Paul McIntyre: Fabulous curveballs in media stoush

Australia's mega media mogul stoush started in the Federal Court on Monday and already it's shaping up to deliver some fabulous curveballs.

After nearly two years, Network Seven's chairman Kerry Stokes this week finally got rolling his claim for about A$1 billion ($1.08bn) in damages from Kerry Packer, Rupert Murdoch, Telstra and a long line-up of other parties.

Stokes is claiming that his media rivals and several high profile sporting codes conspired to put his pay TV channel, C7, out of business by abusing their market power for the broadcast rights to the rugby league and Australian football competitions. Stokes shut down C7 in 2002.

Stokes, or "little Kerry" as he is known in deference to Kerry Packer, has been widely criticised for the cost and scale of his lawsuit, which has already cost Seven about A$20 million. The case against Stokes' rivals is led by one of Britain's top three silks, Jonathan Sumption, QC, on a reported fee of A$23,000 a day, plus five-star hotel accommodation. He's in Australia for nine months.

Rupert Murdoch's Australian arm, News Ltd, has come in for a right old spray from Sumption, and in particular News Ltd director and in-house lawyer Ian Philip.
The Federal Court heard on Tuesday that Philip had organised a consortium in 2000 to bid for the Australian Football League (AFL) rights disguised as a group of independent applicants to "avoid any allegation that this was an agreement among bidders", Sumption said. He said that for their presentations to the AFL late in 2000, Network Ten, Network Nine and Foxtel were "carefully schooled to present themselves as independent bidders who had, as it were, encountered each other by surprise in the lift, with no previous arrangement beforehand."

Sumption also alleged that the National Rugby League sold six-year broadcasting rights in 2000 for at least A$50 million less that it could have because of "scandalous" conduct by Philip. He claimed the Seven Network lodged a financially superior bid but was rejected because Philip took improper advantage of his position on the NRL body which awarded the rights.

Sumption said Philip had leaked three confidential C7 offers to its rival bidder, Fox Sports (a sports channel which Murdoch and Packer own 50 per cent each, carried by Foxtel), on whose board Philip also sat, and did not withdraw from the NRL committee when it awarded the rights to Fox Sports.

"He knew he could fix the [NRL] committee and he did so," Sumption told Justice Ronald Sackville, adding that Telstra executive Bruce Akhurst would give evidence that Philip requested he destroy a fax Philip sent which carried a negative and "unrealistic assumption" about C7's bid price. Telstra is involved in the case because of its 50 per cent stake in Foxtel - News Ltd and the Packer-controlled PBL each own 25 per cent.

Sumption then tabled a note written by Telstra Media's pay TV project manager, Brenton Willis, which mirrored Sumption's allegations about Philip. "I am also very concerned about Ian Philip's conflict of interest," Willis wrote. "Ian has disclosed the confidential C7 offer for the NRL to Fox Sports and Telstra. He has seemingly manipulated the figures to his advantage for presenting them to Telstra for approval yet we are unable to question him on their authenticity or source."

Fox Sports landed the NRL rights for $189 million even though an internal NRL analysis of C7's offer showed the league could have been paid $240 million to $304 million, depending on subscriber numbers.

Of the 22 parties being sued by Seven, Philip is the only individual.

Sumption said that until mid 2000, the pay TV sporting rights strategy was being run by the then Foxtel chief executive, Jim Blomfield, but he was dumped in favour of Philip because News Ltd felt Blomfield was "not sufficiently aggressive for the job. Without doubt, Mr Philip justified the confidence that was placed in him."

Sumption also promised that one forthcoming witness would be Stokes' adviser Peter Gammell, who would claim he was told by then PBL chief executive Nick Falloon in 1999 that Seven was being purposely locked out from having pay channels carried by Foxtel.

"The observation was essentially this: Hell will freeze over before C7 gets on to Foxtel. You are a competitor. You are never going to get on."

While much of Sumption's punches were flung at News Ltd this week, there are literally months of scrapping to come.

Media moguls or mongrels?

* Paul McIntyre is a Sydney journalist