There was plenty of good sport at the Ten Network Holdings AGM this morning just 500 metres from the Crikey bunker at the Sofitel Hotel in Collins Street.
Doddery 72 year old chairman John Studdy and chief executive John McAlpine took 45 minutes to run through their presentations.
Unlike the Packers, at least Ten bothered to put up the big screen at the AGM and show off some of their product, if that's what you call things like Big Brother, Rove and Search for a Supermodel.
I'm not sure what all the shuffling greys thought about the bed scene of that Big Brother resident who was called the biggest sl*t in Australia by Miranda Devine on Beauty and the Beast.
When it came to questions, Crikey opened the batting by quoting from this week's excellent edition of industry newsletter MediaWeek:
"Ten affiliate stations in north Queensland may be hit by a consumer turn-off if federal member of Parliament Warren Entsch gains support for his call to the community to boycott the stations. On Wednesday, Queensland premier Peter Beattie said he wanted the federal government to force the TEN stations to reopen their newsrooms. The premier said he thought it ridiculous to have a licensing system with no means to ensure local news is maintained. The last shot from the last bulletin that went to air last week showed the TEN logo being FLUSHED DOWN THE TOILET. Southern Cross Broadcasting must be wondering how Prime got off so lightly."
This is what chairman Studdy said in his address about Southern Cross Broadcasting:
"I mentioned earlier in my address that TEN had made a non-recurring gain related predominantly to the sale of our shareholding in regional affiliate, Southern Cross Broadcasting. The board's decision to sell our 14.4% stake followed Southern Cross's acquisition of Telecasters Australia Limited, another regional affiliate in which TEN also held a shareholding. The sale of Southern Cross stock at $11.90 per share resulted in a pre-tax gain of $58.6 million. Despite no longer being a shareholder, we look forward to a continuing relationship with a larger and stronger Southern Cross Broadcasting as the supplier of programmes to its expanded regional network."
The question asked was how the hell this situation of closing the newsrooms in Canberra, Alice Springs, Darwin, Cairns and Townsville was handled so badly by Southern Cross. Until a few months ago Ten was the largest shareholder in SCB but the share sale enabled it to pay shareholders an 11c special dividend which Canadian controller Izzy Asper needs at the moment after over-stretching himself with the purchase of Conrad Black's Hollinger newspaper group. So, did TEN know this was going to happen as part of the SCB/Telecasters Australia merger and therefore sprint to the exit to avoid the flak that came with the cynically-timed closures just a few days after the election?
Chairman Studdy claimed it came as a complete surprise and despite continuing to have a close and good commercial relationship with SCB, this was a commercial decision of SCB's which the Australian Broadcasting Authority was now holding an inquiry into.
A shareholder called Roger Moore across the aisle went next with a query on TEN's big tax problem.
This is the relevant extract on the tax issue from the annual report:
"An amount of $52 million was paid to the ATO on 4 October 2001 representing 50% of the amount due on the amended assessments of $133.4 million offset by 50% of the $29.4 million of withholding tax paid over the relevant period. TEN remains confident that its current tax treatment is correct, and will vigorously pursue all avenues of appeal. In these circumstances the dispute constitutes a contingent liability and accordingly the $52 million payment to the ATO will be treated as an asset."
The tax situation really is a scandal and this is the positive spin Studdy put on it in his address today:
"The board has continued to advise shareholders about the Tax Office review of the deductibility of interest paid on the subordinated debentures issued by The Ten Group Pty Limited to CGS Debenture Holdings (Netherlands) BV.
There have been developments over the past year, with the ATO issuing amended assessments following its decision to disallow claims for the debenture interest.
The Tax Office determined that primary tax payable on the debenture interest paid by the company in the relevant period is $106.1m. Additional interest charges of $32.6m resulted in an amended assessment amounting to $138.7m. No culpability charges were included in the amended assessments.
During the appeals process, the ATO decided that TEN only need provide 50% of the assessed amount, with an offset for 50% of the withholding tax already paid by the company pursuant to the debenture interest over the relevant period.
The ATO indicated that this part payment structure was appropriate given, and I quote "there is a genuine dispute over questions of law" and that, and I again quote the ATO that the company "has a reasonably arguable position".
After Roger Moore had his go I got up and pointed out that no foreign investor has made more money in Australia than Izzy Asper's Canwest. When the consortium bought Ten from "the Westpac sick bay" in 1992, the equity injection was only $90 million and Izzy's share was 57.5 per cent even though it is illegal for any foreigner to control more than 15 per cent of the voting stock.
It was a cynical structure designed to effectively break the law and successive governments let Izzy off the hook.
Izzy has made between $1 and $1.5 billion on his original $50 million investment, which means he's made more than 40 times his money.
He then turns around and won't give his fair share to the tax office and won't even provide a decent TV news service given his obsessive approach to cost-cutting. Canwest is a former fishing canning company in Canada and that is how they approach television.
As I told the meeting, the Walkley Awards program does not mention anyone from Channel 10 as a finalist or even a judge. Ten's news service is a disgrace.
Studdy started yelling at this point and someone should have told him he was holding the microphone way too close because there was no way any of his viewers could hit the mute button like when watching some of their drivel on the box.
Studdy actually referred to them as the Wakely Awards and then John McAlpine said this wasn't their cup of tea as the Walkleys tend to acknowledge current affairs journalism which delivered too old an audience for Ten.
When McAlpine finished defended the news spending I yelled out: "Why is TEN the only network with no-one in Afghanistan?", which elicited the response: "Do you want to go?"
After much chuckling, McAlpine said they did not want to risk any of their journalists or foot the expense of Afghanistan so they just sit back and take Reuters and CNN feeds. Can I remind readers that Ten's foundation shareholders have made more than 40-times their money since 1992 and now they have been involved in the decimation of much regional news. The government should start threatening to take away the licences from companies like TEN and Southern Cross.
Ironically TEN will probably profit from the Southern Cross decision because they'll' be providing a much greater percentage of the programming now that SCB have give up the ghost on regional news services in so many markets.
The 13 50-plus blokes and one women sitting cramped on the small stage comprise the board of this outfit and they sat under the Big Screen as a video of Big Brother was played. This really must be an embarrassment for them. Can you believe the annual report calls it "Factual Television"
The video package showed executives from Primus and Pizza Hut expressing their delight in the exposure they got from the program which was watched by 1.6 million Australians on the opening night and an incredible 2.8 million for the finale.
This is part of what McAlpine told the meeting:
"I'd like to say a brief word about Big Brother. The programme did play a significant role in our success this year. It certainly had a direct ratings impact, regularly gaining more than 50 percent of the 16 to 39 audience. However, it was also an excellent promotional vehicle for the rest of TEN's prime time schedule.
There is a real point of difference between Big Brother and other major television events, such as the Olympics, where a network can promote shows that will be broadcast sometime in the future. With Big Brother, each night TEN could point to quality programmes that would air that very evening.
For example, we heavily promoted Rove [live] during Big Brother - and vice-versa, with evicted housemates appearing on Rove's show. You would expect that to boost Rove's audience during Big Brother - and it did. However, those now viewers have stayed with us.
At the start of this year Rove was averaging around 770,000 viewers. In the weeks after Big Brother to the end of the year, Rove's average audience had grown to approximately 1 million.
Success breeds success; 14 of our primetime shows dominated their timeslots in the under-40 demographic this year. That compares to six the year before."
And McAlpine reckons Big Brother 2 is going to be even better:
"While Big Brother was an enormous success this year, we are not taking series 2 for granted. We will build on the initiatives that worked so well the first time around.
For example, cross platform marketing greatly benefited series 1. This involved: radio through Austereo; newspapers through News Limited; out-of-home with Eye Corp; and online through the Big Brother website.
Big Brother appeals through intimately observing human interaction and emotions; it doesn't rely on an exotic location.
We believe series 2 may be a more compelling show for viewers than series 1. And that makes it even more attractive for advertisers.
We will again work with our sponsors to create novel and effective marketing solutions."
I'm sure all those News Ltd hacks writing about Big Brother are delighted to hear they are part of a "cross platform marketing" strategy for a Canadian controlled company exploiting the privilege of owning government issued media licences.
When it came to the re-election of directors I got up and asked why the hell TEN had 14 directors who only meet four times a year when the conventional practice tends to be about 10 directors and 10 meetings a year. Studdy explained this was because of the extremely complex structure (CRIKEY COMMENT: to dodge tax and foreign ownership limits and get listed without Canwest losing control) which sees Ten Network Holdings's only role in life owning Ten Group Pty Ltd.
The large board is because Canwest insists on 3 directors and the ABA insists Ten have 10 other non-affiliated directors. Afterall, we can't have Canwest controlling the show even though long-serving Canwest executive Peter Viner was the CEO for the first years after Canwest bought in.
Studdy was re-elected for another year but announced he'd be retiring as soon as a replacement can be found. Laurance Freedman took the chair for Studdy's re-election and I expressed disappointment that the winner of the two competing candidates, former PBL CEO Nick Fallooon and former Telstra executive Peter Shore, was not announced and Freedman said you should not believe everything you read in the paper.
This was a reference to the fact that the two lads sat opposite each other flying first class to Los Angeles recently for interviews with Izzy and his chief henchman Peter Viner.
The question of foreign ownership is very interesting and I draw your attention to this comment from chairman Studdy during the meeting:
"The recent election has intensified interest in another issue of importance to your company and the media sector generally, that being foreign and cross media ownership.
We do hope that the Government and the opposition parties now take the opportunity to debate the current restrictions which we believe unfairly limit investment. The Prime Minister has already shown his determination to put these matters on the table.
The first move should be to open up our industry to Australian investors whose superannuation and portfolio funds are managed by domestically operated, but foreign owned institutions. Here the sector has already gained support for its case from the Productivity Commission."
Both the Equitilink Twins, Brian Sherman and Laurence Freedman were up for re-election and Equitlink is listed as one of the largest shareholders with 11.97% of TEN. Given that Studdy seemed to be saying that foreign-owned fund managers are deemed foreign on any television share register, what affect did the sale of Equitlink to a Scottish-based outfit called Aberdeen this year have on the level of TEN's foreign ownership.
Afterall, I understood that foreigners can only own 15 per cent of a television network and Studdy's comments would suggest that the Equitlink holding should now be deemed foreign.
The whole structuring of the company, closure of newsrooms and refusal to pay tax demonstrates Canwest's contempt for the laws of this country and now Equitilink appears to be joining in this game because Laurance Freedman simply said "no" without explaining when I pushed him on this point.
That's all I've got time for now as have to head into town and meet another barrister. We'll have a fuller account of this AGM on the site shortly.
Do ya best, Stephen Mayne and the Crikey Team
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