The late businessman, Kerry Packer, was always good for a quote.
In one of his most memorable, he famously noted “You only get one Alan Bond in your lifetime, and I’ve had mine”, in reference to the three year period in which Packer first sold the Nine Network to Alan Bond, reportedly for over $1 billion, in 1987 only to buy it back for a quarter of that price.
Bond, flush with cash and in the midst of an acquisition spree that would result in his corporate downfall, wanted the trophy asset badly – and Kerry Packer certainly received his pound of flesh for the deal. When Bond got into trouble, Packer then promptly bought the network back in a deal that left him hundreds of millions of dollars richer.
The golden years of television
The 1980s and early 1990s were marquee years for free-to-air television. The internet hadn’t yet been invented, pay TV was still years away, and the 6pm news was ‘appointment viewing’ for Australia. In fact, the Nine Sunday evening news was often the most watched program of the week.
Now some 25 years since Kerry Packer first sold Nine to Alan Bond, free-to-air television is a shadow of its former self, thanks mostly to technological disruption from both pay television and the internet. We now have laptops, mobile phones and tablets to take our attention, and we can consume entertainment, news and business at our leisure, rather than waiting for the designated time on the box.
The ultimate disruption
All three commercial networks – the now- private equity-owned Nine, Seven (part of Seven West Media (ASX: SWM)) and Ten (part of the eponymous Ten Network Holdings (ASX: TEN)) are suffering in this new world – facing challenges from instant news online, the plethora of distractions online and even the ability to (legally or illegally) download TV shows online before they’re scheduled to air in Australia.
Add in licks of debt, and the executive suites at all three networks must be uncomfortable places.
Of course, television isn’t the only medium suffering. Newspapers have had to reinvent themselves to respond to the online threat, where news and opinion is instant and free. Just as we no longer need to wait for the newsreader to tell us the day’s news, the morning edition of our major metropolitan daily papers has suffered at the hands of the ‘always on’ internet.
That’s not to say the Australian media has taken the challenges lying down, but many are at varying stages of transformation. Newspapers are evolving and innovating through iPad applications, newspaper subscription models and increasing efficiencies.
Television networks are adding digital channels, ‘catch up’ services online and are reinvigorating their news broadcasts. The Nine Network, in particular, has enjoyed recent ratings successes with The Voice carrying all before it, the nightly news regularly returning to the top of the ratings podium, and Today holding its own against the once-dominant Sunrise.
Unfortunately for Nine’s private equity owners, the on-screen resurgence may not be enough to save the company, with the business’ future squarely in the hands of its lenders. In a worst-case scenario, the once-proud network may be forced into administration if its financiers believe that’s the best way to them to recoup a portion of their investment.
Kerry Packer’s son, James, has shown every sign that the family’s media interests have come to a close, intending to accept News Corporation’s (ASX: NWS) offer for his stake in Consolidated Media Holdings (ASX: CMJ), as he takes the Packer empire deeper into the gambling business.
It’s unlikely that James Packer will be giving Nine a second thought. But, with four generations of Packer media involvement in his blood, it surely can’t be impossible that James might just be amongst the interested parties should there be a fire sale of the company that he sold to private equity company CVC Asia Pacific in 2006 and 2007 for over $500 million.
Kerry Packer had his Alan Bond. James Packer might just have his CVC?
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Scott Phillips is an investment analyst with The Motley Fool . The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691).