Southern has Nine in sights on law review
It is one of the deals being floated as media companies jockey for position ahead of promised changes to media rules governing how much of Australia's population the commercial television networks can broadcast to - no more than 75 per cent.
If these audience reach rules are abolished, Australia's three commercial television networks could then profit by merging with their regional broadcast partners and cutting out any duplicated costs.
The lapse of Nine's affiliate deal with its regional partner, WIN Television, last year, and the expiry of Ten's deal with Southern Cross this June, adds the possibility of the networks swapping partners in advance of any potential merger activity.
The media industry heavyweights are acting accordingly.
Reports this week said Kerry Stokes had joined the list of billionaires on the share register of embattled Ten Network despite having a controlling interest in its market-leading rival, Seven.
Under no circumstances will Mr Stokes be allowed to acquire a second network.
Nine Entertainment insiders confirmed this week that the company had been approached by Ten's regional broadcast partner, Southern Cross, about a deal in which the television and radio group would break with Ten and join up with Nine instead.
It is now believed that any deal could go much further. The major shareholder of Southern Cross, investment bank Macquarie Group, has put a proposal to Nine's new owners to merge the media companies in a transaction that would also see Nine re-emerge as a publicly listed company.
Executives from Nine and Macquarie declined to comment.
Such a deal would rely on Communications Minister Stephen Conroy successfully abolishing media ownership rules that prevent commercial television stations from having access to more than 75 per cent of the Australian population.
It is one of a number of changes the senator is proposing in response to the media Convergence Review last year.
The step-up in media manoeuvring may reflect the fact that the government's only chance of getting the legislation passed will be gone by the end of this month.
Last November Senator Conroy said the government would develop legislation by March this year to go before Parliament.
On Friday, Senator Conroy said he did not want to get into the specifics of proposed changes in response to the review - including the 75 per cent reach rules - as details had yet to be finalised.
In an interview on radio station 3AW on Friday, Senator Conroy said the laws, introduced by the Howard government, allowed for a "damaging" reduction in media diversity and he defended the federal government's inquiries into media ownership.
"John Howard weakened our rules that protected diversity. That's the truth," he said.
The government's Convergence Review was set up in response to the loosening of media ownership laws under John Howard in 2007.
Frequently Asked Questions about this Article…
The article reports that Southern Cross Media reportedly approached Nine Entertainment about breaking its affiliation with Ten and joining Nine. It also says Macquarie Group, a major shareholder in Southern Cross, put a proposal to Nine's new owners to merge the two media companies — a deal that could also see Nine re-emerge as a publicly listed company. Executives from Nine and Macquarie declined to comment.
Media companies are positioning themselves ahead of proposed changes to media ownership rules — in particular the possible abolition of the 75 per cent audience reach cap. If those rules change, commercial networks could merge with regional broadcast partners to increase scale and cut duplicated costs, so companies are reportedly rethinking affiliation deals now.
If the 75 per cent reach rule is abolished, Australia's commercial television networks could potentially gain access to more of the population and merge with regional partners. That would allow networks to consolidate operations, reduce duplicate expenses and expand their broadcast reach beyond the current limit.
Nine's affiliate deal with regional partner WIN Television lapsed last year, and Ten's deal with Southern Cross is due to expire in June. Those expiries increase the chance of networks swapping regional partners or pursuing mergers, which can materially affect regional distribution, advertising scale and potential cost savings — all items investors should watch.
Macquarie Group is the major shareholder in Southern Cross and has reportedly put a merger proposal to Nine's new owners. According to the article, that proposal would combine Southern Cross and Nine and could result in Nine returning to the public market.
Yes. The article states the proposal from Macquarie would see Nine re-emerge as a publicly listed company if the merger went ahead, though the transaction would depend on regulatory changes and approvals.
Any merger of this kind would hinge on changes to media ownership law, notably Communications Minister Stephen Conroy successfully abolishing or altering the 75 per cent reach rule. Conroy is proposing changes following the Convergence Review, but he has said details are still being finalised, so legislative and regulatory approval remain key hurdles.
The article notes reports that Kerry Stokes appeared on Ten's share register despite already having a controlling interest in rival network Seven. It also says he would not be allowed to acquire a second network. For investors, this signals notable billionaire interest in Ten but also highlights regulatory limits on owning multiple major networks.
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