Federal Cabinet has decided to defend any changes to media ownership rules until after the next election.
In May James Packer heir to the family fortune and media empire declared that Fairfax newspaper chain would be a fantastic Christmas present.
But, as some interested players were pointing out yesterday, the Packer Christmas stocking this year will be emptier than expected. Certainly it will not include a larger stake in Fairfax, publisher of the Sydney Morning Herald, The Age, Melbourne, and the Australian Financial Review.
The reasons for Cabinet’s decision to back away from the policy change that would have allowed the packer companies to acquire a controlling interest in Fairfax have not been given. News of the decision was leaked to Channel 9’s Laurie Oakes in the Canberra Press Gallery and Quickly picked up by other gallery reporters.
As it turned out, Monday wasn’t much of a day for Kerry Packer and his son James. They were out manoeuvred comprehensively by Channel 7’s Kerry Stokes and News Ltd when a consortium of the two companies won the rights to build Melbourne’s $400 - million Docklands Stadium. The deal gives Channel 7, in which News Ltd also has a 15 percent interest, the inside running on the rights to televise Australian Football League games past 2001.
This means that between them, Channel 7 and News Ltd have rights to AFL, rugby union (including the highly successful Super 12 series) and Super League. By comparison, Channel 9 has cricket and ARL, with limited rights to Super League.
Yesterday members of a powerful backbench committee were playing down the decision by suggesting that Cabinet had more pressing problems to solve, including the Wik response and unemployment the committee’s views were expressed by its secretary, Queensland backbencher Gary Hardgrave told ABC radio. “Cross-media ownership starts to pale into insignificance in the minds of most Australians.”
Hardgrave undoubtedly is correct, but the Cabinet decision also reveals the competing influences at work in the Howard Government.
Greatest support for a change to the rules came from Communications Minister Richard Alston and Treasurer Peter Costello. Both are Victorians; they share the same unit in the Canberra suburb of Kingston during sitting weeks; they also are close to Victorian Liberal powerbroker Michael Kroger whose merchant bank was handling the Packer attempt to acquire the additional Fairfax shares.
Estimates of Kroger’s potential fee went as high as $7 million. It is important to stress that there was nothing improper in the arrangement. It is, however, fair to say that the Fairfax stake been increased, Kroger’s merchant bank would have stood to gain handsomely.
The other issue driving the Victorians was the change of ownership of the Melbourne Age. the profound animosity shown to the Age by Victorian Premier Jeff Kennett has been a noticeable factor in recent years. It almost certainly led to the departure of former Age editor Bruce Guthrie, and to the appointment of new publisher and editor-in-chief, Steven Harris.
But the reshuffling in the top editorial chairs there might not satisfy those Victorian Liberals who long have believed that The Age was biased against their party.
One scenario had the Packer company selling The Age to a consortium of Melbourne businessmen including Ron Walker and Lloyd Williams, major players in the Crown Casino venture and confidants of Kennett. that scenario has disappeared.
Yesterday there was no official response from the Packer organisation. But it is unlikely that either Packer will be pleased with Cabinet’s decision.
From the time of the March 1996 federal election, they had expected the cross-ownership rules would be changed and, in the limited media market, they would be the major beneficiaries of the change. the other major media player, News Ltd, publisher of The Courier-Mail, was expected to be locked out of any deal because of the American citizenship of News boss Rupert Murdoch. As the issue was being considered, one option canvassed was that News could lift its stake in Channel 7 from 15 percent to 25 percent.
But that would be allowed only if News sold some of its newspapers. As well as The Courier-Mail, News publishes The Advertiser in Adelaide, the Herald Sun in Melbourne, The Daily Telegraph in Sydney and The Australian nationally. News quickly rejected any forced sales.
At the same time, it was clear that news was not interested in lifting its stake in Seven to 25 percent unless it was allowed to control the company. And in the Government, there were some who would baulk at the option.
While the Alston-Costello forces were attempting to push the Government into a decision, the backbench committee was having second thoughts. Unusually for a Government dominated by Liberals, this committee was chaired by national Party MP Paul Neville. Its members included the experienced and respected MP Stewart MacArthur, Brendan Nelson, Joe Hockey and secretary Gary Hardgrave.
The committee had a lot of support among other backbenchers who feared that the Government was going to be seen handing to Packer the prized gift of Fairfax. While the decision is being seen as a triumph for the backbench committee, it was really a situation where Prime Minister John Howard was on a hiding to nothing. Despite the policy push by Alston, it was clear the Government was not going to be able to produce a change that would satisfy everyone. in the end, however, all that determination came to nothing. Cabinet has deferred the decision and the Coalition is unlikely to take into the next election a policy which would either increase media concentration or allow increased overseas ownership. And, given the state of the media market, these really are the only options.
Fairfax chairman Sir Laurence Street described the Government’s decision as “splendid” and added: “This means that the Government no longer is going to be coming out from time to time and speculating about dismembering Fairfax.”
But speculation about Fairfax won’t disappear, simply because Cabinet has decided not to hand it to Packer. As Howard pointed out earlier this year, Fairfax is a company with a less-than-stable share register.
In the decade since Warwick Fairfax jnr launched his disastrous attempt at privatising the company, it has lacked a shareholder large enough to ensure stability.
Canada’s Conrad Black tried. He wanted to increase his steak but was blocked by the Keating government. Black then sold in a flurry of criticism.
The buyers were the investment group BIL, founded by New Zealand entrepreneur Sir Ron Brierley and run today by Rod Price. BIL is an extremely successful investment company but, despite statements to the contrary, it has yet to convince the market it is in Fairfax for the long haul.
Yet, until the cross-media ownership rules are changed, it is difficult to see another player emerging. Other Australian companies, O’Reilly’s Associated Newspapers and John B. Fairfax’s Rural Press, would seem to see acquisition of the Fairfax group as too ambitious. Whether Fairfax has been pardoned, or merely reprieved remains unclear.