Two reasons to fear a Rinehart-led Fairfax

The desire to maximise profit in a media market should be absolutely compatible with the role of the fourth estate. But sometimes this goal of profit is suspended, with deleterious effect.

Free markets and the kind of fourth estate media industry required to safeguard democracy should, in theory, be absolutely compatible.

Indeed, Christopher Joye's excellent piece in Business Spectator yesterday (Why Fairfax needs Rinehart redemption, June 18) explains clearly why this is so.

In theory, that is.

Joye outlines why the desire of shareholders to maximise profit is a positive force in media markets – different audiences will demand different media 'products', and everything from Green Left Weekly to Quadrant will find its way into print, distributed online or via 'traditional' broadcast media.

However, there are a couple of hugely important caveats that must be added to Joye's lucid exposition – the reasons some Australians fear a Gina Rinehart-led Fairfax.

First, competition within the media industries should be about maximising profit within the media businesses themselves. That is, Rinehart's inexorable march towards a 19.9 per cent stake in Fairfax (and beyond?) would, ideally, be aimed at maximising profit for herself and other shareholders within that company.

That all sound pretty obvious, until one remembers that Rinehart is already extremely good at deploying capital for profit via Hancock Prospecting. Taking funds from her multi-billion-dollar fortune to invest in a struggling media company does not look, at face value, like a straightforward financial decision.

What else could be driving Rinehart? Could it be the concern, which she recently expressed in a poem, that:

"Some envious unthinking people have been conned/ To think prosperity is created by waving a magic wand/ Through such unfortunate ignorance, too much abuse is hurled/ Against miners, workers and related industries who strive to build the world..."

(So-called 'friends' read that poem aloud to me on Saturday night. My enjoyment of literature will never be the same again – readers can experience the entire poem here.)

So caveat number one is that in competitive media markets, ownership and control might sometimes be more focused on the profitability of companies outside the media business in question – and when that happens, democracy is the loser.

All miners, not just Hancock Prospecting, might be more profitable if Rinehart was able to influence Fairfax editors into ending any "conning'" of the Australian people they might have been doing, and start chipping away at the nation's "unfortunate ignorance" about the role of mining in Australia.

Not all punters, business leaders, economists or politicians agree with that point of view, of course. It is a political position, and one that can be lobbied for throughout existing democratic structures – including a free 'fourth estate' press.

If, heaven forbid, a powerful director lobbied for the spreading of that message from the board of a large media company, it would not be at all clear whether the success of that media company was the prime motivator.

Rinehart is reportedly demanding three seats on the Fairfax board, and a direct input into the hiring and firing of editors. Is that what Fairfax's other investors want? Is that what will lead to the greatest return on investment? The two objectives are not necessarily aligned.

The second caveat – a subtle variation of the first – is that profit maximising behaviour in media markets does not need to be suspended for very long to achieve massive political effect.

The most famous example of this came the day before Britain's 1992 election, when Labour challenger Neil Kinnock was expected to topple the Conservative government of John Major.

On the day of the poll, the News Corp-owned tabloid The Sun ran the rather wordy front page headline: "If Kinnock wins today will the last person to leave Britain please turn out the lights."

The opinion polls were confounded – Kinnock lost and The Sun's next front page read, infamously, "It's the Sun wot won it."

There is a big danger in reading this kind of media/political history – that if one agrees with the politics of the victor, it's easily dismissed as 'just a bit of fun'.

Had the opposite taken place – Kinnock romping to power because The Sun thought that was a good idea – the more complacent pundits would have been tearing their hair out. The sword of democracy has two edges.

Let me stress again that I agree wholeheartedly with Joye that the profit motive is a force for good in media markets. However, for the two reasons explained above, that motive can be suspended temporarily, or for long periods of time, by media owners who have specific political agendas.

One hopes this will not be the case with Gina Rinehart.

Australian democracy is already wearing paper-thin – an independent Fairfax that identifies and serves audiences, and therefore produces a range of editorial positions on topics such as the MRRT, use of skilled foreign workers or the carbon tax is what's needed.

If Rinehart can assist in building a profitable Fairfax that retains those characteristics, Australia will become a better place – its literary canon notwithstanding.

Follow @_Rob_Burgess on Twitter.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles