Part Four: Fairfax corporate interests

MEDIA Watch and its previous presenter David Marr show clear bias against News Corp, the ultimate publisher of The Australian. News is the dominant newspaper rival to the Fairfax group which employs Marr at the Sydney Morning Herald. While Marr is entitled to his opinions, it is not proper for the ABC to give him a taxpayer-funded soapbox from which to attack a competitor of his employer.

In the Media Watch program of 13 May 2002, Marr mounted an extraordinary attack on News and its newspapers, particularly The Australian.

According to Marr: "Wherever News Corp's own commercial interests are concerned, readers can expect to get a pretty rotten deal. Lately they've been short changed one one of the biggest business stories around: the terrible financial problems ... at News Corp."

For The Australian, the evidence for this was a highly-slanted cut-and-paste job which attempted to show that the newspaper vigorously covered problems at other companies but hardly reported or commented on problems at its own company. Yes, Media Watch, The Australian led the financial press in reporting a profit downgrade at the Mayne conglomerate - a ripping yarn in which doctors at the nation's biggest private hospital chain were revolting against new cost efficiencies demanded by management. That single example proved nothing about its coverage of News Corp.

Nor was anything proved by the Media Watch efforts to compare coverage of News Corp by The Australian with coverage by The Australian Financial Review. Yes, the financial daily devoted more space to coverage of News Corp's asset writedowns in 2002. So what?

Here, the supposedly central bit of evidence was the revelation that The Australian did not report the following direct quote from News Corp president Peter Chernin admitting that News paid too much to buy television rights in American sports. "Clearly, you would have to say we overpaid ... These contracts are now being written down to their actual value."

Marr told viewers: "You had to go to the Fairfax Financial Review to read about it ...Sadly News Ltd paper in Australia didn't run that (the Chernin quote) anywhere."

It is ridiculous to suggest that The Australian would censor comments by a top executive of its parent company. Marr didn't tell ABC viewers that the Chernin quote run by the AFR appeared in the middle of a modest-length comment article on page 16. The quote did not appear in The Australian. But neither did it appear in Fairfax newspapers The Sydney Morning Herald or Melbourne's The Age.

It is also wrong to suggest that The Australian under-reported the bad news in News Corp's second quarter 2002 result or the writedown of sports rights in the wake of the technology and media sector boom-bust. Here's part of how The Australian reported the result in an article headed "News punished for writedowns" on the front of its business section on 14 February 2002, the same day the AFR reported the Chernin quote:

"Global media group News Corporation has revealed asset writedowns of almost $4 billion and cut profit forecasts for the second time this year, reporting a 12.4 per cent fall in second-quarter operating income ...

"Despite netting $2.35 billion from the sale of its half-interest in Fox Family Worldwide, News recorded net abnormal loss in the quarter of $1.6 billion.

"The bulk of the $1.78 million in abnormal losses related to the value of sports broadcast rights, which have declined in the weak advertising market ... "(Rupert Murdoch said) The value of the sports rights was affected by the 'anaemic advertising market', which reduced forecast long-term advertising growth rates ..."

"We are great believers in high profile sports ...(but) when prices were set for those events they were based on assumptions that business conditions would not only remain where they were a couple of years ago but would continue to improve," he said.

That is, News paid too much for the sport rights, which were now being written down in value on the company's balance sheet.

While the AFR comment piece that day concentrated on the sports rights issue, the comment piece in The Australian quoted Chernin on problems at News Corp's Fox television network in the US. That comment piece began: "Among a woeful set of results, the most striking problem besetting The News Corporation Ltd was the performance of its US TV businesses".

Media Watch did not include this in evidence for its claim that readers of The Australian had been short-changed in the newspaper's coverage of News Corp.

Nor did Marr tell viewers of a column in The Australian a day later examining in depth the slump in the value of television rights for US sports. That column began: "Rupert Murdoch's admission this week that News Corp paid too much for sports rights is the latest sign that the market has peaked."

Instead, Marr signed off with another claim: "This week readers (of The Australian and other News Ltd newspapers) can expect to read very little about another News Corp disaster".

This was a reference to further big write-downs expected to be included in News Corp's third quarter results due to be released the following night. Marr implied the release, early New York time, was timed for 2002 Federal Budget night in Australia so that financial commentators would be diverted by other news.

But The Australian did not "short change" its readers on the results. It led its business section with a news article (headed "News Corp posts record $7.7bn loss") which began: "Media giant The News Corporation Ltd last night reported a $7.7 billion quarterly loss, the largest in Australian corporate history after writing down the value of its stake in its US-based Gemstar TV Guide.

"The huge loss was triggered by the company's $8.2 billion asset writedown on the 42.6 per cent-owned Gemstar, an interactive home TV guide business, and takes the total value of writedowns by News, (publisher of The Australian) to $9.8 billion three quarters of the way through its financial year."

Here's how the AFR reported the same news ("Gemstar hands News $8.3bn loss"): "Rupert Murdoch has defended his disastrous foray into Gemstar-TV Guide International despite a $US4.15 billion ($7.6 billion) writedown on the investment that plunged News Corp to a $US4.52 billion ($8.3 billion) loss in the nine months to the end of March, the worst result in Australian corporate history.

"In announcing the writedown of the 42.6 per cent stake in Gemstar, Mr Murdoch last night expressed confidence about the company's future."

But, despite the Media Watch suggestion that News Corp wanted to hide its "another News Corp disaster", the sharemarket reacted to the third quarter asset writedowns by pushing up the company's share price by 14 per cent.

Here's how the AFR reported it: "More than $8bn was added to the value of Rupert Murdoch's News Corporation yesterday as investors ignored its record loss to embrace the media giant's surprisingly strong underlying profit growth."

Yes, Media Watch, like many global media and technology companies, News Corp suffered some heavy writedowns in the wake of the collapse of the sharemarket's technology boom. It was the biggest loss in Australian corporate history in large part because the company had grown into a global media enterprise. But, unlike Media Watch, investors saw through this "financial disaster" to focus on the company's strong operating result, which continues to this day.

Throughout this, The Australian has properly reported and analysed News Corp's business and financial results. It did not "short change" its readers.

Media Watch did not contact the editor-in-chief or editor of The Australian before launching its extraordinary attack on the newspaper. When challenged, Media Watch claimed it had based its claims on "a comprehensive assessment of these stories in News Ltd newspapers". Yeah, like the comprehensive assessment it has done on the business performance of Marr's employer, the Fairfax group.

In the Media Watch world view, such scrutiny of Fairfax presumably is not necessary. Marr's take coincides with that of his boss, Mark Scott, Editor in Chief of Fairfax Metropolitan Newspapers. Scott claims that unlike other certain "media dynasties", the journalism under the openly-held public ownership structure of Fairfax does not "pander to certain corporate interests" or "receive riding instructions" on what reporting must find. (Sydney Papers, Summer 2005) Through Marr, Fairfax corporate interests get their own outlet on the ABC.