Ten ... and counting
Townsville ON one level – and it is the level most people actually, literally, see – nothing changes.
Thirteen days ago, the Ten network went into voluntary administration. That night it was telecasting as usual on all its stations, 1, 10, 11, 12 and 13HD. No viewer would have noticed a difference because there was no difference to notice.
Now, Ten is about to go into receivership. The night after it does it will still be telecasting as usual on all stations. And indeed it will be in the days and weeks after that.
The only way those Ten channels are going to go “dark” anytime soon is if all the channels go dark, thanks to a general power outage.
Indeed, the move by the CBA will make even more certain that the more things change, in regard to Ten’s legal status, the more they will stay the same, so far as viewers might notice.
The move will actually stabilise and enhance Ten’s cash position. On a more fundamental level, though, a line in the sand will have been crossed.
Companies can “come back” from a period in administration. It gives management – via the administrator – a critical “breathing space”, where they don’t have to look over their shoulders at creditors, to basically take some tough decisions.
Provided those decisions can get revenue to sustainably exceed expenses – as someone who sat at the very epicentre of the Ten network’s more catastrophic implosion a quarter century ago happened to rather coincidentally put it to me in passing late yesterday – you can return, broadly to life as before.
In contrast, companies almost never “come back” quite so seamlessly from a receivership. With “normal” businesses it usually proceeds to some mix of a sale of the business and its breakup and/ or closure. By “normal” I mean other than one of the three FTA- TV networks, whose government- mandated oligopoly access to mass consumer eyeballs has – up until now – meant both that none of them would ever be closed in any absolute sense, and that there was always a queue of buyers.
That paradigm still – broadly – holds for the immediate future. But precisely because of the disruption from the online world of Netflix, You- Tube and the rest which has dragged eyeballs away from FTA- TV and rendered the ones that stayed more flaky, it’s not a long queue.
So a CBA move to place Ten into receivership subtly but fundamentally changes the dynamic.
A broad analogy would be that administration is like a house renovation – a new kitchen, bathroom and paint- job; receivership is like a stripped- to- the- shell total rebuild; liquidation knocks the house down.
The CBA move makes even more necessary and urgent the Government’s proposed changes to the media rules.
Two are key to the resolution of Ten’s situation.
The big one is the loosening of the ownership restrictions. This will allow the two most obvious buyers to, well, buy Ten: Australian- born Bermudan billionaire Bruce Gordon – currently prohibited by the 75 per cent reach limit; and Lachlan Murdoch/ News Corp prohibited by the two- out- of- three limit. The second is the proposed cut in FTA- TV licence fees, which when ( and if) delivered will be a welcome if not exactly lifesaving contribution to that all- important advice of the necessity for revenue to exceed expenses.
The one big functional change with receivership is that Ten will get access to some much- needed lumpsum cash, probably via a new facility from the CBA.
Indeed, CBA would have exactly that in mind as the requirement if not the motivation for triggering receivership.
In that broad sense it puts the three key players to resolving – positively – the future of Ten on the same side of the table: the CBA, the two shareholder lenders Murdoch and Gordon, and the administrators/ managers.
Administrator Mark Korda told the creditors’ meeting yesterday Ten was broadly washing its face ( before both any licence fee cut and lower payments on renegotiated contracts with Fox and CBS), but it faced some lump- sum payments which would require lump cash.
The CBA move effectively would announce it was prepared to supply that cash. That would assume Ten becomes cashflow positive and is recapitalised by turning debt into equity and then the raising of additional equity.
Now, two points about the assumption that as a consequence of all this Ten would be moved smoothly and cheaply ( counting the cost only from this point) into the arms of News Corp, publisher of this paper.
First, changes to the media rules might allow News Corp to buy Ten, but it would still have to get past the basic competition issues of the ACCC.
Secondly, if News Corp were free to buy Ten it would also be free to buy Nine and indeed Seven ( were Kerry Stokes prepared to sell).
The rational decision would be to assess which offered better value for money. Interesting question.