Former Nine Entertainment boss David Gyngell is incredulous and very tanned.
He’s just left the witness box after only five minutes of particularly tame cross-examination at the Federal Court in Melbourne for the civil penalty proceeding brought by the corporate watchdog against former Tennis Australia director Harold Mitchell.
Holding his arms apart, hands outstretched and palms upwards, the now semi-retired surfing enthusiast asks: “I come from Byron Bay for that?”
“It’s the first time I’ve seen a witness disappointed to leave the witness box. This case has got a number of interesting features,” quips Australian Securities and Investments Commission’s counsel Michael Pearce.
He isn’t wrong.
ASIC’s case – that Mitchell and his co-accused former Tennis Australia Steve Healy improperly helped Seven win the rights to the Australian Open in 2013 over rival groups Network Ten, Nine and US marketing firm IMG – shone a light on the cut and thrust of multibillion-dollar sports broadcasting rights.
The epic scrambling by networks, the desperation by Seven to retain its 30-year-plus legacy broadcasting the tennis and the behind-play blows between Tennis Australia’s executives and Seven and allegedly Mitchell were laid bare before the court during the three-week trial.
Seven paid $195 million for the rights in 2013. But the deal was sealed after months of battle between Seven and Tennis Australia, with Seven believing interest of other networks drummed up by Tennis Australia boss Steve Wood to eke more coin out of Seven, which had initially put a paltry $130 million on the table.
To explain its case ASIC called a who’s who of current and former media executives to give evidence about the negotiations – from Seven commercial director and straight-talking deal-maker Bruce McWilliam, to Gyngell, to former Ten boss now REA Group chairman Hamish McLennan and former Nine managing director Jeff Browne.
There was also a bizarre range of references to points of Australian television history that served little purpose but added a dash of the ridiculous – from references to Mr Squiggle characters, episodes of the Brady Bunch, the invention and implementation of the remote control device and ASIC senior counsel waving a book like a preacher – revealed by this paper as Mitchell’s autobiography – as a prop during the cross-examination of McWilliam.
At the centre of this circus was Mitchell.
A self-made magnate born into a family that worked the sawmills in the Victorian town of Orbost where the sons, including a young Mitchell, picked the splinters out of their hands.
Once widely known as “Fat Harold”, the now more slimmed-down Mitchell is a man who for decades effectively controlled vast swathes of the advertising market and with strong ties to any media executive with a view to self-preservation. Seven mogul Kerry Stokes is a close friend. So are the Packers.
ASIC alleges Mitchell interfered with the negotiations to force the organisation to do a deal with Seven despite red-hot interest from Network Ten, Nine and IMG.
The court heard Mitchell was not used to being told what to do and allegedly had very set views on how Australian sports broadcasting worked in Australia during a rights negotiations.
He allegedly scolded Tennis Australia boss Wood when he wanted to court other networks to at the very least squeeze more money out of Seven.
“Nine has the cricket, Seven has tennis and football, Ten has the rest.”
“It’s how things have always been done … keep off the grass.”
Yet things were changing. As Gyngell testified, he was seriously interested in acquiring the five-year rights to broadcast the tennis and had met with Wood to discuss the topic. “Did you discuss numbers?” Pearce asked Gyngell. “No,” he said.
(A point possibly proven by Nine snatching the five-year rights to the Australian Open for $300 million when the contract came up for tender.)
Ten was also extremely serious given its financial future would rest on the “halo effect” in advertising circles if it secured the rights to a major sporting event.
James Warburton – then boss of Ten after a recent departure from Seven where he’s now chief executive – made a cameo appearance with ASIC seizing on an email from him to former Ten executive Russel Howcroft ahead of a meeting over a cup of tea with Mitchell to prove that Ten was willing to pay as much as $50 million per annum for the rights, or $250 million over the five years.
“We want the tennis and will pay whatever it takes,” Warburton wrote to Howcroft.
‘Warby’, would make another brief appearance as a concern of McWilliam during the rights negotiations. “Harold says Ten has been down trying to upset the apple cart … Warburton is involved,” McWilliam wrote in an email to other Seven executives no doubt passing on the interest of Warburton in part because of the fact that only a few months earlier he had been an executive at Seven.
Though as Healy’s barrister, Neil Young, QC, pointed out in his closing address: “It’s completely unreal. No witness from Ten ever said they would pay $50 million.” In fact the number Ten appeared centred on was $40 million.
IMG, which had the international broadcast rights that were up for re-negotiation, had made highly conditional offers of about $40 million, though those offers were conditional of Tennis Australia re-awarding it the international rights with limited value uplift. An internal report not presented to the Tennis Australia board had estimated the rights worth around $40 million – give or take a few million on either side depending on how you read the figures.
Then there was Seven, the ultimate winner of the rights.
As the incumbent, Seven had the rights to an exclusive negotiation period (ENP) with Tennis Australia. Mitchell and Healy were concerned, the court heard, that the failure to do a deal with Seven in this period could open them up to being low-balled by Seven’s rivals once they figured out a deal with Seven was not on the cards.
At the same time, McWilliam was also pushing very hard for a deal, aggressively pushing Wood to do a sign off on a deal during the ENP, claiming a gentlemen’s agreement.
Yet as Wood explained during his evidence. “We shake hands at the end of every meeting with Channel 7. They, shrewdly, take that to mean, “You agree with everything I’ve said.”
McWilliam would end up as the unexpected star witness after being called to give evidence about his internal emails by the judge hearing the case, Justice Jonathan Beach.
Under cross-examination McWilliam told the court he believed Mitchell was trying to play “good cop” and get Seven to put more money on the table. “He was trying to keep us bidding,” he told the court. But McWilliam’s emails, according to ASIC, painted another picture.
Those emails appeared to show Mitchell feeding Seven information, ASIC alleged. “Harold swears we are safe” and “Harold has pooh-poohed Ten”.
Yet the evidence of McWilliam – who explained that at various points Seven thought it was bidding against itself – was a blow for ASIC which had wanted the emails admitted as untested evidence due to the belief that McWilliam was, according to Pearce, a “witness firmly in Mitchell’s camp”.
But proving that McWilliam’s statements about Mitchell prove his wrongdoing is an extremely hard task. ASIC’s last-ditch attempt to use its coercive powers outside of the court process to obtain fresh evidence from Mitchell’s former media buying business about a conflict of interest, earned it the legal equivalent to a flogging – a stern wagging of the judicial finger and orders to stop its out-of-court endeavours to shore up its case.
In the end this manoeuvre if executed sooner may have yielded the so-called smoking gun. It may have also led to naught.
But in a room full of colourful characters, egos and flamboyance it was a move fitting of such a trial.
Judgment has been reserved and is expected next year.
Source: Thanks smh.com