Decoding Peter Costello’s final salvo from his Nine exit

Welcome to a Tuesday update from Unmade. Today: Peter Costello is out as Nine chairman. He dropped some hints about his successor Catherine West and CEO Mike Sneesby is his final statement. We dig into what he means.

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Peter Costello resigns as Nine chair, and on the way out, tries to stop deputy Catherine West getting the prize

It took three days longer than it should have, but Peter Costello eventually did the right thing and resigned as Nine chairman on Sunday night.

In the end, what did for him was not his board’s failure to get to grips with a toxic newsroom culture, a disintegrating business model and a plummeting share price. Instead, the last straw was Costello’s knocking over a reporter who was asking annoying questions. You can’t ask for safety for your own journalists if that’s how your chairman behaves towards them.

How we covered it on Thursday night:

So on Sunday night, Costello announced his departure.

Deputy chair Catherine West gets a battlefield promotion. But that’s not the end of the matter. Along with an announcement for the ASX from Nine, Costello put out his own statement suggesting he doesn’t want her to keep the job. In part it was self congratulatory, and in part it was read-between-the-lines score settling.

We’ll start with the self-administered back pats.

The word “we” does a lot of the heavy lifting. While all technically true, I imagine that the eyes of five men in particular – David Gyngell, Hugh Marks, Mike Sneesby, Nick Falloon and Antony Catalano – will have widened reading those claims. Let’s take the one at a time.

First: “We made Nine a truly national FTA network by acquiring stations in Adelaide and Perth”. Costello was a newly arrived director at the time, and one with no media business experience, at that. He didn’t become chair until 2016. The strategic (and actual) work in buying Nine Adelaide and Nine Perth from WIN in July and September 2013 was done by CEO David Gyngell who also led negotiations with the banks to rescue the company from the brink of insolvency in October that year.

Second: ”We established Stan the most successful Australian subscription streaming service which runs at a profit”. Success has many fathers and Stan’s three dads were Gyngell, Fairfax Media CEO Greg Hywood, and most of all, its founding CEO Mike Sneesby. It was this achievement of launching a start up streamer while Foxtel and Seven West Media flunked Presto that later got him the top job at Nine.

Third: “We acquired a publication division with mastheads including The SMH, The Age, The AFR”. That Nine-Fairfax takeover-merger was kicked off by Gyngell’s successor as CEO Hugh Marks and Fairfax CEO Nick Falloon, after the two men met in June 2018.

Fourth: “We acquired full ownership of a national talk radio network”. Yep, after already taking majority control of Macquarie Media in the merger. Well done, you.

Fifth: “We acquired a majority interest in Domain.” As part of the merger. And after Antony Catalano had built it into a business worth floating out of Fairfax.

The next thing to read into the announcement is the lack of warmth towards deputy Catherine West, who joined his board in 2016 shortly after he became chair.

The only words he says about West directly in his lengthy statement: “The Deputy Chair Catherine West has been working with the Search Firm and is well placed to Chair the company and conclude the process of refreshing the Board.”

And he then adds: “The Board has been supportive through the events of the last month and last few days in particular. But going forward I think they need a new Chair to unite them around a fresh vision and someone with the energy to lead to that vision for the next decade. The new Chair will require full support from all Directors as this is an industry where there is fierce rivalry.”

In other words, Costello thinks West lacks the vision, the energy and the board support. Since the Nine-Fairfax merger, there have always been divisions within the board, even after the departure of Falloon.

To be clear, the board did not appoint West into some sort of interim role. It simply announced her as chair. So putting in a new chair later will mean rolling her.

West is well credentialed. A lawyer by background, she was director of legal and business affairs at satellite broadcaster Sky in the UK where she worked for 17 years. She’s also the current chair of Australia’s leading stage school NIDA, the National Institute of Dramatic Art.

Other than Costello’s non-endorsement, the greatest challenge for West may be in the investigation currently under way into newsroom culture. It’s been reported that some board directors had been told of concerns about the behaviour of now departed director of news and current affairs Darren Wick. If that’s true, then it would be surprising if, as chair of the board’s people and remuneration committee, West was not one of them.

And there’s one more piece of reading between the lines to do. Although Costello says in his statement: “Mr Sneesby has always had my full support as CEO,” that’s as far as he goes. Consider that he could have said any nice thing he wanted to about Sneesby, and that was what he chose.

In one aspect Costello makes an important observation: “The threat to this industry comes externally from Trillion Dollar technology companies that are competing for its business.”

After the merger, Nine was worth $5bn.  Now its market capitalisation is $2.2bn. In an exquisite piece of timing, the stock market was informed on Friday night that Nine was being kicked out of the ASX100 index because it has shrunk so much.

The greatest criticism that could be made of Costello is that in the six years since the Fairfax takeover, Nine has not made any further transformative moves. Setting future strategy is the single most important contribution a company chair should make.

As Costello observed in his statement: “To stand still or hope to continue to do things as they always have been done is not an option.”

True dat.

Thanks as always for supporting Unmade through your membership.

We’ll be back with more tomorrow. Chances are we’ll be looking at the new radio ratings, out in about an hour from now.

Have a great day.

Toodlepip..

Tim Burrowes

Publisher – Unmade

tim@unmade.media