Welcome to a busy Best of the Week, written on Friday afternoon next to a roaring fire in Evandale, Tasmania, and on a chilly Saturday morning wishing the fire hadn’t gone out in the night. Nine glorious days of zero interstate travel lie ahead.
In this edition: Media’s market wipeout saw three broadcasters hit record lows yesterday; News Corp’s chair Michael Miller tries to reframe the platform conversation; Nine’s chair Peter Costello puts a journo on his arse; Luke Girgis gets the arse; and Telstra unveils a truly distinctive ad campaign.
Happy Jelly-Filled Doughnut Day, you freaks.
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Battles lines at Nine and News
It was a week where the chairmen of Australia’s biggest two media companies made daytrips to Canberra, and found themselves confronted by journalists from rival titles.
On Wednesday, News Corp executive chairman Michael Miller took on the whole pack at the National Press Club; on Thursday, Nine chairman Peter Costello went one-on-one with a journo from The Australian at the airport arrivals hall.
One of the chairmen came out of their skirmish with more dignity than the other.
We covered Costello’s poor behaviour yesterday. They say that a week’s a long time in politics. That’s true in media too. Eight days ago, I was checking the ASX every few minutes to see whether Nine’s CEO Mike Sneesby had resigned; yesterday I was looking to see whether Costello had gone. And these are the people charged with getting their company through the biggest crisis the media business model has yet seen.
Miller’s reason for being in Canberra was to talk about the platforms.
As is so often the case with the disruption digital media has brought to the old business models, the diagnosis was good. The hard bit is the cure.
Miller’s main point was that by spanning borders, digital platforms get to act like sovereign states. And for those headquartered in the United States (all of them apart from TikTok), the law gives them a free pass too.
Indulging in the alliteration that News Corp’s global boss Robert Thomson loves, Miller told the Press Club: “If you’re a Silicon Valley Sovereign, courts outside the US can’t touch you, and inside the US you’re a protected species.”
In the US, the platforms are protected from taking legal responsibility for the third party content they carry by Section 230 of the Communications Decency Act. This 28-year-old statute treats them like a mail service or phone company, not as a publisher. The precedent has then rolled across borders.
That means the platforms lack incentives to moderate away harmful content.
A second issue, arguably just as hurtful for society, is that the platforms do not pay sufficient tax in the places they write their revenues. By recharging their local arms for their products “or purchase of services” as Facebook labels it, they get to book a local cost to offset the income. That reduces the profit number they are taxed on.
In the case of Meta, the ACCC reckons the company is writing $5bn in local revenue. But in the 2023 financial year Meta declared a local profit of just $35m. Google, even bigger with revenue around $10bn, paid tax of $132m.
That’s all perfectly legal, by the way. The talking point from the platforms is that if only there was one regime around the world, they’d be delighted to follow it.
As Miller put it in his speech: “When the threat of regulation comes in their direction, the Tech monopoly has a playbook. They declare that they want to be regulated but no solution is ever workable for them.
“Then they insist that regulation should be harmonised across jurisdictions.”
Not that Miller uttered the word “tax” during his presentation. As a multi-jurisdiction organisation, News Corp has been historically as adept as any at legally minimising its tax obligations - particularly when it was more profitable than it is now.
Many of the questions to Miller afterwards were predictable based on the organisations the journos were from. The ABC’s Monte Bovill wanted to know why News Corp wrote so much about the ABC; the News Corp journos backed their boss’s line.
The most telling question came from Crikey’s Daanyal Saeed, who challenged News Corp’s own tax record. Miller’s response that the organisation "has no issues with the tax department” wasn’t the whole story.
When we move from diagnosis to solution, Miller’s proposal was that the concept of social licence - where companies are expected to do a greater good in order to earn the right to go about their business - should be bolstered with an actual Social Licence. That’s the key part of Miller’s proposal:
“This Social License would be a package of laws and requirements that Tech monopolies would need to meet, if they want access to Australian consumers.
Under this license the Australian government would be able to make the platforms liable for all content that is amplified, curated, and controlled by their algorithms or recommender engines - no hiding behind Section 230 in Australia.
The licence should require that each platform has an effective consumer complaints handling system, including call centres contactable by telephone with expert staff in Australia.
Other measures to be included:
The ex ante competition framework set out by the ACCC which would address the problem of the monopolised digital advertising markets.
A contribution to the money we are spending tackling mental health problems.
A requirement for tech platforms proven to be the media’s unavoidable trading partners, would be to honour the Media Bargaining Code and compensate publishers and media companies.
Penalties should also be included. Penalties that incorporate criminal sanctions for companies and their executives that agree to the licence, but then break the rules.
And the power to ultimately block access to our country and our people if they refuse to play by our rules.
So a potential perp walk for Meta’s Will Easton and Alphabet’s Mel Silva.
Not that those proposals are likely to come to fruition. While News Corp was deeply influential in creating the News Media Bargaining Code, that was under a craven Coalition government that was willing to give people who spoke to their voters almost anything they wanted. Labor is also on the local team, but shows no appetite to go as far as treasurer Scott Morrison, PM Scott Morrison and treasurer Josh Frydenberg did in 2021.
The first test is weeks away. Soon Labor’s deputy treasurer Stephen Jones must decide whether to designate Facebook under the bargaining code. Then the fight begins.
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Unmade’s take on the issue back in April:
The dire state of the Unmade Index
If you’re looking for dead canaries in the coalmine, then they all fell of their perches on Friday, on the worst day of milestones the Unmade Index has seen since we launched it in January 2022.
Three of the for four ASX-listed broadcast stocks hit new lows.
ARN Media lost 3.25%, to drop to its lowest share price since listing on the ASX as APN News & Media just over 25 years ago.
Nine lost 2.1% to hit its lowest share price since July 2020. And Seven West Media lost 2.78% hit its lowest point since October 2020.
Meanwhile the 1.37% fall for Southern Cross Austereo was enough to take it within 1c of the all-time low share price it hit a week ago.
Outside of the broadcasting sector, The Market Ltd, owner of Hot Copper, also hit a new low yesterday, with its market capitalisation falling 11.43% to $48m.
Continuing the rout, Aspermont which specialises in B2B publishing and events for the resource sector, lost 18% to land on an all-time low market cap of $22m.
And out of home player Motio hit its own low earlier in the week, with its market cap declining below $4m, on Monday.
The bloodbath saw the Unmade Index hit another new low of its own yesterday, dropping by 1.76% to 484.8 points. Since we started tracking the ASX performance of media and marketing stocks two years ago, the sector has lost more than 51% of its value.
Bad blood at Brag Media
Something messy and unusual went down at Australia’s largest (depending how you measure it) youth publisher this week.
Luke Girgis, the engine of the Brag Media publishing group, exited Vinyl Group, the company that acquired his business just five months ago.
From the outside, this was a shock. When I interviewed Girgis and Vinyl Group’s CEO Josh Simons in February, they insisted he was staying for the long haul. To incentivise him to stick around, they issued him 5m share options which were cancelled this week, as abruptly as his departure.
It may have been slightly less of a shock internally. Girgis had not been seen around the offices for some time.
The most benign (and, I think incorrect) explanation for what went down is that having bedded in the acquisition, having two bosses on big salaries was unjustified.
The board of Vinyl Group does have previous there. Simons ended up in the top job a year ago after selling his music industry platform Vampr, to what was then called Jaxsta and is now Vinyl Group, and the board deciding that he could replace Beth Appleton.
But the biggest clue in Tuesday’s announcement from Vinyl Group is in what it doesn’t say.
Within the announcement of promotions, synergies and a $750,000 cost cutting drive, there’s just a single line about Girgis’s exit: “Managing director and publisher Luke Girgis has departed the business”.
That’s not just cold, it’s calculatedly cold. There are none of the usual niceties of thanks and acknowledgments that generally accompany an exit, even when something has ended badly.
“Departed”, not resigned. In other words, fired.
In drafting the announcement that way, the board at Vinyl Group would have known, and wanted, it to be taken that way.
There are only a handful of possibilities a reader of that announcement could conclude:
Vinyl believes it had been misled about what it was buying from Girgis and his former business partner Sam Benjamin. However, the fact that there was no accompanying profit warning to the market tends to rule that out. We’ll find out more when they release their half year numbers;
Or that Girgis had behaved badly in a personal capacity. To stress, I don’t make that allegation, only that this is one conclusion a reasonable person might draw from the manner of the announcement;
Or there has been some fundamental breakdown in. the working relationship between Girgis and Simons. That seems to be not the case;
Or to get really deep in the weeds, the only other possibility I can think of is that for some reason Vinyl Group wants the reader to conclude one of those first three things, and there’s a more cynical motivation in it wanting Girgis out.
Rereading the original acquisition announcement, Vinyl paid just over $8m for Brag Media. But it also agreed to pay up to another $2m if Brag Media hits its numbers. I’d be surprised if that ends up being paid out without some sort of legal battle.
According to its last quarterly ASX update, up until the end of March, Vinyl Group had $2.9m in the bank, but burnt through $1.2m cash in the quarter. In many ASX companies that would be deeply concerning, as on that trajectory, the group will run out of money in less than a year.
But it’s worth bearing in mind that although the group is listed, it’s also a plaything of a billlionaire or two. Richard White, founder of WiseTech, owns 34% of the business. The B2B music plattform Songtradr, run by Aussie Paul Wiltshire, recently increased its stake to just under 20%. In that context, Vinyl may be too small to fail.
Neither Girgis or Vinyl would comment to me further this week. There’ll be lots more to come. If you know any more, email me at tim@unmade.media.
COTW: Rocky Cape rodents
In each edition of BotW, our friends at Little Black Book Online highlight their Campaign of the Week
LBB's Toby Hemming writes...
This week's Campaign of the Week features the first major project from Telstra's Team +61, the innovative collaboration between indie agency Bear Meets Eagle on Fire, TBWA, and OMD.
Produced by Jeff Low at Revolver and directed by the acclaimed Tobias Fouracre, the campaign consists of 28 short films that capture the unique voices of Australians in regional areas. Bringing these stories to life through evocative and fun stop-motion animations of local wildlife, they showcase the power and reach of Telstra's regional network.
Historically, telco advertising has not been known for its creativity. However, this campaign breaks the mould, delivering an innovative, engaging, and world-class effort.
In case you missed it:
On Monday we kicked off the week with the sale of Paramount at centre stage and Australian Venue Co entering the retail media goldrush:
On Tuesday we looked for evidence of a bright side in the latest SMI Guideline numbers:
On Wednesday all eyes were on Melbourne for the first indications of how Victorians were taking to The Kyle & Jackie O Show:
On Thursday, we recapped The Great DebAIt from our AI conference HumAIn:
And on Friday we examined Nine chairman Peter Costello’s thuggish behaviour towards a journalist
A quick declaration of interest. Through my super fund, I have shares in most of the listed companies discussed in this edition. More fool me.
Time to leave you to what, in most parts of Australia, is a long weekend. We’ll be skipping Monday’s Start the Week podcast, returning on Tuesday. If you’d like to fill that audio void, I joined the Fear & Greed podcast yesterday to discuss the awful performance of the Unmade Index.
Have a great weekend
Toodlepip…
Tim Burrowes
Publisher - Unmade
