[DEBATE] : Media groups look after money first, Crotty
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Thu Feb 2 04:04:06 GMT 2006
Media groups look after their own interests first
Business Report, Johannesburg, February 1, 2006
By Ann Crotty
During the brief skirmish with PSG, Naspers's directors made much of the
claim that independence "is of great strategic and practical value to media
companies, both in the local and international arena".
But they failed to explain why. Was it to protect the Afrikaans language and
heritage? Was it to protect Naspers from a Murdoch-type predator who would
want to launch a dodgy, no-news-value, low-end, remarkably successful daily
newspaper that would restrict coverage to such gripping items as body-theft
The group subsequently said the desire to be unassailable was driven by a
need to avoid "compromising the group's ability to do business in several
countries". It seemed that established and potentially highly profitable
joint ventures with parties in India and China might suffer from perceptions
that Naspers could end up in the hands of a raider.
But surely in a global market characterised by sometimes frenzied merger and
acquisition activity even the Indians and Chinese realise this is an
inevitable aspect of doing business? And it's hardly plausible that
Naspers's partners in India or China have strong views on its editorial
No, it's much more likely that the directors' control concerns were private
ones related to protecting their particular management style, and not public
ones related to protecting diversity of ownership and editorial quality.
The notion that a media group plays a special role in society and should be
sheltered from hostile attacks is extremely appealing to a journalist.
It prompts the vain hope that this much-put-upon segment of society might be
afforded some special status; that readers might stop focusing on all the
little misStakes we make; that there might be an end to the snide whispering
when we sneak into a room.
But while all of us in the print media would like to believe the industry is
a little special, the sad reality is that it really is no different to the
baked beans business.
This reality is dictated by the inescapable need for any industry to make
profits for its shareholders in order to survive. The only way to escape
such strictures is to create the sort of trust structures under which the
UK's Economist and Guardian are controlled and managed.
These trusts do not have to answer to the often short-term demands of fickle
shareholders who are trying to anticipate the equally fickle demands of
Ironically, if Naspers's control had centred on a trust and not all sorts of
unlisted shares, it might not have been able to support the exceptionally
profitable, but at times nerve-racking, growth path chief executive Koos
Bekker has taken it on.
So when there is talk of the need to protect the control of the media it
seems the protection is wanted for the guys who manage or control the group
and not for any public interest values.
Across the globe there are all sorts of contrived shareholder structures
that aim to secure control in the hands of the entrepreneurial families that
founded particular media groups.
This is how the Bankcroft family controls The Wall Street Journal, the
descendants of Adolph Ochs control The New York Times, and the Graham family
controls The Washington Post.
The Mohn family and the Bertelsmann Foundation control the Bertelsmann
Group, the world's third-largest media conglomerate. Then there's Rupert
Murdoch's News Corporation, whose media assets are spread across the globe.
Besides the quirky element of US xenophobia that required Murdoch to become
an American citizen to control a media group in that country, efforts to
control the media are generally not much different from the Pikwik structure
that allows the founding Ackerman family to control Pick 'n Pay.
In South Africa the print media is dominated by the Independent Group,
Johnnic Communications (Johncom), Caxton and Naspers. Only Johncom's control
structure is open to assault.
The Independent, which owns Business Report, is 100 percent owned by the
Independent Media Group based in the UK and Ireland, while Caxton's control
is held tightly in the hands of the Moolman-Coburn Partnership.
Naspers's control was regarded as tightly secured in a complex web of
cross-holdings of unlisted shares until PSG's Jannie Mouton decided to see
how secure it was.
To shore up an apparent weakness in the structure, two key Naspers
executives, Bekker and Cobus Stofberg, provided Sanlam with a huge profit on
half of its unlisted Naspers-related shares in a deal that presumably gave
them first option to buy the rest.
The sad reality is that financial imperatives trump social and political
requirements. Management's focus is not on producing a better newspaper but
on generating more profits. For this reason individuals who control papers
should not be relied on to protect the public interest and so should receive
no public dispensations.
In the absence of Guardian-type trusts, we must rely on strong public
regulatory bodies such as the competition authorities to protect the public
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