Paul McIntyre: Packer counts chips as axe falls at Nine

James Packer's strategic drive away from media - and TV in particular - came into sharp focus this week with his troubled TV operation, Network Nine, going under surgery with widespread staff cuts.

James, unlike his late father Kerry, has little emotional attachment to Publishing and Broadcasting Ltd's magazine, cinema and TV media assets, demonstrated by his ongoing push to develop a big casino business out of Asia.

This week, in a move that would probably not have happened under Kerry Packer's reign, Nine ripped into its staffing levels with the full force of the cuts - 7 per cent of Nine's workforce - felt by the once untouchable news and current affairs team.

At least 80 jobs will go under a move blessed by PBL but made by Nine's former on-air-star-turned-chief executive Eddie McGuire.

Since 2002, the once invincible news and current affairs programming team at Nine has been on the slide. The all-important 6pm news bulletin has seen its audience decline by 17 per cent while archrival Seven has lifted its ratings by 24 per cent.

The post news slot filled by Nine's A Current Affair has fallen 21 per cent in audience numbers while Seven's competing show Today Tonight is up 17 per cent. And for the first time in 30 years, Nine lost the 6pm to 7pm news and current affairs ratings slot to Seven last year.

"We've reviewed our news and current affairs programmes and decided where we should be putting resources," McGuire said this week. "The changes are designed to strengthen our news and current affairs programmes. There are different ways of doing TV than we've done in the past."

Basically it means Nine will have far fewer resources for the serious and expensive news stories - it's late night news programme Lateline could go and there are big question marks hanging over the Sunday and Business Sunday programmes.

McGuire has also installed his old mate Gary Linnell as the broadcaster's new head of news and current affairs - the third appointment in as many years. Linnell was the respected editor of the weekly news magazine the Bulletin, also part of the PBL media stable.

This week's changes are all part of an astonishing change of fortunes for PBL's one-time TV darling. It is also struggling in profitability and revenues.

Nine's earnings for the six months to December were down 13 per cent to A$148.9 million ($176.5 million) while advertising sales went backwards by 4.6 per cent. The current half is deemed to be even worse in revenue terms, with the broadcaster declining a further 9 per cent.

One of Australia's biggest buyers of media advertising space, Harold Mitchell, figures profits are off at least A$78 million for the current financial year for Nine as Seven's ratings rise starts to bite - advertisers are redirecting their money out of Nine into Seven.

"The Nine Network traditionally has around 40 per cent of the total [TV advertising] revenue with a break of around five [percentage points] on the Seven Network," Mr Mitchell told ABC Radio this week.

"One [percentage point] is worth A$26 million, so if they were to keep losing as they have been, down to 37 per cent or perhaps even lower, that's A$78 million which is big money for a public company."

Indeed, other media buyers estimate Nine's share of capital city TV advertising would be around 35 per cent for the current half, down from 38.5 per cent over the same period last year. That means revenues could be off by a frightening A$100 million for the broadcaster and indicates why the job-shedding plans have been announced.

Nine, which contributes 26 per cent of PBL's earnings, has been the group's worst performing division over the past year, making it easy to see why James Packer has been heading rapidly into the casino business.

PBL's gaming revenues are forecast to leap from A$1.53 billion currently to nearly A$2 billion by 2008 and gaming profits by then will be more than double that of PBL's TV interests. Investors certainly like the new direction, with PBL's share price rising from a low last year of A$14.70 to a recent peak of A$19.20.

Most of the casino investments are headed to Macau, which is being seen as the new Las Vegas. Nearly 400 million people live within four hours' travel of Macau and Packer sees plenty of potential. TV, however, is another story.

Paul McIntyre is a Sydney journalist