Paul McIntyre: Young Packer gambles with the media

The death of the world's 94th richest man, Kerry Packer, continues to fuel speculation about the direction of media and gaming giant Publishing & Broadcasting (PBL) under son James Packer.

At PBL's annual meeting late last year, the billionaire heir reaffirmed the firm's commitment to Australia's A$12 billion ($13 billion) media sector, but the reality is that, unlike his father, James is far less enamoured with media assets.

Kerry Packer was a TV freak, with an uncanny ability to foresee what Australians wanted to see on the box - his Nine TV network has maintained a supreme ratings lead for about 30 years.

But James Packer is far more a casino and gaming man, so evident under his charge as PBL's executive chairman since 1998. Although Kerry was very much the king of PBL until his death, James has redirected PBL into casinos and the results are stark.

Of the A$3.3 billion in revenues at PBL, gaming is now its single biggest revenue and profit contributor - 46 per cent, or $419.1 million of last year's earnings came from casinos.

And it was James who managed to woo Lawrence Ho, son of Asia casino tycoon Stanley Ho, to become joint-venture partner in a huge gambling expansion of the two family empires in Asia. They have ambitious plans to create the biggest Asian-focused gaming company in the world through Melco PBL Holdings, a company which is essentially in competition with Stanley Ho's existing casino operations in Macau.

Ho jnr and Packer (via PBL) have two casino projects under way in Macau. The first is a A$250 million development and the other a A$1 billion investment in the grandly named "City of Dreams" in Macau.

James's love of the gaming sector is different to his father's, who was one of the world's biggest gamblers.

For the new head of the $7 billion Packer family empire, gambling is not a personal obsession but a crucial business growth strategy.

And because of that there is much conjecture about the attention PBL's media assets will get from James.

Indeed, the signs of more vulnerability in the once all-conquering Nine network emerged last year as Nine's stranglehold on the ratings started to erode before a reinvigorated Seven network under the helm of another billionaire, Kerry Stokes.

Kerry Packer's huge play just before Christmas and his death to retain the broadcast rights to the Australian Football League - $780 million over five years - forced Stokes' Seven network and the Canadian-controlled Network Ten to match the offer in a joint deal.

There is a widespread belief that Packer's offer - the biggest in Australian sporting rights history - was to ensure Seven and Ten would lose bucketloads of cash to land the deal - under an arrangement struck in 1997, Seven paid $20 million to have first and last rights to the AFL code for two contract terms. Although panned at the time, Stokes is now seen as a genius for the idea as it has come at a critical time in the TV battle.

For the first time in nearly three decades, Channel Nine's dominance of TV audiences no longer looks as certain. Last year, it lost its ratings supremacy in news and current affairs to Seven, which was the only commercial broadcaster in 2005 to increase its audience numbers. Nine and Ten saw falling audience shares.

The AFL deal for Seven - starting in 2007 through to 2011 - will give it more rocket fuel to continue its climb up the ratings ladder and quite possibly overtake Nine in the next two or three years.

Although there are suggestions that Packer's $780 million bid was simply a ploy to push up what Seven and Ten had to pay, Nine's interim chief executive, Sam Chisholm, is known to be bitterly disappointed about losing the bid.

When PBL, News Ltd and the Ten Network jointly won the present five-year rights for about $500 million in 2001, Stokes refused to match the offer, claiming the price was too high. Packer and Co may have thought it could happen again.

Some analysts believe Seven could lose $20 million a year on the present deal but the bigger picture is a TV landscape which could see Nine knocked off its top perch. For Kerry Packer, that scenario was unthinkable but for his son the prospect is far less dramatic. All the more reason, perhaps, to head for the casinos.


* Paul McIntyre is a Sydney-based journalist.