AFR gas cartel grovelling will destroy Nine’s profits

It is one of the great ironies of today’s hopelessly corrupted ideological soup. Those who cheerlead for “business” over “markets” are often the victims of their own useful idiocy.

Nowhere is this more true than at the Australian Financial Review. For the past decade, the “Fin” has transformed from intellectual liberal democratic champion to dumbed down, trickle-down, oligarchic cheerleader.

Mindless “businessomics” is deeply hypocritical at the best of times. Given the AFR drones constantly about the need for productivity reform but then trashes it the moment reform threatens any standing vested interest.

But kissing business booty probably does normally support its profits in a perverse kind of way. All of those glossy magazines that preen business “ubermensch” do attract decent coin.

That is, until now. Sometimes the reflexive resort to celebrating the latest self-serving utterance of corporate psychopaths is not such a good idea for the paper’s, or its owners’, good.

Take the developing gas debate. The AFR is today a direct pipeline of unprocessed gas cartel propaganda. All material is robbed of context. All debate is reduced to the constraints of gas cartel press releases. All wider business is forgotten:

If it sells papers then so what, you may well counter. And fair enough. The problem is that pushing the one-eyed agenda of a war-profiteering energy cartel as it robs revenue from 99.9% of wider business is not a great business plan for the AFR’s parent company, Nine Entertainment Holdings.

The AFR’s cheerleading for the gas cartel is openly destroying its profits and it is going to get much worse if the paper continues. If the AFR actually succeeds in preventing Labor reforms to repair the gas market then Nine is going to get wiped out.

This is not a difficult argument to make. Media firms are highly sensitive to changes in the business cycle and Nine is more exposed than most to the approaching end of this one.

The issue is that gas cartel war-profiteering is central to Australia’s skyrocketing inflation. Ipso facto, it is also central to the interest rate tightening underway at the RBA, which it has made clear:

Ahead of the release of the June quarter Consumer Price Index (CPI) at the end of July, members noted that domestic inflationary pressures, including those outside of the labour market, continued to build. Non-labour input cost pressures were evident across a range of industries. Adverse weather conditions had affected the prices of some fresh produce. Rents were expected to pick up in response to tightening rental market conditions across most of the country. Wholesale electricity and gas prices had also increased sharply in recent months, reflecting domestic supply disruptions during a period of increased demand. The effect of these increases on retail electricity and gas prices was expected to be evident later in the year, since state subsidies and hedging arrangements had limited the near-term pass-through. More generally, firms in the Bank’s liaison program had indicated a greater propensity to pass through cost increases to consumer prices. As a result of these price pressures, inflation was expected to increase in year-ended terms through the remainder of 2022.

This is confirmed by the most recent data:

The pace of inflation accelerated in July, with the Melbourne Institute prices gauge rising 1.2 per cent, the fastest rate in two decades, which stemmed in part from higher energy prices flowing through to household budgets.

The RBA’s monetary tightening is already crashing house prices. Household consumption is definitely next. Followed swiftly by business investment.

Like the 99.9% of non-gas cartel businesses the AFR appears determined to ignore, Nine is overwhelmingly dependent upon the household and business sectors for its profits. This is especially the case given its recent acquisition of Domain, a major growth engine, but highly sensitive real estate play, currently being annihilated by the RBA as it chases energy inflation.

So, as equity investors considering an investment in Nine, we must ask: is its strategy and management decisions aligned to create value at this juncture? You tell me:

If I were a Nine shareholder, I might be tempted to conclude that management is allowing ideological, political, or personal vendettas at the AFR to destroy value at the firm.

Houses and Holes
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Comments

  1. Display NameMEMBER

    They are going the way of Murdoch papers, fact optional zones. Bought and paid for vanity projects. When Rupert was challenged on the fact that his media properties consistently defecate effluent into the public consciousness, he suggested the sites are entertainment not news despite hiding in plain sight with news in their title. The point is we should treat them more like the Shovel or the Onion. The sites are a satire on the gas or banking industry depending on who has purchased them for the day.

    • Uncle WattleberryMEMBER

      Yep, well said. If Michael Stutchbury is still the editor of the AFR, then it’s worth noting he has a long and distinguished background in writing for and editing non-profitable rubbish as an employee of Rupert. He’s not had to worry about wooing a wider readership. He’s only ever had to peddle perverse ideologies.

  2. Where the hell is the counter-argument of the impact on ordinary Australians!! If they want to get into the gutter so should the other side and pit “Big Greedy Uncaring Foreign Business Interests” against “you, me and everyone else who just want to live day-to-day and make ends meet for their families”. Call out Big Business as not giving two sh!ts about ordinary punters and diverting profits overseas. Brand them as un-Australian and a risk to our sovereignty…..a creation of the LNP. Start playing the class war and the us vs them card. Make them squirm!!

  3. The goals of the managers (and politicians) are not always the same as the shareholders. Maybe those running the AFR don’t care about the rest of the ‘Nine’ Organisation?

  4. Nowhere is this more true than at the Australian Financial Review. For the past decade, the “Fin” has transformed from intellectual liberal democratic champion to dumbed down, trickle-down, oligarchic cheerleader.

    The same thing happened to The Economist about 15 years ago.

    In December 1996 The Economist’s Foreign Editor Brian Beedham wrote a much cited article calling for the completion of Democratic Project; In part:

    This survey argues that the next big change in human affairs will probably not be a matter of economics, or electronics, or military science; it will be a change in the supposedly humdrum world of politics. The coming century could see, at last, the full flowering of the idea of democracy. The democratic system of politics, which first took widespread root in the 19th century, and then in the 20th century beat off the attacks of both fascism and communism, may in the 21st century realise that it has so far been living, for understandable reasons, in a state of arrested development, but that those reasons no longer apply; and so democracy can set about completing its growth.

    The places that now consider themselves to be democracies are with a handful of exceptions run by the process generally known as ‘representative’ democracy. That qualifying adjective should make you sit up and think.

    The starting-point of modern democracy is the belief that every sane adult is entitled to an equal say in the conduct of public affairs. Some people are richer than others, some are more intelligent, and nobody’s interests are quite the same as anybody else’s.

    All are entitled to an equal voice in deciding how they should be governed. There is therefore something odd in the fact that in most democracies this voice is heard only once every few years, in elections in which voters choose a president or send their representatives to an elected parliament; and that between those elections, for periods of anything up to seven years, it is the presidents and parliamentarians who do all the deciding, while the rest of the democracy is expected to stand more or less quietly on one side, either nodding its head in irrelevant approval or growling in frustrated disagreement. This is part-time democracy.

    By 2011 editor John Micklethwaite and his acolyte Andreas Kluth (now both in exile at Bloomberg) were railing against “extreme democracy” and the perils of “populism”. “Populist” became their favourite pejorative. After all, if you can’t actually explain what’s wrong with a policy simply point out that it’s supported by the “lower orders”. That’ll do it.

    This trend only increased after the people of Britain “voted the wrong way” in the Brexit plebiscite.

    On the other hand, wise business leaders must be allowed complete freedom to do as they wish. And the rest of us should all be grateful. There needs to be a revolving door between business and government to “share expertise” and attract the “best” people.

    This is an example of “capture”. If a journalist has special interests wining and dining them, and constantly whispering in their ear, how can they resist falling under the spell.

  5. I like DLS’s approach in this one. Evolving the debate from complaining media aren’t living up to their institutional role to pointing to conflict in the vested interests they represent. This is a true issue for them. And the type of conflict within institutions that might actually lead to real change.

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