‘How could I have thought that was normal, or that I could succeed?’
Three years after his father died, Craig Heatley made his first foray into property, laying down $200 on a $10,000 lot. He was still in school.
As Heatley’s 15th birthday approached, his widowed mother, Vera, taught him to drive. On the day of his birthday, he sat and got his driver’s licence. Vera owned an Austin 1800 which she allowed him to drive whenever he liked. It was no Jaguar, but for Heatley, a new freedom opened up.
Vera’s parents lived in Levin and occasionally on weekends Heatley would drive his mother to visit his grandparents, taking himself off for a drive while the older people talked. One Saturday, he dropped off his mother and drove through to Foxton. He ambled along the main street, killing time. Pausing to look in the window of a real estate agency, Rod Weir & Co, he saw an advertisement for a block of land with “subdivision potential” near the local racecourse. It cost $10,000. Heatley at the time would have had about $800 if he had sold his shares and added the proceeds to his Post Office savings. He opened the door and walked in.
Just as Ron Jarden had taken Heatley’s call a few years earlier, so the agent took him seriously now, even though Heatley openly admitted that he was at school and had little money. But he had time and was interested in the property so the agent drove him to look at the land, which was covered in weeds and scrub. Heatley was impressed by the size of it and could see, when the agent pointed it out, how it could be turned into a residential subdivision. He could also see how he could make money from it. This, at last, was the potential for real earnings.
Driving home, he excitedly told his mother about the land and its potential. She was incredulous that he would consider anything so absurd but probably comforted herself knowing that nothing could come of it because her son could not possibly afford it. But Heatley could not let the idea go. At school and in the evenings, he considered what he would need to do to create a subdivision. He contacted a surveyor and the next time Heatley went to Levin, they met. Once again, Heatley’s easy manner, his frankness in admitting this was all new to him and his ability to see past the numerous obstacles in his way gained him a sympathetic hearing. Did the real estate agent and the surveyor, perhaps learning that his father had died, feel sorry for him? Or did they simply think that if this foolish kid was prepared to risk his deposit, they might as well take it off him? Heatley does not know, but after several long discussions with the surveyor about section sizes, prices, utilities and planning rules, he felt sufficiently confident to make an offer.
Heatley confessed he had nothing like the $10,000 asking price. The agent said he would accept $1000 as a deposit. Heatley went to a bank to ask for a loan and was turned down. He went back to the agent and said he could offer $200 now and the balance of the $10,000 would have to wait until some of the sections could be sold. There must have been no sign of a better offer. The agent accepted the terms and with that, Heatley became the schoolboy-owner of several scrub-covered acres of undeveloped land in Foxton, with a $9800 debt that he had no way of paying unless his foray into property development, about which he had so recently known nothing, was successful.
Did the real estate agent and the surveyor, perhaps learning that his father had died, feel sorry for him?
What he had on his side was that the surveyor and agent wanted it to work too. The surveyor said his fees would be $1500. Heatley told him he would pay $2000 but not until some sections were sold. [His sister] Debbie thinks their mother, who was always ready to stand behind her son, helped out with the odd bill. But putting in a road, sewerage, water and stormwater were jobs for professionals. He had to raise some money.
On Saturday, July 6, 1974, a few weeks after Heatley’s s 17th birthday and halfway through his final year of school, “11 Outstanding Residential Sections” went under the hammer at a public auction in the Foxton Town Hall supper room. The terms were a one-third deposit down,
with the balance payable on title. At the auction, seven sections sold, giving Heatley sufficient cash to pay for the land, road and utilities. In the school holidays and on some nights after school, he used his savings to pay school friends to help clear the site. William Whewell was one of them.
“Craig was miles ahead in business,” Whewell recalls. “His Foxton deal was a masterstroke and at the time I wondered who was advising him, but other than to describe the pre-sale conditions of the sections – some of the money was to be paid as a deposit and the balance was to be paid once the services and roads were in – he never talked about business. He just got on and did it.”
One sticking point in developing the site was getting the concrete stormwater pipes. The manufacturer, Humes, had a near monopoly on the pipes and was not interested in supplying for such a small job. Heatley was frustrated that even with the money to pay, he could not get what he needed. It annoyed him that he had to personally beg a supplier for something he was paying for. Eventually, the pipes were supplied and the job was finished. Within two years, all but one or two of the 11 sections were sold and his $200 investment had become $17,000 profit.
Looking back, he can scarcely believe that as a schoolboy he even considered creating a subdivision, let alone that he achieved it. But at the time he did not think he was doing anything unusual because the people he was dealing with treated him seriously and were professionals. “But how could I have thought that was normal, or even that I could succeed? It’s crazy! Perhaps I was arrogant. I just don’t know. But it worked.”
NO LIMITS – HOW CRAIG HEATLEY BECAME A TOP NEW ZEALAND ENTREPRENEUR, by Joanne Black (Allen & Unwin $36.99) New Zealand market when competition for entertainment is now global.
“When we started Sky, only a few media companies could access New Zealanders’ homes. We were one of those companies. Today, YouTube videos can be watched in New Zealand homes, just as Netflix and others can, even though those companies are based in the United States.”
In Heatley’s view, the biggest irony of the Commerce Commission’s decision is that the merger was turned down on the grounds that it would not be in consumers’ interests, whereas he believes the decision actually weakens the domestic landscape.
“There is no question in my mind that Sky and Vodafone are weaker apart than they would be together. They will not be as able to compete with the bigger international onslaught that, for sure, is coming. With New Zealand players unable to merge to form stronger companies, those foreign companies will find New Zealand more fertile ground.”
UNBUNDLING
The point, he says, is that the way technology is unfolding is changing, and rapidly. Now, people are forced to pay for a bundle of movies or channels they have no interest in watching. In time, he thinks TVs will be fully equipped for streaming and viewers will choose la carte. A viewer will press “golf” and they will get golf. If they press “history” they will get history. They will not be forced to pay for channels they never watch. Further, instead of consumers paying one company for an internet service, another for a phone service and a third for video content, it would be more efficient and likely to be cheaper for them, he argues, to have one company provide all that, which might have been possible with a Sky-Vodafone merger.
“The implication from the Commerce Commission was that if you had to buy all those from one supplier, you would pay more. As a businessman I would say that’s completely wrong. You would actually pay
In school holidays and after school, he used his savings to pay school friends to help clear the site.
“The Commerce Commission is ignoring the fact that an Amazon could come in with an open chequebook.”
less. The commission has said that internet is separate from video, that video is separate from cellular and wireless. Well, you know what? They used to be, but in today’s world they are not. I just think their decision was out of touch with the times.”
Heatley also thinks newspaper companies Fairfax and APN should have been allowed to merge. The argument that a merger would have reduced competition in covering domestic news and reduced the number of voices in the mainstream media is valid, he says, “but only if you think that they are both going to survive, which I don’t”.
“By turning down the newspaper mergers, which included some radio assets, and Sky-Vodafone, the commission is keeping everyone separate and completely ignoring the fact that an Amazon could come in with an open chequebook and essentially create a much more dominant and aggressive competitor in the market that could ultimately result in less consumer choice.”
He thinks the commission’s decision might have been valid had there been only two main telecommunications players in the New Zealand market. “But the communications space is not like that. It’s global so, if I want to, I can stream a game of baseball being played right now in Philadelphia. I think the commission’s decision means you will end up with all the local players being weaker.”
US MEDIA MERGER
Very similar arguments have just been aired in the US, where the scale of the industry is far bigger but the pressures similar. AT&T – the biggest pay-TV distributor – has been allowed to acquire Time Warner, whose stable includes CNN, HBO and Warner Bros TV and film studios. The judge in the case said the Justice Department, which argued against the deal and said it would make the pay-TV market less competitive and less innovative, had not proved its case.
Reaction in the US to the US$80 billion ($118 billion) deal has been mixed. A former Federal Communications Commission official, Rob McDowell, told the Wall Street Journal the decision showed the court recognised the market was changing and business models were converging. “Yesterday’s definitions of old channels of commerce are quickly becoming obsolete,” McDowell said.
Georgetown University’s McDonough School of Business project director Larry Downes told the WSJ the deal showed incumbents on the contribution and distribution side of TV were fighting a losing battle against new entrants. “These deals are not signs of strength; they are almost desperate efforts to come up with new combinations of assets they can use to compete with Netflix and Hulu.”
Against the merger, Gigi Sohn, distinguished fellow at the Georgetown Law Institute for Technology Law and Policy, said she thought the price of Time Warner products would rise, and programming choices would be reduced. “I’ve never seen a media merger that’s had any benefit to consumers and this one is certainly no different.”
Public Knowledge president Gene Kimmelman went further, saying the deal was dangerous. “This enables the content and transmission companies to further consolidate and maintain their control over large bundles and high prices, whether delivered on cable, satellite or broadband,” he said.
Heatley thinks the Commerce Commission missed the speed with which technology is moving and if another application by Sky and Vodafone was made in a year or two, the outcome might be different.
SKY MISSES THE BUS
He concedes that the criticism about not keeping up with the changes could also be made about Sky itself. Sky would probably admit that it should have embraced streaming earlier than it did, he says. “It was a little late to that party in seeing the challenge of video-streaming, but it was hardly alone. Ten years ago, Netflix was minor, now it’s huge. None of us really saw how quickly that transformation would happen.”
Sky is a prime example, Heatley thinks, of the hazard of incumbency. He says Sky never had a monopoly and never had anything that a competitor could not also have bid for – a point proven by Spark and TVNZ recently winning the rights to show the 2019 Rugby World Cup. Incumbency feels advantageous but that can be misleading, and especially dangerous in an era of fast technological change.
“Just ask Xerox, or ask Kodak, which for decades made 24- or 36-exposure films for cameras and sat there as a fat and happy company when it should have been leading the digital revolution. When you are an incumbent, you think defensively when you should be thinking offensively, but that is far easier to say than do. The most successful businesses I’ve seen are those which, every day, say, ‘Okay, what would we do to
“There have been mistakes, no question, and I think the people in Sky would say the same thing.”
“The most successful businesses I’ve seen say, every day, ‘Okay, what would we do to disrupt our own business?’”
disrupt our own business?’ They are really brutal in their assessments and then they say, ‘If that’s what’s required, that’s what we’ll do.’ Not many companies are willing to do that.”
But none of this is to say that anyone should write Sky off, Heatley contends. It remains a substantial and significant company. It could be in a better position, but it’s not too late to fix its problems.
“Did Sky make mistakes? Yes. Did the Commerce Commission make mistakes? Yes, I think it did. There have been mistakes, no question, and I think the people in Sky would say the same thing. But a company, at the end of the day, is a group of people, and show me a company, show me a person, who’s never made a mistake. I’ve never met one, and I’ve certainly made lots myself.”