Billionaires' Bet on Australian TV Sours as Ten Network Faces InsolvencyBy and
Administrators to explore potential sale, recapitalization
Ten failed to follow shifting tastes of young target audience
Even having Lachlan Murdoch and billionaire James Packer in your corner isn’t enough to save you these days.
Ten Network Holdings Ltd., the smallest of Australia’s three main commercial broadcasters, has entered voluntary administration after losing the support of Murdoch and Australian media owner Bruce Gordon to carry on borrowing.
Ten, which broadcasts ‘Homeland,’ ‘Neighbours’ and ‘Masterchef Australia,’ is crumbling under the cost of buying programs from the U.S. as advertising revenue plunges. The channel’s demise reflects the migration of audiences to on-demand platforms including Netflix Inc., and the transfer of advertising dominance to Google and Facebook.
“All the big backers have ended up doing is pouring more and more money into it,” said Peter Wells, a professor at University of Technology Sydney who has undertaken research into earnings management and financial reporting. The appointment of administrators was “inevitable,” he said.
Ten also counts casino owner Packer and mining billionaire Gina Rinehart as shareholders. In a filing on Wednesday, Ten’s directors said they “regret very much that these circumstances have come to pass.”
Ten, whose shares have fallen to 16 Australian cents from a 2004 high of A$33.53, sought the refuge in administration after advisers for Murdoch and Gordon told the board they won’t continue to back the company’s credit facilities. Ten’s shares were placed into a trading halt Tuesday and were suspended Wednesday.
Hours later, a separate filing by Ten disclosed that Murdoch and Gordon had agreed last week to work together on a plan to restructure the company. Because they are guarantors of Ten’s secured A$200 million facility with Commonwealth Bank of Australia, it could be in the pair’s interest to work on a proposal that could see Ten’s debt repaid, according to a June 9 letter that was signed off by the investment vehicles of both Murdoch and Gordon.
It’s not clear how the appointment of administrators affects that agreement.
Ten said in April it was on the hunt for a new and larger loan, possibly around A$250 million ($188 million) to repay debt and help service its existing A$200 million loan facility which ends in December.
As far as possible, administrators KordaMentha plan to keep the business running during a financial assessment before a “potential sale or recapitalization,” Ten said in its statement.
Out of Time
Ten ran out of time to push through its three-part transformation program. That involved cutting costs, renegotiating U.S. programming contracts and reducing the broadcasting license fee paid to the government.
Ten said in its statement it had agreed “in principle” to the vast majority of replacement content deals with its U.S. studio partners, Fox and CBS, although final terms haven’t been formally ratified. Those new arrangements would halve the bill for U.S. content, while still giving Ten access to studio productions “over the medium term,” the company said.
Ultimately, Ten didn’t adapt fast enough to the viewing habits of its young target audience, said Marc C-Scott, a lecturer in screen media at Victoria University in Melbourne.
“Sometimes you need to be dynamic and Ten hasn’t made the move quickly enough,” he said. “You can’t just be looking at the television screen anymore. You need to be platform agnostic.’’