Media market's in a froth

By PAUL MCINTYRE

John Howard's emphatic election victory sparked frenzied buying this week in media stocks and feverish speculation among commentators about who would do what to whom in the media game.

The Australian media sector generates about A$10 billion a year in revenues from advertising, but there is much more at stake than just the ads.

Sentiment for media is back in favour of deriving efficiencies and synergies from owning different media platforms - radio, print and TV for instance. That idea in the early 1990s was very much on the nose.

The market's drooling this week started because the conservatives have the real chance of controlling the Senate from next July, or, in the worst case, requiring the support of one independent.

The Coalition has tried twice to push through changes to media ownership laws but has been blocked by a hostile Senate, where the Greens, Democrats and independents have held the balance of power.

The real possibility of the Coalition controlling both houses won't be known for weeks, but it won't stop conjecture in Australian media or the markets remaining rife with takeover speculation.

The 250 scenarios already painted this week for Kerry Packer's listed Publishing and Broadcasting Limited (PBL), makes him both a seller and a buyer while Rupert Murdoch's News Corp is firming exclusively as a buyer.

The share price for two of the three commercial TV networks (Ten and Seven) rocketed this week - Packer's Nine Network, which sits inside PBL's gambling and media operation, was an exception - on speculation they could be takeover targets.

Newspaper publisher John Fairfax is being seen as a possible buyer of a TV station or a radio network, as is APN News & Media if a TV network was to be broken up. Austereo, owner of the top two national FM radio networks, is viewed as a ripe takeover target.

Much of this week's fever has come about because the media industry has been held back by restrictions on owning newspaper and television assets simultaneously for many years, providing a check on the growth ambitions of the barons such as Packer and Murdoch.

Murdoch has said in the past that he would be interested in creating a fourth free-to-air television network in Australia, but his more likely path these days is to buy a network outright if the rules are freed up.

It could all change, but Packer's Nine Network and Kerry Stokes' Seven are considered frontrunners.

It was shares in the Ten Network, however, which hit a record high this week, boosting the market value of the company by A$300 million. Chief executive Nick Falloon announced that majority Canadian shareholder CanWest would be prepared to partly sell down its 55.6 per cent stake if there was a major deal on the table.

Shares in a range of other smaller media companies also surged.

In turn, groups such as Fairfax could view the potential new environment as an opportunity to move back into broadcast media and stump up for a stake in one of the television networks - it once owned metropolitan TV stations now in Seven's camp.

The only caveat at this stage is that media stocks are already trading at generous earnings multiples, so some of the big media players may have to pay top prices in order to realise long-held ambitions.

The other wild card is the potential entry of overseas investment groups that view Australia as a safe and stable market in which to place funds.

They could add to any bidding wars that eventuate in the second half of next year and into 2006.

While many of these scenarios are only speculation until new laws are passed, it does represent a once-in-an-era opportunity for the big guns of Australian media to stake their claim in the new world of digital communications.

Indeed, Foxtel (the No 1 pay-TV operator, owned by Telstra, Packer and Murdoch) has recently begun trials of personal video recorder technology in advance of a commercial launch before June next year.

The PVR technology allows viewers to record programmes at the push of a button, record video-on-demand films, and pause live broadcast television.

At the same time, Telstra is secretly testing an internet-based television technology that will allow consumers to watch high-quality video content in the home. These so-called disruptive technologies are likely to continue the trend of more diverse entertainment and content offerings for consumers in Australia, who are buying DVDs and surfing the internet in record numbers.

And although there is significant concern in the US about increasing media concentration as the Federal Communications Commission looks to push through a similar relaxation of ownership rules, no one in Australia has been too vocal about the rising dominance of larger players.

This may be because consumers now believe they can get enough diversity from a variety of content delivery platforms, or it may be that people are now sharing their own personal digital content with their friends and families.

Or possibly the public is simply not as interested in the politics of the media industry as the media. After all, John Howard won the election on the platform of individual choice.

If you don't like what's on the telly, you can simply switch off, or rent a DVD. Whatever the case, we're in for a wild media ride over the next year.

* Paul McIntyre is a Sydney-based journalist.