Pace of change keeps pressure on media

We’re sorry, this feature is currently unavailable. We’re working to restore it. Please try again later.

Advertisement

This was published 12 years ago

Pace of change keeps pressure on media

By Elizabeth Knight

At Seven West Media's annual meeting this week Kerry Stokes will get the opportunity to update the market on how his media assets are faring. This will cap off an action-packed fortnight in the industry, which included a changing of the guard at News Limited and Foxtel, the sale of the majority of John B. Fairfax's shares in Fairfax Media and the release of an ugly set of accounts from Nine Entertainment Co.

The management and ownership changes are not necessarily related to the financial heath of the companies involved, but in some instances reflect bigger seismic shifts occurring in the industry.

The timing of the replacement of John Hartigan as head of News with former Foxtel boss Kim Williams smacks of political expediency at a time when the industry is under the microscope of a government inquiry by the Murdoch-hostile Labor government.

The appointment of Rupert Murdoch as chairman of the Australian subsidiary of his global empire is strange given this is one of its smallest regions and comes against the backdrop of shareholders pushing to reduce the family's involvement in management.

An increased management focus by Murdoch on print-dominant geographies is all the more curious given its print assets are under an industry-wide structural threat. In News Corp's case this is exacerbated by having to close its top-circulating British title, News of the World - the ongoing controversy around which could result in James Murdoch leaving the company.

Thanks to the generally soft advertising environment it has been difficult to gauge the pace of internet-driven structural shifts in traditional media. But it appears that the structural challenges for television and radio are no longer as acute as they are for print media. The old electronic media seems to have found its landing ground where the future of print is more fluid.

In the case of Nine, the dire forecasts delivered by Stokes from the sidelines that Seven's competitor would be in the hands of its bankers within a year are obvious but reflect the overgeared vehicle in which these assets are housed rather than the state of the TV industry.

Ten's poor performance this year was also heavily influenced by the strategy peculiar to its previous management. The sharemarket is now pricing Ten as a recovery stock under the new stewardship of Lachlan Murdoch and James Packer, who are paring back costs.

In general, television did manage some growth in 2011 and Seven Network (the star performer) lifted its earnings before interest, tax, depreciation and amortisation by 23 per cent. All networks managed to get a boost from their growing digital channels whose success seems to have stemmed from audiences migrating to pay television.

Publishers, including Fairfax Media, grappled with earnings declines and last week it was revealed that sluggish consumer spending and the popularity of digital media caught newspaper sales during the September quarter in a painful pincer squeeze.

Advertisement

Figures from the Audit Bureau of Circulations showed the combined sales of national, capital city and regional daily and weekly print newspapers declined 3.7 per cent in the three months to September 30, to 19.1 million copies a week.

Sunday newspapers were the hardest hit, with their combined sales dropping almost 5 per cent.

The sales of weekday and Saturday newspapers fell 3.5 per cent, compared to a 4.2 per cent decline in the June quarter.

Fairfax's circulation across all of its delivery platforms has grown strongly and there has been a move to cut back on unprofitable newspaper circulation. But the advertising rates on the non-print products are a fraction of those of the newspapers.

Having said this John B. Fairfax's sale of 9.7 per cent of Fairfax - all but emptying his cupboard of the stock - is being viewed as a result of his private company's financial woes.

Radio, media's poor country cousin, receives very little attention but has been quietly gaining advertising sales. The city radio advertising market grew by 2.7 per cent to $64.2 million in October, according to the industry group Commercial Radio Australia. Revenue was up in all cities except Sydney, where it declined 1.2 per cent.

At this stage it is perhaps the most structurally resilient of the traditional media.

Fresh from a refinancing of its debt, Stokes's Seven West Media's experiment of grouping together print and television assets - sold to the former West Australian Newspapers shareholders as a way to salvage their investment in the declining print media - will be under scrutiny.

The company's Perth print assets have held up better than many others in the metropolitan market but it has the advantage of operating a sweet spot - a monopoly product in the booming mining centre of Western Australia.

But there will still be an economic overlay in any near projections made by both traditional and new media companies.

The weaker consumer market this year has not only created a cyclonic headwind for newspaper sales but has also hit its advertisers. Some large consumer advertisers such as retailers and banks are struggling with sales and have responded by cutting costs, including advertising.

In the past week there has been some glimmer of hope that consumer sentiment is improving in response to the Reserve Bank's interest rate cut.

However, the consumer's temperature has not been taken since the latest developments in the European debt crisis last week and the resultant fallout this caused in worldwide equity markets.

Most Viewed in Business

Loading