This magazine launched in October 2002 with a cover story on e.tv chief executive Marcel Golding, written by Denis Beckett. At the time, or so we like to think, the Golding persona was still a daunting proposition to a relatively cloistered media industry. Here was this ex trade unionist, a man who made his name punching the country’s mining giants in their unyielding guts, and the incumbent media heavies were filled with private doubts about their own apparent hardness. Publicly, of course, the incumbents were just regurgitating an old line.
So Beckett quickly addressed the “but-you-used-to-be-a-trade-unionist-and-now-you-are-a-capitalist” slur, which raised nothing more than an eyebrow out of Golding, and went on to the numbers. Was e.tv profitable, then?
“That’s coming, from January,” said Golding. “We have overcome the prejudice against the newcomer. Now people know we’re here, okay. Their jaws drop when we show them our growth, but we still have to overcome the prejudice against a wide audience. It’s an easier life, you know, if a media planner can just say ‘a luxury product goes to M-Net and gets the LSMs 9 to10’ or ‘this is a mass product, SABC1 gives us LSM 4’.”
In October 2005 that other prejudice has been dropped too. Media planners recognise that the channel delivers big audiences in LSMs 4 to 7, and sales and marketing director Khalik Sherrif rebuffs the mumbled gripes at e.tv’s ubiquitous wrestling fare with the words, ” a nation gets the television it deserves”. As for the Golding myth, reason has been restored – maybe because he’s since taken to making people in the gaming industry nervous, but more likely because he’s kept showing the sort of year-on-year growth that render all sideswipes pointless. Headline profits for the latest interim results were R94-million – as eMedia reported in March 2005, “in the same six months last year, e.tv’s headline earnings were just short of R40-million, and the year before that in the same period it lost more than R50-million.”
The face on The Media‘s second cover was not as fortunate. We said in November 2002 that SABC CEO Peter Matlare had the toughest job in South African media, having to perform a balancing act between the demands of the largest audience in the country, an inordinate slice of the national advertising pool, and the government shareholder. We also said that Matlare, a “consummate diplomat”, had the skills to negotiate the potential pitfalls. We were wrong.
Matlare announced his resignation in January 2005, cutting short a contract that was supposed to run until the end of the year. Speculation on the announcement was that he came off worse in the ongoing clashes with news head Snuki Zikalala over editorial control, and that his involvement in the widely condemned “Great South Africans” series brought on the final push. Matlare’s official line was that he was simply pursuing a new career at Vodacom, but it was clear he didn’t have the crucial backing of the SABC board.
Still, even if one agrees with Financial Mail editor Barney Mthombothi that Matlare was too slick for his own good, there’s no denying the role he played in bringing the public broadcaster its biggest profits ever. At the announcement in August of the 2004/2005 financial results new CEO Dali Mpofu only made passing reference to his predecessor, which was also about as much as the media could muster. The snubs notwithstanding, the SABC’s R240,3-million net earnings, the largest in the corporation’s 70-year history, were in no small part due to Matlare’s commercial nous. Whether that’s the most desirable trait in a public broadcasting head is something Mpofu will now have to work out for himself.
In February 2003 we ran our first of two covers on South African media’s most powerful chief executive (“powerful” being a function of assets, market capitalisation and global reach). The timing coincided with Koos Bekker’s reorganisation of what was then Naspers, MIH Holdings Limited (MIHH) and MIH Limited (MIHL) into a single group. It was a move that, as writer Donald Paul put it, placed Bekker “in control of the largest media company in South Africa, almost three times the size of its closest competitors Caxton/CTP and Johncom.”
Commenting on the numbers at the time, Paul wrote: “Although the Naspers share price dipped 5 percent to R20,50 as shareholders reacted to the proposed dilution of their holdings, this was up significantly from the September 2001 price of R14,95. Interim results posted for September 2002 showed group revenues grew by 26 percent, while operating profits before amortisation and impairment charges amounted to R78 million, compared to a loss in 2001 of R111 million.”
Two years later, in the February 2005 cover piece comparing the interim results of Naspers and Johncom, Kirsty Laschinger observed of the former that, “core headline earnings per share were up 103 percent.” The notable factors in those results, according to Laschinger, were the unexpected turnaround in the Greek pay television operation, MWeb SA’s R27-million operating profit (Paul had noted that in the half-year to September 2001, before delisting, MWeb lost R152-million), and a 50 percent increase in South African pay television’s operating profit.
Another major positive for Naspers in that second cover piece was the print media division Media24 showing a 66 percent increase in operating profit. Laschinger quoted media analyst Peter Armitage, who said: “This is a typical case of an increase in advertising (+27 percent) flowing straight through to the bottom line”.
One wonders what would have happened had the chief executive on The Media‘s April 2003 cover, Saki Macozoma, survived through to the height of the current advertising boom. Again using Beckett as the writer, we tried to get the erstwhile New Africa Investments Limited (Nail) CEO’s take on why the regulator blocked him on an attempted Kagiso Media acquisition, what happened with his failed attempt at a Johncom acquisition, and why his flagship newspaper the Sowetan was faltering.
On the first question Macozoma gave Beckett an answer that this month’s cover, new Icasa chair Paris Mashile, might want to pin on his wall. “Icasa can only see empowerment one way, which is that every little town has its own little radio station, thousands of little entrepreneurs have their own little media organs. They should know by now that this is a formula for multiple bankruptcies, but they would rather perpetuate their cherished myth than have a proper company move in and run things so there is scale, so there is growth, so there is profit. They frustrate vital investment.”
The answer to the next question – on the failed Johncom deal – made an equal amount of sense, but is hugely ironic in hindsight: “It would have been the perfect fit, on three levels. Co-owned presses would mean more usage for the presses and better deals for owner-users. Back office synergies would mean fuller utilisation of management and support staff. Complementary titles would mean buttoning up the middle-to-upper market. To get better than this is not possible. It is tragic that it has not happened.”
What’s ironic of course is that this has indeed happened, just the other way around – Johncom is currently enjoying those synergies without Nail (on the final question Macozoma blamed the Daily Sun‘s R1.00 cover price for Sowetan‘s circulation troubles, but it’s all academic given Johncom’s recent successes with the paper). Further, the majority of Nail’s radio assets have gone to Kagiso Media, the other failed acquisition target.
In a recent probe into Nail’s history and ultimate collapse, the Financial Mail wrote that in “a classic asset strip” the successful R1,2-billion bidder, the Tiso consortium, “have already realised R1,5-billion”, with “another R100-million or so” to follow. Reflecting that winding up Nail was the right decision, Macozoma said: “For me it is critical that BEE companies, their management and shareholders take decisions that are commercially rational. That is part of growing up in the commercial jungle.”
These empowerment imperatives formed a central thrust in the October 2003 cover piece on Johncom CEO Connie Molusi – it was an angle brought on by Macozoma’s abovementioned failure to raise the R1,5-billion asking price for the group. At the beginning of that year, we pointed out, Johncom’s parent Johnnic Holdings had been looking to unbundle its convoluted structure and realise shareholder value by selling its 62,5 percent shareholding in the media company. When that strategy failed, Molusi took on responsibility for squeezing operational dividends out of the assets.
As we wrote at the time: “Given that much of the impetus for exiting the media space came from the National Empowerment Consortium (NEC), whose 30 percent stake in Johnnic Holdings still hasn’t been repaid (NEC raised the initial capital from institutional funders back in 1996), there is a lot riding on a successful restructuring by Molusi.”
So Molusi got a mandate from the board to deal with problematic businesses and dispose of Johncom’s non-core assets. Debt, which in 2002 stood at R401-million, had been reduced to R54-million the following year – largely as a result of the disposal of close on 16 million shares in listed cellular network provider MTN.
Said Molusi: “I’ve got a very simple philosophy. I’ve looked at the businesses and I’ve said where there are problems you either fix them, you sell them, or you close them. I think we’ve been quite successful in that. If you look at the business now it’s completely different, it’s quite focused.”
Two years later Molusi’s track record speaks for itself. For the year to March 2005 the group lifted headline earnings by 129 percent, from R177-million to R406-million. This translated into headline earnings per share of 390 cents, compared with 170 cents in 2004. Referring to the performance of former Nail assets, Johncom said in a statement: “The Sowetan and Sunday World titles were successfully integrated into the Johncom media division with the Sowetan enjoying a robust circulation increase and contributing positively to profits. Sunday World continued to entrench itself in the challenging Sunday market—”
Molusi’s next challenge is figuring out who’s going to own him – and making sure that, whoever it is, they’re properly empowered. Informed speculation has it that the strongest bidder for the 62,5 percent stake previously held by Johnnic Holdings is a consortium made up of Caxton chief Terry Moolman, Cyril Ramaphosa and Tokyo Sexwale. All Johncom is saying is that “the board is currently working with professional advisors to ensure that an appropriate black economic empowerment shareholding is achieved in the short term.”
The Media‘s next big executive cover, in May 2004, was a first-ever South African interview with heir apparent to the Independent News & Media global group, Gavin O’Reilly. Responding to local perceptions of editorial staff cutbacks and multiple newsrooms becoming single newrooms, O’Reilly forcefully said: “These criticisms would probably be levelled at every media group in the world. Our company’s capital and resources will be invested in the areas we see fit. There’s a sense of misguided entitlement that certain people in the newspaper business have. But it has to be responsible. Let’s not forget, we’re the ones taking the risk at the end of the day.”
He continued, putting an apparent lie to the evergreen rumour about Independent looking for a local buyer, that “in South Africa there seems to be a ‘not-invented-here’ reaction to us, but we are very committed to this country as a family and as a company, and we will continue to invest in it.”
The piece also reported that the Dublin-based group’s 2003 results, released in late March 2004, “edged ahead of market expectations with a 20 percent rise in pre-tax profit before exceptionals to 154,6-million euros” – a turnaround in the South African currency, we added, had boosted the group’s bottom line.
The latest results out of South Africa’s only foreign-owned media conglomerate, which controls 15 newspapers across the country, 50 percent of outdoor leader Clear Channel Independent, and a consumer magazine operation, are even more impressive. Global profits before tax for the year to December 2004 was 189,1-million euros, with earnings per share rising from 6,81 cents in 2003 to 10.9 cents. The South African division, according to the results, showed operating profits of 31-million euros (R243,6-million on September 2005 rates), 31.9 percent up on the previous year.
Explaining the South African results the report said: “This performance reflects a combination of a strong double-digit improvement in total revenue and the benefits of extremely low cost increases, which flowed from on-going cost containment initiatives. These initiatives included major efficiency improvements arising from the re-organisation and rationalisation of the company’s production and distribution activities.”
Another media executive that gets the benefits of cost rationalisation and economies of scale is William Kirsh, CEO of Primedia. The Media‘s April 2005 cover piece, again written by Laschinger, had Kirsh confirming that he had four “very good” radio stations working synergistically together, and that he was hoping to leverage the benefits of Primedia’s management expertise and empowerment credentials as the regulator relaxes ownership limits and grants more commercial licences.
Primedia’s year-end results to June 2005 showed operating profit before depreciation of R418,9-million, up 29 percent on the previous year. Headline earnings per share were up almost 40 percent, to 95 cents. Radio was again the big factor in these numbers – as Laschinger pointed out in the April piece, 94.7 Highveld Stereo alone made up 41 percent of operating profit in the group’s results for the six months to December 2004, and the full-year results weren’t far off that. But, as Kirsh is betting, the more assets he acquires the less of a problem his dependence on Highveld becomes; he spent almost R200-million on acquisitions last year alone.
So those surviving chief executives featured on The Media‘s covers over the last three years are all smiling. It’s no big surprise when you consider that total advertising spend measured by Nielsen Media Research over the period has risen almost 50 percent, from R10,6-billion for the year July 2002 to June 2003 to R15,6-billion for July 2004 to June 2005 [see table, page—].
But a big question confronting two of these executives, one that this magazine has yet to cover, concerns the proposed empowerment solutions out of Naspers and Independent. We also intend to cover new SABC CEO Dali Mpofu, when he’s a bit further into his tenure. And it would be very nice, assuming mercurial Caxton chief Terry Moolman ever agrees to a picture and face-to-face interview with any media outlet whatsoever, if that vehicle were us.