Nine rules out regional TV merger
The Australian
November 19, 2014 1:09PM
NINE Entertainment Co. boss David Gyngell has dropped his longstanding interest in merging with a regional TV network, arguing he will soon be able to reach regional audiences with programming via the internet.
The chief executive of Nine also dismissed rumours linking the company to a merger involving Fairfax Media, but opened the door to the publisher buying a stake in his company.
Speaking at Nine’s inaugural AGM following last year’s float on the ASX, Mr Gyngell told The Australian he was not interested in merging with companies owning print media. “I haven’t thought about it because I think they are a long way from moving out of print,” he said.
“They talk about it but their regional newspapers still contribute a hell of a lot of profit to their business.”
Nine has partnered with Fairfax on a subscription video-on-demand joint venture, StreamCo, which will compete with US streaming giant Netflix for customers. Netflix today announced it will officially launch in March, with the press release sent as Nine’s AGM got underway.
“I think people are reading too much into that: there is this whole world of Fairfax and Nine (speculation) going on,” Gyngell said. “I don’t see any value at this point of doing any more than (StreamCo).
“If they want to buy our shares at a nice price then with my little bit I will vote for it if it’s the right price. I don’t know if they could afford to do that at this stage.”
After aborted confidential talks with regional television and radio company Southern Cross Austereo about a $4 billion merger, Nine lobbied hard to get media ownership and concentration laws removed to enable Australia’s second-placed free-to-air network to undertake a merger with a regional TV network.
But Gyngell said the moment has passed as the National Broadband Network opens up new avenues between media companies and regional audiences previously unaccessible to metropolitan TV networks.
“I’m not interested in the 75 per cent rule anymore,” he said. “I think technology is going to overtake that. They are all missing the boat. They’re all playing politics on this. In five years’ time we will just go around regional television and stream our content into those markets.
“I think free-to-air regional television is in a hugely challenged way,” he said.
“I think it’s going to be disappointing for regional viewers. They will get no local news, nothing, because people are playing politics and games on something that is going to destroy value for viewers.”
After buying Nine’s affiliate television stations in Perth and Adelaide from Bermuda-based billionaire Bruce Gordon, Mr Gyngell said that despite having a first-look option to buy more regional stations from Gordon’s WIN Corp, he will not exercise it.
“I’m sure Bruce thinks his business is more valuable than I think it is worth, but I am not interested in buying it so it doesn’t matter anymore,” he said.
Mr Gyngell reserved judgment on whether he would attempt to oppose pay TV operator Foxtel buying a stake in his free-to-air competitor Ten, but said Nine and Seven should be allowed the same opportunity.
“I think Nine and Seven should have the opportunity to do the same thing as Foxtel,” he said. “I wouldn’t want to buy Channel 10, but I think if Foxtel is allowed to buy it ... all rules should be removed bar anti-siphoning.”
He said there was a compelling logic driving interest from Foxtel and its potential bid partner US cable operator Discovery Communications in Ten as part of a global trend that has seen pay-TV companies consolidate with free-to-air networks.
“I can see value creation for Foxtel or an international company because you’re playing inside the $600 million dollar cost base,” he said.
“You’re not trying necessarily to make profits. You may well say, ‘Okay I will provide my content and instead of someone else getting $100m out of it, we’re going to get $100m out of it’.
“I see the same reason we would be interested in buying Southern Cross’s regional television business because we could put our content down those pipes and generate profits.
“Discovery will put their content down those pipes. Foxtel will do joint deals which they are already doing, which is smart.”
Mr Gyngell said Nine’s interest in buying radio and outdoor advertising assets had failed to progress due to high price valuations.
He warned the Australian Football League he would not be a ghost bidder in the code’s imminent media rights negotiations just to add competitive tension to the negotiations with incumbents Seven Network and Foxtel.
“I’m not there to help them jam the price on Foxtel and Channel 7,” he said. “It’s very difficult at these sports prices to think you can own rugby league, cricket and AFL, or (that) anyone else is going to do that.
“We will be astute. We’re a rugby league company. We love the rugby league … we will look at the AFL but if they think we’re going to be sitting there and bidding up Seven and Foxtel we’re not going to play that game.”
Commenting on speculation the AFL is pursuing a 20 per cent-plus rise in the price of the rights, he said: “It’s a joke. They’re not going to get it … that sounds like an extraordinarily high price.”
