Williams has gone, but the problems at News remain

In his farewell note to News Corp staff on Friday, Kim Williams said his time in charge of News' Australian operations had been marked by "many good wins matched with some memorable awful problems and opponents".

There certainly were some important wins.

He led a $2 billion takeover of James Packer's Consolidated Media group last year that doubled News' ownership of the Foxtel pay-TV group to 50 per cent, and carried it from half to full ownership of Fox Sports, a crucial and profitable supplier of content to Foxtel.

Then, when Rupert Murdoch split News Corp globally this year into two listed companies, one centred on pay TV, broadcast TV and film and the other centred on publishing, the Australian pay-TV assets that Williams embraced went across to the publishing arm, "new" News Corporation.

The industrial logic of that move was questionable, but the financial logic was not.

The print media assets inside new News Corp, including News' newspaper interests in the United States, Britain and Australia, posted 5 per cent lower revenue of $US5.1 billion in the nine months to March 31, according to documents filed by News.

They are generating close to two-thirds of new News' revenue, but face the same challenges from digital media all established publishing operations face. Newspaper masthead values have been written down, and earnings before interest, tax, depreciation and amortisation (EBITDA) were 14 per cent lower in the nine months to March, at $US584 million.

The pay-TV assets inside new News Corp that were bulked up by Williams are smaller, but have a stronger revenue and profit growth profile. Cable network programming, Fox Sports, in effect, booked $US178 million of revenue and booked EBITDA of $US44 million in the nine-month period. The 50 per cent-owned Foxtel collected revenue of $US2.4 billion, and booked EBITDA of $US675 million. Along with new News' 61.6 per cent-owned Real Estate Australia online platform, they are yeast in a print-heavy cake.

Williams' departure, and News' decision to replace him with one of the Australian publishing group's old hands, former Herald and Weekly Times managing director and HWT chairman Julian Clarke, suggests however it was the fights and losses inside News' Australian arm that wore him down.

Williams was running Foxtel in December 2011 when it was announced he would cross over to replace John Hartigan as boss of News Ltd, News' Australian media arm.

He came as an external change agent, with a brief to meet the challenge from digital media. The changes he wrought extended beyond the Cons Media acquisition to a restructuring of News itself, but he made enemies in the process.

Editorial production and commercial processes including advertising sales were unified under a "one city, one newsroom" mantra, and editorial numbers were rationalised. External management consultants were engaged.

In another business it would have unexceptional, but in the tribal world of newspapers, in which structural and cyclical pressure on revenue and profits is extreme and changes take time to flow to the bottom line, key lieutenants, including editors, pushed back.

Williams was an outsider making changes that made commercial sense, but the paradox was that the very fact that he was a print media outsider counted against him: the recent arrival of News' former New York Post editor Col Allan with a short-term brief to "take the tabasco" to News' titles was interpreted as an ominous sign.

The role Williams played in last year's $1 billion-plus auction of Australian rugby league broadcasting rights might also have been influential.

He was a key player in the auction, and it was won by the Nine network and Fox Sports. The Ten network and its 9 per cent shareholder and chairman, Lachlan Murdoch, were squeezed out. Fox Sports' win was also a financial win for News, because by the time the rights were auctioned it had moved to full ownership of Fox Sports, and doubled its stake in the recipient of Fox Sports content, Foxtel, to 50 per cent, matching Telstra's 50 per cent shareholding.

Lachlan Murdoch has continuing significant influence at News, however, He resigned as a News executive in 2005, but is a director of both the new News Corp and the TV and film spin-out, 21st Century Fox. He is also being talked about again as a potential successor to Rupert Murdoch after the News International telephone hacking scandal damaged the prospects of his brother, James. For Williams, Fox Sports' win in the rugby league auction might therefore have come at a political cost.

Where to from here for News in Australia? Williams is gone and his replacement is steeped in the newspaper culture, but the problems Williams was addressing remain.

More senior management changes will inevitably follow the leadership change. It is the nature of the process. There is also speculation that Clarke is warming the seat for an eventual return by Lachlan Murdoch to executive duties.

The problems News faces are industry wide, however and its unlikely that regime change will result in News charting a radically different course in Australia to the one Williams has set.

Print media revenue is being squeezed worldwide as readers and advertisers gravitate to internet-powered alternatives. Established media groups have no choice but to pull their print media operating costs down as they try to navigate a course to a sustainable digital media model, and many of them are considering or implementing the kind of changes that Williams has made. Fairfax Media, for example, is also unifying commercial support functions for its mastheads, consolidating editorial content production, and cutting editorial numbers and overheads.

It's a process Williams is familiar with after his stint with News. He leaves the group with a deeper curriculum vitae than the one he brought, and is likely to be on any Australian media group's list of candidates when they consider the question of CEO succession.

mmaiden@fairfaxmedia.com.au