Deal that played well for Packer

The Australian Competition and Consumer Commission undertook an undisclosed investigation into James Packer and Lachlan Murdoch's acquisition of 18 per cent of Ten Network because of concerns over sports programming.

The secret work was done and evidence was taken in response to the decisions made by the Packer/Murdoch-led Ten board to scrap the Ten digital channel, One, which had been entirely devoted to sport.

At the time the Packer-controlled Consolidated Media Holdings had a 50 per cent interest in subscription producer of sport Premier Media Group. The other 50 per cent was owned by News Corporation - which is controlled by Murdoch's father, Rupert.

The transformation of One from a sport channel into a broader entertainment channel was explained by the new management of Ten as purely financial. The digital upstart was losing money and rating poorly.

There were a couple of other reasons the ACCC turned the active investigation into a "watching brief". The first was that it was aware that Packer was seeking to offload his interest in Premier Media and Foxtel.

The second was that there were a couple of other large shareholders in Ten, Bruce Gordon's WIN and active funds manager Perpetual.

Soon after Australia's richest person, Gina Rinehart, took a 10 per cent stake and joined the board. Thus the ACCC ultimately concluded that together Lachlan Murdoch and Packer were not in a position to control Ten.

But there is little doubt that axing Ten's fledgling sports channel played well for Packer commercially. Financial statements from his Consolidated Media demonstrate that Premier Media's performance was stagnating while its results from Foxtel were much more positive. The establishment of Ten's One channel created a new player in the sports programming market. While it was not sufficiently large or well-funded enough to bid for first-tier sporting events, its presence in the room bidding for second-ranking products was pushing up their price.

This was a problem for Premier Media Group and its various Fox Sports operations. When the One sport channel was abandoned the product it had acquired was on-sold to Premier Media for a knock down price and Ten took a one-off financial hit as a result. From Packer's perspective selling Consolidated Media - which owned Premier Media - became a much more lucrative proposition when channel One was disbanded.

He ultimately sold Consolidated Media in a $2 billion deal to News Corporation. It was a good deal for Packer - leaving him flush with funds to pursue his gaming interests through Crown.

After he bought into Ten back in 2010 he lasted only a few months on the Ten board. While he has since supported the company by subscribing for its two capital raisings, his influence has been publicly absent.

But as history has now clearly demonstrated Lachlan Murdoch took undisputed control of Ten. Soon after buying he took over management until his hand-picked chief executive James Warburton could take over in early 2012. Murdoch sacked him a year later.

Over the past couple of weeks he has installed a News Ltd executive, Hamish McLennan to replace Warburton.

To be fair the rationale for Packer and Murdoch taking a stake in Ten was a two-pronged strategy. It wasn't all about sport.

The two media heirs thought they could cut the network's program expenses and return it to its low-cost and edgy-program youth roots.

Again history has shown this strategy has not worked. Since 2010 when their investment was made the company's financial performance and share price have plummeted.

The digital channels run by competitors began to look just like the mainstream Ten product. It was a feeding frenzy for advertisers that bid down rates for what appeared to be homogenous product.

Reputations are riding on the outcome - in particular that of Lachlan Murdoch.

While the icing of One as a sports channel has played out well for Packer, Murdoch's upside rests exclusively with restoring the network's fortunes.

And in television there is no quick fix. It has strategy-to-outcome lead times more akin with the mining industry than a service business.

McLennan will need to find his strategy, refine his team, find the audience pitch and come up with a list of new programs that resonate with viewers.

It then needs more than a year of ratings performance before media buyers will start to allocate advertising. At the same time he will need to keep a handle on costs.