Tuesday, 26 August 2014
The 73 million reasons why the Abbott Government is intent on crushing public broadcasting in Australia
American media mogul Rupert Murdoch and News Corp made no secret of the fact that they supported the Liberal-National Coalition gaining federal government and backed Tony Abbott's bid for prime ministership in the September 2013 Australian federal election.
This support was enthusiastically and sometimes crudely expressed:
In his turn Tony Abbott has kept his close links with News Corp since he became prime minister: for example attempting to change the racial discrimination act after a News Corp journalist was found to have breached this act; briefing Rupert Murdoch personally before informing his cabinet of a major policy initiative; attending The Daily Telegraph post-budget party; and informing The Daily Telegraph before his parliamentary colleagues of changes to data retention policy.
In the Abbott Government's first budget this 'alliance' with Rupert Murdoch continued – funding cuts and loss of a media platform befell public broadcasting which co-incidentally happens to be a major player on the Australian media scene:
The full extent of the ABC threat to News Corp isn't clear until you closely examine their competing activities.
First there's television, and the years-long saga of the ABC's Asia Pacific service, a national vanity project costing tens of millions a year, which the Howard government begged Jonathan Shier to take on in 2001. After the ABC began producing a reasonable, if low-cost, service, News coveted it for Sky News (of which News Corp has an interest via its holding in one-third owner BSkyB) to improve its international clout at taxpayer expense and tried twice, in 2005 and 2010, to win it, getting knocked back both times, although for very different reasons the second time around.
Then there's ABC News 24, a direct rival to Sky News itself and to News Corp's half-owned Foxtel, which carries Sky News. News 24 reaches about 14% of metropolitan audiences a week, far ahead of Sky News.
And free-to-air: Lachlan Murdoch's Ten Network has been regularly losing its third spot in the evening television ratings to the ABC. The ABC pointed out yesterday that it had lifted its prime-time share to a 14.6 share, up 1 percentage point from 2012 and the best performance of any free-to-air network this year. Ten's share fell and in fact spent all of 2013 behind the ABC, consigning it to fourth in metro markets, while its regional performance was even worse. ABC management has simply outclassed Lachlan's conga line of executives. The former head of ABC TV, Kim Dalton, was behind the suite of programs that enabled the ABC to have programs that viewers wanted to watch when Ten imploded in August of 2012, and continued to slide this year. Lachlan Murdoch has removed two CEOs and is now on his third in three years. Ten's problems are as much his problems as those of the poor decision making by former management.
Lachlan Murdoch also slashed and burnt the previous Ten management's carefully developed news and current affairs presence, at a time when the ABC was strengthening its position as the most trusted source of news for Australians across radio and television, far ahead of commercial broadcasters and newspapers — with News Corp's increasingly biased mastheads bringing up the rear as Australia's least-trusted newspapers.
"Plainly there are good leaks involving government secrets, which embarrass the ALP, and bad leaks, which make life difficult for the Coalition."
The ABC's online iView service is also a threat. It's now the most popular TV replay source online, and it competes directly, and for free, with Foxtel.
ABC Radio also competes directly with Lachlan's DMG radio stations in each state capital; Nova FM only beats the ABC's metropolitan local stations in Brisbane and Perth. And ABC Radio is planning a development that will not be greeted warmly by News or Ten or DMG Australia. Fairfax won't be happy either. In an email to staff two weeks ago, ABC Radio head Kate Dundas revealed that, among a long list of changes and new ideas, were state-based online news editions planned for 2014, a new e-mag for Radio National, a huge revamp of the Triple J Dig multiplatform, and a second online music stream for Classic FM.
Probably the most important will be the first version of the ABC audio player — the audio equivalent of iView. Podcasts for programs such as Conversations (which attracts hundreds of thousands of listeners a month) and RN programs will move to this new player site. ABC Radio Multiplatform also has a lot planned for 2014, with mobile versions of key sites like ABC Rural, Dig Music and ABC Local news sites.
The suspicion arises that Tony Abbott will increase pressure on the Australian Broadcasting Commission (ABC) whilst he has the power to do so.
Given that on 20 August 2014 Crikey.com.au revealed a further motive for this pressure - the parlous state of News Corp in Australia:
Combined with the sharp earnings drop already reported in 2013-14, and with circulation and advertising revenues continuing to decline, the accounts suggest News Corp's Australian newspapers, including the national, metro and regional publications, will struggle to break even this financial year.
The confidential operating accounts for News Corp Australia have never been seen by investors and provide a detailed picture of a print business in rapid decline, with swingeing cost-cuts, cover price increases, new digital subscriptions and digital advertising failing to make up for the loss of revenues from advertising and circulation……
The accounts were produced last year just as Murdoch spun off his troubled print media assets worldwide from the profitable Fox film and cable television empire in the United States, in the wake of the UK phone-hacking scandal.
News Corp was spun out on June 28, 2013, from the renamed 21st Century Fox, and houses mastheads including The Wall Street Journal and New York Post in the US, the Times and Sun in the UK, News' Australian newspapers, plus book publisher Harper Collins, Foxtel and Fox Sports in Australia, and a 62% stake in ASX-listed REA Group, which operates the successful realestate.com.au website
Listed on the NASDAQ and the ASX, News Corporation, valued at $11 billion, goes to considerable lengths to avoid breaking revenue or earnings down by country or masthead, lumping its worldwide newspaper operations plus other businesses together into the "news and information" segment, which accounts for 71% of the group's total revenue, and only offering finer detail selectively.
Crikey can reveal that, amid a forest of negative brackets, revenue from News Corp's Australian newspapers fell 14% to $1.9 billion in 2012-13, with circulation revenue dropping 5% and advertising revenue falling 18%, while operating income fell 67% to $94 million.
Within the division, The Australian stands out as the worst performer: revenues dropped 20% from $135 million to 108 million in 2012-13, while operating income fell 41% from a loss of $19 million to a loss of $27 million. After depreciation, the masthead's operating loss fell to $30 million.
The profit drop in newspapers was only partly offset by growth in other operations like REA Group and Fox Sports, with total operating income falling 38% to $221 million. After income from investments including Foxtel, the group recorded a total profit before interest or tax of $367 million, down 28%.....
the heavy falls in print have continued if not accelerated through 2013-14. This is confirmed in News Corp's most recent quarterly earnings update and annual report, showing the Australian newspapers are dragging on recovering newspaper operations in the US and UK, as well as divisions reporting profit growth, such as book publishing.
News reported that earnings before interest tax depreciation and amortisation from Australian newspapers fell by US $67 million in 2013-14, or $73 million — which by Crikey's estimate represents roughly an 80% fall on the previous year, nearly wiping out the division's entire operating income. The division dragged heavily on the news and information segment, which reported a 16% drop in EBITDA in 2013-14.
The operating accounts show Melbourne's Herald Sun was the mainstay of News Corp in Australia, with the weekday paper generating revenues of $250 million in 2012-13, down 13.5% on the year before, and operating income of $35 million, down 41%. Revenue for the Sunday edition fell 17% to $75 million, while operating income fell 31% to $21 million.
Of the major tabloids the weekday edition of News' monopoly masthead in Brisbane, The Courier-Mail, suffered the steepest falls, with revenue dropping 18% to $158 million while operating income fell 68% to just $17 million. The Sunday Mail revenues fell 15% to $71 million and operating income fell 33% to $20 million.
The weekday edition of Sydney's Daily Telegraph was another weak performer, with the lowest profit margins at 5%, with revenue dropping 14% to $160 million while operating income fell 65% to just $8 million. The Sunday Telegraph revenues fell 15% to $94 million and operating income fell 53% to $7 million.
At that level Adelaide's Advertiser's weekday editions alone made a much stronger contribution than the Tele in 2012-13, generating revenues of $138 million (down 15%) and operating income of $22 million (down 47%) — without counting the Sunday Mail.
The financial performance of the newspapers has only worsened. In its latest accounts News Corp revealed that overall revenue from the Australian newspapers had fallen by another 18% or US $359 million in 2013-14, compared with the previous year, made up of US $314 million decline in advertising revenue and a US $45 million decline in circulation revenue. Of that, News said US $199 million — a bit over half — reflected the impact of a weaker Australian dollar versus the greenback, which pointed to an 8% decline in revenue in local currency to below $1.8 billion. [my red bolding]
Crikey.com.au 21 August 2014:
Adding the two divisions, to make the comparison easier, circulation revenue at Fairfax grew 13% to $327 million in 2012-13, and another 1% to $331 million in 2013-14. Ad revenue fell 18% in 2012-13 to $1,022 million, and another 15% to $869 million the year after. Total revenue fell 11% to $1,507 million in 2012-13, and another 12 % to $1,333 million in 2013-14. There was a moderate improvement in profitability, however, with EBITDA rising 3% to $269 million in 2012-13 and 1% to $273 million in 2013-14.
In 2012-13, Fairfax's Metro Media division recorded a 17% increase in circulation revenue to $222 million. Advertising revenue fell 21% to $634 million. Total revenue fell 12% to $996 million. In the Regional Media division, circulation revenue fell 4% to $98 million, ad revenue fell 13% to $388 million, and total revenue fell 10% to $511 million. EBITDA at the Metros fell 26% to $76 million and in Regional it fell 16% to $133 million.
In 2013-14, ignoring the restructure of Regional Media into Australian Community Media, the corresponding figures were as follows: Metro Media circulation revenue grew 9% to $228 million while ad revenue fell 14% to $460 million and total revenue fell 9% to $803 million; Community Media circulation revenue fell 7% to $103 million while ad revenue fell 16% to $409 million and total revenue fell 15% to $530 million. On the EBITDA line, the Metros reported a 41% increase to $121 million while Community Media fell 17% to $152 million.
In terms of percentage growth and/or declines, from year to year, the comparison shows Fairfax outperforming the News Corp papers on most measures, counting both revenues and earnings. [my red bolding]
Financial Review 22 August 2014:
The Blue Book showed the average cost of employees at The Australian’s print operations was $178,256. That included associated costs and actual salary, but that still seemed higher than most of the ABC journalists the paper had slammed as overpaid. By comparison, the average cost of employees for the Daily Telegraph was $141,214. The toilers at the Herald Sun made do with $131,944, $125,135 for The Courier Mail, and $90,990 for smaller titles like The Geelong Advertiser. [my red bolding]