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Best TV dramas play behind the scenes

Australian networks have their own story arcs

James Packer and Lachlan Murdoch caused a stir last year when they took over Oz’s third-ranking network, Ten, in a share raid snaring them 18% of the web, not least because Packer had only recently sold out of his family’s long-held free web Nine Network. The pair have since ousted the board and begun a review of Ten’s strategy in an attempt to get value back into the web.

Five years ago, Ten may have still ranked third but it was running a lean ship with cheap, youth-skewed content to attract advertisers keen to target the young.

Then the Aussie government introduced multi-channeling, that allowed the three major webs (Seven, Nine and Ten) and the two pubcasters (SBS and ABC) to introduce up to two separate digital channels. Nine and Seven used the opportunity to lower their demo and undermine Ten’s aud. Ten, however, took the odd step of starting a sports channel called One that lifted costs. It then launched Eleven with the Eye web that took a lot of the youth programming off the main channel, which then chose to increase its news service, another expensive move. Before long, Ten was not only garnering low ratings, but it was also in the red.

Enter Murdoch and Packer, with a plan to return the channel to profitability — but all has not gone their way.

“Whilst it is still early in the 2011 ratings year, the ratings performance from the new strategy has so far been disappointing,” says Andrew Anagnostellis, media analyst with Deutsche Bank. “Ten has had a poor start to the year with a 25.5% share for the first eight weeks of the ratings year. Whilst the new multi-channel Eleven has made a promising start, it appears most of the audience has come from the primary channel.”

This poor performance was noted by Murdoch, who took on the role of interim topper in February after removing previous CEO Grant Blackley; Murdoch acknowledged recently there was more work to be done and the web’s performance was “unacceptable.”

To help the web, Murdoch poached James Warburton from the Seven Network to take over as topper in March and return Ten to “the bold, youthful, confident, slightly irreverent brand” of the past, but even this has hit a snag. After announcing his surprise move from the web, which was grooming him to take over the top job from CEO David Leckie, Warburton found himself defending a Seven legal claim against in the NSW Supreme Court last month. The case is complex and revolves around Australian employment law, but the aim is clear: to send a message to Warburton, and Ten, that the defection won’t go unchallenged. It also claims that his defection undermines the 2009 deal where U.S. private equity firm KKR had paid $690 million for half of Seven.

But that idea is under pressure given Seven’s corporate moves his year. The web has merged with media group West Australian Newspaper (WAN), both of which count billionaire Kerry Stokes as a significant shareholder, to form the country’s largest media org.

Meanwhile, Nine Network, also the subject of a private equity buyout around the same time, is rumored to be limbering up for a share listing. Nine’s private equity owner CVC Asia Pacific has been streamlining the business with many speculating it will head to the sharemarket to try to recoup some of its losses from buying the business just before the global financial crisis.

Last month, Nine topper David Gyngell tried to pour water on the idea of a merger.

“I think everyone is preoccupied with how essential it is for us to float. It’s not that essential,” he told the Deutsche Bank Business Leaders Forum.

Preoccupied they may be, but this was a medium being written off just a few years ago by analysts and shunned by investors including the once-loyal Packer; it was to be eclipsed by online and feevee, and now each free-to-air web is experiencing boardroom battles, mergers and court battles that are bound to keep viewers keen to see how all the dramas play out.

More from World Report: Australia:
Waking up Oz pics | Best TV dramas play behind the scenes | Up and comers Down Under | New blood brings new buzz to Oz stage | Oz pursues runaways | Oz at Cannes

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