The fate of fossil media lies in the balance if share market antics and mass sackings at Seven, Nine and News Corp are any gauge. Michael West on share buy-backs, government mollycoddling and tumbling valuations.
Long-suffering journalists at Nine Entertainment Group, principally those at the SMH and The Age, can hardly have been enchanted to see their chief executive Mike Sneesby swanning around Paris for the Olympic Games. Here they were fighting him for a pay rise – they even went on strike for five days – while The Sneese was frolicking in the City of Love.
In fact, Mike had jetted off for a week’s holiday in Greece just hours after, as Mumbrella put it, “hitting send on a company-wide email informing staffers of up to 200 job losses … he was later spotted by The Daily Tele in the First Class Lounge at Sydney Airport”. And then the City of Love while they were going on strike.
Mike’s email to staff had cited “the loss of revenue from the Meta (Facebook) deal and challenges in the advertising market” as the reason for the restructuring. Restructuring is corporate lingo for sacking people. It’s a word routinely deployed by media executives of late.
Seven and News Corp aussi
Rupert Murdoch’s News Corp, Kerry Stokes’ Seven are busy swinging the axe to get their costs down too.
That’s why it was morbidly amusing to see The Sneese confronted by a Seven reporter while cruising into the lobby of his Paris hotel on the day his workers went on strike (and after he had been carrying the Olympic torch).
“I don’t have time to chat,” said Mike.
“Pretty straight forward though, should you be staying in a boutique hotel when you’ve just sacked staff?” the reporter asked.
“You’re a boss of a media business are you here for work or are you here on a holiday with your family.”
He did not appear to answer the question.
Gesundheit or goodnight?
Meanwhile, shares in Kerry Stokes’s once prosperous media empire were changing hands today at 16.5c for a market value of just $254m – an indication that the end may well be nigh.
And all these legacy media stocks have been propped up by taxpayers via secret payments from Google and Facebook. That’s thanks to the previous government’s self-described ‘visionary’ Digital Media Bargaining Code.
Fake news or no news? The folly of the News Media Bargaining Code
Even further to this morbid amusement, even more morbidly amusing for some, they were reminded that while Nine had been refusing to meet the pay demands of its workers, management had in fact been spending Nine’s surplus capital buying back their own shares.
Share buybacks, although adored by investors, are little more than a legal way for companies to ramp their own share prices. Yes, market manipulation. Less shares on issue means higher share prices as demand takes out supply, but not always … and not for Nine.
In the case of Nine – which took over the Fairfax newspaper empire a few years ago – former chairman Peter Costello and his team had been buying their own shares at prices up to $2.24. The stock was languishing at $1.35 yesterday, meaning the company has expended $220m buying its own shares while they hit the skids.
Nothing better to do?
Not all shareholders like buy-backs, at least not all the time, because they don’t actually get any cash. Not like a dividend or capital return. And they might well ask of management, hey guys, why are you spending our money buying our own shares? Isn’t there anything better you could do with it?
For their part, taxpayers might ask the government, what the blazes are you doing giving these guys subsidies – the Google and Facebook payments are surely tax deductible under the Bargaining Code ‘protection racket’ for media moguls – when they are spending this money buying back their own shares?
That’s correct; there is absolutely no obligation to spend the money on journalism.
As for workers, well they could ask whether Mike Sneesby and his team get bonuses (say, based on share price) as a result of splashing money on Nine stock while being told they might get sacked because times were tough.
Mike would be too diplomatic to tell them openly but they could do away with journalists entirely and just use AI. That would save costs. In any case, and it was good to see it reported in the Nine papers, the end of the share buyback would happen soon. The story was unsourced but a testament to the fact that journalism is still afoot behind the paywalls despite the best efforts of successive managements to kill it.
Nine may never rival the majesty of the great AGL share buyback where they spent $620m buying back their own stock at $19 before the stock fell below $10. And it will never have the weirdness of tech stock Promedicus which did a buyback when its PE ratio was 185x. Not to mention Qantas, which was doing a buy-back as the ACCC was investigating the Ghost Flights scam.
Alan Joyce selling his own Qantas shares into the buy-back, que?
Yet the deeper question here is about the future. Unlike fossil fuel exporters who are making dazzling profits in the twilight of coal and gas, fossil media are really taking the long-handle to costs, freezing new hires and sacking workers across the board.
Just those market value numbers again. Seven is 96% down from its all-time highs. That’s investors or ‘the market’ saying we see no earning potential for you in the future. Nine is in better shape but that is not thanks to the newspapers or TV stations. Nine still holds 60% of Domain whose market capitalisation is $1.9B versus $2.1B for Nine, ergo investors are valuing the rest of it at $1B.
Likewise Murdoch’s News Corp which owns 61% of digital ad group REA. REA is valued at $25B. That’s where the growth is.
Against this backdrop of future earnings scepticism, it is little wonder that media companies continue to lobby the government to gouge more money out of the platforms such as Google and Facebook.
And it’s no wonder they are opposed any meaningful changes to the virtually unfettered advertising regime for gambling companies. Just look at the money Sportsbet must spend with Nine and others promoting gambling.
Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.