Australia Focus
Ten’s downfall - what now for MasterChef?
The financial failure of the Ten Network TV raises important questions about media ownership, media diversity and the role of the Murdoch family.
But first the really important issue — MasterChef.
Last week, the Ten Network went into voluntary administration because its directors were concerned it wouldn’t be able to pay its bills.
It is a step short of receivership, where a company is typically wound up and its assets sold off piecemeal.
Instead, administrators are appointed — in this case the accounting firm Korda Mentha — to keep the business running and try to save it or see if they can find a buyer to pick up the company in its entirety.
Thus Channel Ten will keep going and MasterChef will remain on Australian and New Zealand television screens, at least for the time being, but the budget will likely be cut, so fewer overseas chefs and fewer trips away for the contestants.
Leaving cooking shows aside, it appears that two of the Ten Network’s existing shareholders — Lachlan Murdoch and Bruce Gordon — are planning to buy the network from the administrators.
Bruce Gordon is the Bermudabased octogenarian billionaire owner of the WIN regional TV network, while Lachlan Murdoch is one of Rupert’s offspring, vying with his siblings for ultimate control of the family media empire.
On the face of it, losing hundreds of millions of dollars on a failed television network won’t help Murdoch’s case. But if it happens that he subsequently picks up that network for a bargain and at the same time precipitates a change of media ownership laws that allows the Murdochs to increase their reach in Australia, then that would change things.
What is notable is there were several actions taken by Lachlan Murdoch and by companies controlled by his family that preceded the collapse of the network. The first was the bank loans. Ten’s directors became concerned about the company after its billionaire shareholders refused to continue to guarantee its bank loans.
Murdoch, Gordon and James Packer are all major shareholders of the network and were guarantors of Ten’s existing A$200 million ($276m) loan facility with the Commonwealth Bank of Australia. But they refused to support a replacement A$250 million loan the network needed to stay afloat.
This is fair enough. Directors and shareholders shouldn’t be expected to lend money if they don’t think they’ll get it back.
A couple of days earlier, Murdoch and Gordon wrote a letter to the other directors, threatening to sue them if they went ahead with a recovery plan for the network, after which the directors said they had no choice but to call in the administrators. The two billionaires were acting to protect their own investments in the company and had been working on their own joint plan to take control of the network if it defaulted on its debt.
It is little surprise the directors — already nervous about incurring penalties under Australia’s punitive insolvent trading laws if Ten collapsed — were concerned by the additional risk of being sued.
Then there is the role of Murdochowned 21st Century Fox in the US.
Ahead of the administration and as Ten was working to secure backing for a new loan it was slashing its costs, including what it paid overseas TV companies for content. It was having fruitful talks with fellow US network CBS, but hit a stumbling block with 21st Century Fox.
According to one report, Ten had told 21st Century Fox that the deal was urgent.
As the cost savings plan came down to the wire, negotiations with Fox stalled. According to one report, 21st Century Fox’s president of international distribution Mark Kaner, who was renegotiating the deal for Fox, became very difficult to contact over the past week or so. Apparently he was totally uncontactable on the weekend before Ten went into administration, despite the network trying several times an hour to reach him.
This left a major dent in Ten’s recovery plan.
Ten has always been the worst performing of Australia’s three free to air networks, so there won’t be many people lining up to buy it, particularly as traditional advertising revenue is declining so steeply and there is so much other competition for viewers from new media. Which leaves the door open for Gordon and Murdoch to buy it, with the added incentive for Murdoch of profitable tie-ups with the rest of the family media empire. But because they both already own significant media properties, media ownership laws will have to change to allow the media owners to own more properties in the same market. These laws are already planned, but the government and independent senators will come under increasing pressure to pass them if it means saving the Ten Network. The people who appear to have been forgotten in the whole debacle are Ten’s 17,000 or so retail shareholders, who will end up with a few cents a share, if anything at all.