advertising in its Domain print and ( mostly) online – but really quite separate– product.
Yes, TPG is also bidding for the three mastheads, the SMH, the Age and the AFR; and it either appears to regard them as still a necessary underpinning of Domain’s rivers of gold, or a defence against a “new Domain” being launched off the mastheads, or simply a recognition that leaving them in the Fairfax rump with the ragtag of others bits and pieces would just be pushing the envelope.
There are two broad points that this trip down memory lane tells us about the current state of play. That is, apart from the obvious one: once again we have politicians belatedly catching up with the past.
First, the media values that previously existed, which were based on a symbiotic relationship that deliver- ed mass eyeballs for unified content and advertising, have evaporated.
Yes, the obvious driver has been the two broad stages of the digital revolution – first, the internet and then secondly the intersection of the creation of the smartphone and social media.
The two biggest media companies in the world and growing bigger are Google and Facebook. That is where the commercial power resides; that is where social and political power reside.
But less obvious but of equal importance has been the more general dynamic across economies – driven by both the digital revolution and the rise of China – which has shredded profit margins and has turned any form of cross subsidisation into a corporate death warrant.
Back in the late- 1980s, you could embark on a “conventional” – mainstream print and free- to- air – media takeover with some confidence in the sustainability of the revenue and even more the profit.
Indeed the continued existence of Fairfax, despite its almost unending attempts to commit corporate suicide over those last 25 years, speaks rather ironically to that.
But not now. Mainstream print used to be protected by its market dominance; FTA- TV by the eyeballs delivered by the combination of technology and government muscle. Don’t forget, back then even subscription- TV was banned.
While print media is well and truly on its own, now yes, we still have a protection racket for FTA- TV. That’s whether the existing rules persist or the gently modified ones do find their way through the Senate.
So yes, there will be some “regulatory value” that could prompt corporate activity – like for example Foxtel acquiring the Ten Network to get primary access to the sports on the antisiphoning list.
But frankly, even that is not going to “save” Foxtel from the harsh winds of digital disruption. And every day the ubiquitous NBN comes closer.
The really ludicrous idea is of a print- TV “mega- merger” building a 21st century profit powerhouse.
We’ve already had a foretaste of that in the merger of Kerry Stokes’ two media arms, WA Newspapers and the Seven Network. Despite giving it an unparalleled dominance of the WA market, it has shredded billions of dollars.
Brutally, abstracting from any “regulatory value,” in commercial terms a merger of mainstream print and a FTA network would be like someone with tertiary syphilis getting into bed with someone with terminal cancer. Of course, these days neither are quite the death sentence they used to be. But averting such an outcome does require massive and successful intervention.