Media upheaval

Nine Entertainment tipped to partner up with Southern Cross Media

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published March 4, 2013 12:42 pm AEDT

The media sector could be set for its biggest upheaval since 2006, when foreign ownership rules were relaxed.

Recent media reports have speculated that Southern Cross could be considering a tie-up with Nine Entertainment, should current media legislation be relaxed. Currently, metropolitan TV stations, such as Nine, Seven and Ten are prohibited from merging with regional broadcasters, but the federal government has flagged changes to existing media laws.

Regional free-to-air TV broadcaster and radio station owner, Southern Cross Media (ASX: SXL) has confirmed that it is reviewing its options – with its agreement with Ten Network Holdings (ASX: TEN) set to expire in mid-2013.

Southern Cross currently broadcasts Ten's signal in regional Australia, but may have become disillusioned with Ten's programming, and sliding market share. The Australian reports that a combined Nine and Southern Cross group could then list the TV operations on the stock market – with a value estimated at around $4 billion.

The potential switch to Nine Entertainment also raises questions about the future of Nine's current affiliate, WIN Corporation, which is currently on a month-to-month contract with Nine. WIN's options include switching to Ten, or go it alone and source its own content locally and offshore.

But it's not only Nine and Southern Cross that could consider pairing-up. Seven West Media (ASX: SWM), may gobble up its regional affiliate, Prime Media Group (ASX: PRT), in which it already owns 11% and a long standing broadcasting agreement.

Should Southern Cross switch to Nine, Channel Ten would be left without a regional broadcaster, and its options could include setting up its own affiliate – if proposed changes to media rules go ahead – or entering discussions with WIN Group.

Foolish takeaway

Things are certainly hotting up in the media space, with news last week that Kerry Stokes' Seven Group Holdings (ASX: SVW) had taken a 5% holding in Ten, alongside other billionaires including James Packer, Gina Rinehart and WIN Group's Bruce Gordon. The media landscape could see major changes in the months ahead.

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