Who Would Buy TV3?

Chief executive Greg Hywood: What does he mean by “the end game ” for Fairfax?

Rejection of the Fairfax-NZME merger has revived speculation about the future of Tv3. In the past, Fairfax was tipped as a possible buyer for the MediaWorks Group, including TV3 (+HR=E)  and half the country’s radio stations. Eighteen months ago it made some sense. Fairfax-owns some big newspapers and the Stuff website. Mediaworks owns TV3, but the radio network is much more commercially successful. It has an under-developed digital arm. But the main plus for Fairfax would be there are none of the market dominance issues that bedeviled the NZME deal.

 

Media industry sources say that the media landscape has changed. Fairfax has bigger fish to fry back home. Does it want really want to hang around and buy into a difficult market in this country?

Advertising has slumped and television ad spend is particularly vulnerable. During merger hearings at the Commerce Commission, Greg Hywood said that rejection of the merger would be “the end game” for Fairfax.

“We don’t have the capacity of deep pockets of private money to subsidise journalism,” Hywood said. “There are many proprietorial models where wealthy individuals and families, for social and political influence, own media companies, but we have shareholders and they demand that these publishing businesses stand on their own feet. Unless the merger was allowed, “it becomes end game”, he said.

At the same time as announcing the merger, Hywood made around 125 journalists redundant in Australia raisiing widespread attacks against the layoff strategy implemented by Hywood and the board. .  Many journalists at the Sydney Morning Herald and The Age have walked off the job in a wildcat one week strike. Fairfax has cleared some of the debt that hung over the company but it it still faces big problems.

MediaWorks CEO Michael Anderson

Staff at the SMH and Age have walked off the job in a wildcat one week strike. Fairfax has cleared some of the debt that hung over the company but it it still faces big problems. Given the financial issues facing Fairfax, would the board of directors continue with a newspaper network it insisted was unviable? Fairfax owns radio stations in Australia, But Fairfax does not know much about TV. TV3 already has big head challenges to maintain its share of the advertising market and secure a  good cash flow. It is countered by its successful radio operations

MediaWorks radio is a healthy business and has been well run, (though its respected CEO Wendy Palmer recently resigned suddenly).

Wendy Palmer

MediaWorks owners at Oaktree Capital could probably find a buyer for the radio arm easily.

Tv3 has a tougher problems. It is having to fund a lot of local content so it stands out from other media and that costs money. Staff say it is much more stable than it was under former CEO Mark Weldon. But TV programming is expensive to make. Oaktree recently topped up the company with a $12.5 million injection, in part to pay for new television shows like AM and The Project.

On April 19, Duncan  Bridgeman in the National Business reported: “The cash injection came in two tranches – $4.5 million in July 2016 and $8 million last week – following resolutions from the MediaWorks board and the shareholder.The company this week increased its number of shares on issue to reflect the new investment. Since Oaktree emerged as a 100% shareholder in June 2015 it has ploughed just under $40 million into MediaWorks.A MediaWorks spokeswoman says the latest funds were applied to general business, “specifically in [first quarter] this year where we invested in new content (The AM Show and The Project), a TV rebrand and training for our sales teams.”The company has not disclosed financial statements since early 2015 when it revealed a $11.9 million profit for the period between August 8, 2013, and September 30, 2014. However, NBR understands more recent accounts will be made public next month.The company began its 2015 financial year owing $90 million to its bank. The spokeswoman says MediaWorks has not negotiated any new debt facilities in the last 12 months.

TVNZ chief executive Kevin Kenrick was blunt recently when he said that New  Zealand free to air sector was probably not big enough for two players. If that sounds self-serving, the comment encoutaged rumours that TVNZ might itself be planning to buy TV3. The state broadcaster is looking for more scale. But a takeover of its direct competitor seems unlikely especially after the Commerce Commission rejection of the NZME-Fairfax deal. The future of Fairfax and TV3 rlates to some key questions.

  • What changes Fairfax plans for its existing newspaper and what is its commitment to New Zealand.
  • Fairfax operates radio In Australia. Is it interested in buy into MediaWorks radio
  • In the past, MediaWorks has not been prepared to split TV from radio for any sale. Has that changed.?
  • As for Tv3, how much interest is there in the market among investors interested in buying a free-to-air TV network?

 

 

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