Boston Review editor Simon Waxman wrote a piece this June in the Washington Post, saying that the US Army’s decision to name its weaponry after Native American tribes – like the Apache helicopter above – is worse than the Washington Redskins’ decision to keep its gross racial slur name.
Waxman is white and not of Native American descent . His piece doesn’t contain quotes from, or interviews with, Native American writers tribal leaders, or members of the public. Or indeed anyone at all, except Noam Chomsky, which is probably slightly worse than not quoting anyone at all.
This makes him less qualified to comment than, uh, the US Army. Who, sensibly, require any decision to name a weapon after a Native American tribe or chief to be approved by both the relevant tribe and the Bureau of Indian Affairs:
Native Americans get to decide whether the Washington Redskins is an acceptable term. They think that it is totally unacceptable. Therefore, the Washington Redskins need to change their name. Native Americans get to decide whether Apache helicopters is an acceptable term. They think it is fine. Therefore, Apache helicopters don’t need to change their name.
Neither white sports fans, nor white Boston lefties trying to demonstrate their contrarian right-on-ness, get a say in either, and nor should they. Case closed.
Why am I bringing this incredibly basic point up now? Well, because of a response to Waxman’s piece by US Army aviator Crispin Burke. It is well-researched; indeed, it is where I found the reference to the consultation with Native American tribes that I’ve reproduced above.
But the tone it takes is absolutely terrible. The lede is:
Everyone Relax—The Army’s Native American Helicopter Names Are Not Racist
There’s a difference between honor and exploitation
The piece goes on from the tone set there, pointing out for several paragraphs how the names are chosen to honour Native American warriors, complaining that Waxman’s piece reads like an Onion parody of political correctness, and generally following the irrelevant ‘it’s honour! Not a slur!” line that the Washington Redskins’ defenders tend to spout.
The key point that Burke has found: that all decisions to name military hardware after Native American tribes are approved by the tribe and the Bureau of Indian Affairs is buried almost as a sarcastic aside.
And it ends with this sign-off, which is a vat of aaaaaaagh no large enough to pickle an elephant:
Taking Waxman’s logic to the extreme, we should expect to see legions of Peloponnesian-Americans demand the military purge its references to Spartans from its lexicon. And let’s not forget the howls of protest from disgruntled Fighting Irish.
No, if Greek-Americans were overwhelmingly offended by the term Spartans; if Irish-Americans were overwhelmingly offended by the term Fighting Irish, then changing them would be a good idea. The only reason changing them is not a good idea is that those groups aren’t offended .
Neither Simon Waxman nor Crispin Burke get to decide whether the use of a term is racist. Only the people on the other end of the term get to decide that. Although Burke’s conclusion is the right one in this particular case, that appears to be only by coincidence.
 Unless I’ve missed something whilst researching his biography and his other work, in which case I apologise. Although if he is of Native American descent then it might have been a good idea for him to mention this in the original piece.
 Relative privilege and historical guilt may also mean that people in the US are obliged to give special consideration to the views of Native Americans compared to those of Greek- or Irish-Americans. But since the latter groups aren’t making these requests, we don’t need to worry about that here.
US-based banana producer and importer Chiquita, the world’s largest banana company, is almost certain to be bought by a Brazilian consortium, after the collapse of its attempted tax-dodge reverse takeover of Irish-based banana importer Fyffes.
In some ways, this is an entirely normal business story.
It features the collapse of the easy, painless  tax revenues that the US government could once reliably collect from US-based multinationals’ overseas ventures, as companies move their formal registration and a couple of dozen accountants and lawyers to low-tax jurisdictions like Bermuda, Ireland and the Netherlands whilst keeping management control in the US. It features the growing importance of Brazil’s highly competent and often highly cash-rich middle class, whose flagship was Brazilian-controlled InBev’s takeover of Budweiser brewer Anheuser-Busch.
But that isn’t the whole of it.
The full story takes us back to the tail-end of the 19th century, when advances in shipping made it viable, for the first time, to ship bananas from South America to urban consumers in the northern US.
The United Fruit Company, founded in 1899 by the merger of banana pioneers in Boston and New York, owned and operated plantations in the Caribbean and Central America, and introduced refrigerated sea transport to provide New Yorkers and New Englanders with the freshest fruit.
The UFC  found itself building complex logistics networks in countries that had previously lacked any real communications capacity. And as the US became the world’s leading power, and US consumers became richer and hungrier for bananas, the UFC found itself far richer than any of the governments that nominally ruled the Central American countries where it traded .
Which is how the term ‘banana republic‘ was coined. Even before WWI, the UFC controlled telecoms and postal networks in Guatemala, Honduras and Costa Rica. With politicians in the company’s pockets, it dominated the US banana trade. It kept costs low by dispossessing peasants of their lands through crooked legal systems, and then employed them as cheap labour on the grounds that serfdom was mostly better than starving to death.
The main difference between the United Fruit Company and the East India Company is that the former never even required a show of US military force to protect its interests. The implicit threat was so clear, it never needed to be carried out. Besides, bribes are cheaper than wars.
So why am I blethering on about the United Fruit Company? Well, in 1990, it was renamed to Chiquita Brands International. The same one mentioned above. That’s right: the ultimate US imperialist multinational, the inventor of the banana republic, is about to be bought by South Americans.
In the long run, all empires fall and all companies collapse. And often enough, it’s the people they oppressed who take over. The East India Company brand is now owned by an Indian business. There’s nothing new under the sun, and so on.
But I don’t think I’ve seen a quicker shift from colonial corporate power to re-appropriation than Chiquita.
 For US consumers and the US economy in general. I’m sure US CEOs were deeply pained.
 The best wrestling abbreviation coincidence since Pandas vs Hulk Hogan.
 There is some extremely good development economics work on this; this paper is a great start.
There were two by-elections this Thursday for UK parliament constituencies, both in England: Clacton-on-Sea, in Essex, and Heywood & Middleton, in Greater Manchester.
The Clacton one isn’t particularly interesting: a vaguely crazy Tory MP decided to defect to UKIP, as MPs are allowed to do in a Westminster system, and decided to waste everyone’s time while buying publicity for his new party with public money by holding a by-election instead of hanging on until the general election in May 2015. He won, because Clacton is full of horrible bigots. The Labour vote share went up, albeit from barely anything to not very much.
The Heywood by-election is more normal, in that it came about because the local MP inconveniently died, but also more interesting.
Heywood is traditionally a reasonably safe Labour seat. But it’s not a “they weigh the vote here” seat like Clacton used to be for the Tories, of the sort that Labour still have in poorer, more industrial northern English and southern Scottish cities: in the 2010 General Election, Labour took 40% of the vote, the Tories took 27% and the Lib Dems took 23%. UKIP, in their previous incarnation as mostly harmless vaguely posh cranks, got 2.6%; the outright-fascist BNP got 7%.
In yesterday’s by-election, Labour’s share of the vote held up: they got 41%. The Liberal Democrats were pulverised, with their vote share falling to 5%. The Tories were badly damaged, with their vote share falling to 12%, and the BNP didn’t stand. UKIP benefited from all of these changes, with their vote share rising to 39%.
The concept of Lib Dems switching to UKIP seems weird, but it was borne out by Tory strategist Lord Ashcroft’s polling after the Eastleigh by-election, where Lib Dem-to-UKIP switchers were the largest single group. This reflects the fact that a lot of people voting Lib Dem in 2010 did so because they hate the Tories and Labour, not because they are committed to economically-centrist civil-libertarian ideas.
Hopefully we’ll get some detailed post-vote polling data on the dynamics in play at Heywood. I suspect we may not, as it is certainly not a Tory target seat and so may not be worth Lord Ashcroft’s money – I’ll do some more detailed analysis on switching if we do. But on the face of it, it would appear that in Tory areas, UKIP is capable of taking significant numbers of Tory votes, to the point where it will win some seats outright and – more importantly – cost the Tories enough votes in marginal seats to win them for Labour.
In Labour areas, the best UKIP can manage is to bring together angry Tories, ex-neo-Nazis, and the people who voted Lib Dem in 2010 out of spite – which could plausibly win it a seat or two in its own right (although it’s worth noting that by-elections always exaggerate the crank party vote, because they’re far more likely to bother turning up), but certainly won’t lose Labour any seats to the Tories, and should actually help Labour out in seats that were close Labour/Conservative marginals in 2010.
If the way things played out on Thursday night is the way they play out in Westminster in May 2015, Ed Miliband will be the next Prime Minister, leading a government with a working majority. Don’t listen to the idiots who are pretending this is equally bad news for both major parties.
The picture is a Banksy mural. It was painted on 30 September 2014, and erased by the end of 1 October 2014.
The story was reported by UK media on 2 October 2014 as being “erased after ‘racist’ complaint“, with the implication being that – despite its clear antiracist message – minority groups were offended because they’re idiots who can’t take a joke.
This is unlikely.
Clacton-on-Sea is one of the whitest places in England. Of the 1,688 people living in the seaside postcode area, 29 are non-white.
It’s also one of the most bigoted places in England. Its Tory MP recently defected to UKIP, and is expected to win a resounding victory in his new incarnation as a Kipper – which is presumably why Banksy chose the place as the site for his mural. Like many eastern England coastal towns, it is full of bitter angry old white people (much of the Economist’s analysis on Tilbury stands in here, although Clacton is far further from London and was never a dock town) and low on jobs. Despite featuring very few immigrants, because nobody in their right mind would choose to live there, the residents blame the lack of available jobs on them anyway.
So let’s consider the probabilities of these two scenarios:
1) one of the 29 non-white people saw the piece, assumed it was racist rather than anti-racist, complained to the (bitter, angry, old, white) staff at the right-wing, Tory-controlled council, and was taken seriously in an example of PC Gorn Mad.
2) one of the 1,659 white people saw the piece, didn’t like its message, complained to the (bitter, angry, old, white) staff at the right-wing, Tory-controlled council about Anti-White Racism, and it got taken down in an example of humourless jobsworth-ery with a possible side dish of bigotry.
Long-time Twitter users, myself included, value it mostly for the general feed (everyone you follow, live and in chronological order) and the ability to replicate the general feed model for specific lists you’ve made of people you follow and for specific search terms and hashtags.
At the same time, Twitter is a confusing experience for novices and newbies – and to keep the venture capital taps flowing, the service needs to demonstrate growth.
So this week Twitter-the-company has talked about taking something that resembles its existing “discover” feed, which shows some highlights from the last couple of days of a user’s interactions, their friends’ interactions, and paid-for commercial content, and steering new users towards this ahead of the general feed.
This has cause a bunch of people who mostly should know better to lose their shit (sample lazily pulled from the article above):
It's sad that @twitter has to tinker and maybe ruin the features we like just to show it's doing something. My feed is my feed for a reason.
There is a tiny flaw in their reasoning: it is bollocks.
Why? Well, you need to remember that Twitter’s value – to users and advertisers alike – is completely different from Facebook’s.
Facebook collects detailed demographic information and combines that with your interactions with the site to create a scarily tailored advertising profile. That’s what it’s for. At work this week, I bought a Facebook advert to reach people in Perth, WA who are interested in space exploration. This would have been simply impossible before Facebook existed.
Twitter doesn’t. It provides a direct, unmediated platform for anonymous people, pseudonymous people, named people, famous people, and brands, to all interact on the same level. It doesn’t collate demographic information; the demographic profile data it shows to advertisers is based on surveys of people and the networks they use, not on the information they provide to the site.
But the demographic profile it has is extremely valuable: Twitter’s users are older and richer than the users of any network other than LinkedIn. They are also stroppy as hell, as the storm over this issue (not to mention every other issue that there is in the world) has confirmed.
Twitter-the-company has a balancing act to run, trying to bring in new users so it doesn’t get Kiss of Death growth headlines that deter people from putting up money, but at the same time making damn sure it doesn’t alienate its existing users to any degree beyond that which is necessary to sell advertising, because that would also deter people from putting up money.
The way it deals with this balancing act will, absolutely and definitively, not be by turning into a version of Facebook with the targeting data that makes Facebook into Facebook removed.
The law in force at the time provided automatic citizenship by descent on registering with the Australian government, for anyone under the age of 25. Abbott’s parents didn’t do this at the time of his birth, and also didn’t do this when they moved to Australia in 1960, when Tony was three years old, as assisted migrants (Ten Pound Poms).
Abbott acquired Australian citizenship by registration in 1981, at the age of 23, when he applied for a Rhodes scholarship to Oxford University. Taking an Australian Rhodes scholarship requires you to have Australian citizenship, and to have been resident in Australia for five of the last 10 years. Abbott presumably discovered on application that he wasn’t the Australian citizen he believed himself to be .
Not worrying about formal nationality was common at the time of Abbott’s birth and emigration: British and Australian nationality were only legally separated with the two countries’ 1948 citizenship acts, and up until 1973 the distinction remained irrelevant for most practical purposes. British citizens  were eligible to move to Australia without strict migration criteria, vote in Australian elections, and become Australian citizens after a year’s residence without having to undergo the naturalisation process that applied to other foreigners. For another decade, up until 1984, British citizens were eligible to vote and stand for office in Australia without becoming Australian citizens – and British citizens who were on the electoral roll in 1984 and continue to reside in Australia remain eligible.
So, Abbott’s parents were a bit crap at admin, in a context where nobody really thought that the legal difference between British and Australian citizenships mattered (the majority of Australians in 1960, and a large proportion in 1980, had been legally British during their own lifetimes despite never having set foot in the UK, because all Australians were legally British until 1948). His parents filled out a form well within the allowable 25 years allowing him to claim citizenship through birth rather than naturalisation.
People going on about this aspect of Abbott’s early life are basically idiots, with fewer legs to stand on than the average snake.
Independence Day: 3 March 1986
The Australia Act 1986, passed simultaneously in the UK and Australian parliaments, severed Australia’s remaining formal colonial ties to the UK . The UK Parliament renounced its right to legislate with effect in Australia (at state or federal level), the UK government renounced all powers to advise the Queen on Australian matters, and the UK Privy Council lost its status as Australia’s official highest court of appeal.
The long title to the Act describes Australia as “a sovereign, independent and federal nation”, and the High Court of Australia confirmed in Shaw vs Minister for Immigration in 2003 that the Act marks the start date for Australian independence. As well as being a far better date to celebrate Australia’s national day than either the current Australia Day (commemorating the First Fleet of white criminals and prison guards on 26 January, 1788) or the sometimes-suggested alternative of Federation Day (commemorating the establishment of the federal parliament on 1 January, 1901), this declaration of independence had a particularly weird unforeseen consequence for federal politics.
One of the major drivers behind Federation was settler paranoia about non-white people and people of non-English descent, and the desire to impose greater control on borders . This is reflected in the Constitution, whose Section 44i bans people who are “a citizen… of a foreign power” from standing for federal parliament.
This clause came out of fear of fifth-columnists, traitors, Germans, Chinese spies, and all the other things that continue to fill the nightmares of white right-wing hicks. Since all Australians were British citizens at the time, nobody from the British Empire was considered to be of a foreign power; that only applied to the weird ones who ate garlic, drank coffee and didn’t even speak English. But if you were of German birth and wanted to stand for federal parliament, you needed to renounce your German citizenship first, even if this wasn’t cancelled upon your acquisition of Australian citizenship.
You can probably see where this one is going
After the Australia Act 1986, the High Court determined in Sue vs Hill (1999) that since Australia was independent, the UK was now also on the list of undesirable places full of dirty foreign traitors who shouldn’t be allowed to sully the federal parliament’s door – and therefore, that anyone who was an Australian/UK dual national was required to renounce their citizenship before they were elected to federal parliament, just like dual nationals of other countries.
In a country with a flexible constitution, this would have been a good cue to take the sensible measure of repealing a ridiculous law enacted by 19th century xenophobes and serving no purpose whatsoever. But the Australian constitution is extremely hard to amend, requiring a process of national referendums, which would be overkill over a mild and faintly embarrassing procedural inconvenience – so Section 44i remains in force. Anyone born a foreign citizen seeking federal office needs not only to become an Australian citizen, but also to renounce their foreign citizenship.
Which brings us to the more significant accusations against Abbott.
Former PM Julia Gillard, also UK-born, made clear as PM that she had formally renounced her British citizenship before entering the Australian parliament in 1998. Abbott has never said this publicly in the same way, arousing suspicions from various corners. Yesterday (2 September), his office issued a statement that “The Prime Minister is an Australian citizen and does not hold citizenship of any other country”.
This is a noticeably less strong claim than the one that Gillard made: it could mean he renounced his UK citizenship either before standing for parliament, or at some point after becoming an MP, or last week.
Screeching Birthers are still talking out of their arses
But Tony Abbott’s eligibility to be a federal MP in this parliament doesn’t hinge on whether he had renounced UK citizenship in 1994, when he first became MP for Warringah – it hinges on whether he had renounced UK citizenship at the date of the last federal election, which was his second as Leader of the Opposition and prospective Prime Minister. It’s vanishingly unlikely, given that Section 44i and Sue vs Hill are both known quantities, that the Liberal Party would have been incompetent enough to go to election twice with a leader who was ineligible for office.
Even if this had somehow happened, which would be hilarious, the result would be to invalidate Abbott’s election as MP for Warringah, forcing a by-election in an safe Liberal seat, with a large continued Liberal-National majority in the lower house even in the extremely unlikely event that the by-election were lost. There would be no requirement in the constitution for Abbott to stand down as PM at this point: the PM isn’t mentioned in the constitution, and there is no legal requirement for the PM to be an MP. More likely, he’d stand in the by-election (since we know he is now eligible), win it, and then carry on regardless.
Nonetheless, the whole shebang does draw attention to an extremely silly constitutional provision that Australia would be best without.
 Something rather like this happened to a friend’s sister, who was born in Australia after the 1986 Australian Citizenship (Amendment) Act to parents who at the time were not permanent residents. She discovered aged 18, having lived her whole life in Australia, that she wasn’t an Australian citizen and needed to apply for naturalisation rather urgently.
 For reasons that are painfully complicated, the law actually referred to British subjects, which is not quite the same thing as British citizens, but that’s a post for another day.
 Elizabeth II’s powers in Australia are as Queen of Australia, not as Queen of the United Kingdom.
 luckily, this no longer applies to anybody ever.
Qantas announced its financial results today. Predictably, they were a car crash (Qantas still hasn’t had a plane crash [*], but they’re definitely a crash). $646 million operating loss, and $2.6 billion in one-off write-offs from revaluing the company’s aircraft fleet. No rock and roll fun.
Fiddling and burning
As Qantas CEO for the last six years, and about as many restructuring programs, much of the blame has fallen on Alan Joyce. “Alan Joyce is to Qantas what Caligula was to the Roman Empire”, said independent Senator Nick Xenophon, who never met an exaggeration he didn’t love.
And it’s true: while he hasn’t yet made his horse a board director, Joyce’s strategy has been something of a disaster. His approach to a long-term structural weakening in Qantas long-haul, combined with an epic boom in domestic demand, was to ignore the former (leaving the long-haul airline with a fleet of fuel-guzzling 747-400s, highly-efficient-when-full-but-hard-to-fill A380s, and senescent 767s up to the end of 2013), and deal with the latter by starting a price war with its only real domestic rival, smaller, lower-resourced, lower market share Virgin Australia. Although at least the domestic airline’s ageing planes were replaced with efficient new 737-800s.
Under Joyce, Qantas’s investment has been focused on expanding pan-Asian short-haul budget airline Jetstar, which has had modest success in Australia and Singapore, less success in Japan, embarrassment in Vietnam, and dismal failure to even get an operating license everywhere else (including Hong Kong, for which the airline bought six brand new A320s that have been sitting idle). Much of the failure has been due to Qantas’s and Joyce’s failure to understand the Asian operating environment, where the perception that the airline is controlled by local partners is vital to local regulators.
More recently, as long-haul became predictably loss-making, the airline has slashed services, cancelled further A380 deliveries, life-extended 747-400s up to the point where they’ll be welcomed in museums on decommissioning, postponed 787 deliveries (despite the fact that, due to Boeing’s program delays, the airline is due an exceptionally good price on its 787s), made no effort to lease 777s in order to decommission 747-400s, and negotiated a codeshare with its biggest international rival that hands over most of its long-haul services out of most Australian cities.
And rather than attempting to either blitz or alleviate Qantas’s troubled relationship with staff and their unions, Joyce ratcheted the tension up to maximum, closed the airline for a day to hold a lockout, and then stuck a band-aid over the wound.
So, yes, Joyce has been inept. But what about the environment he’s facing?
They can’t be better than us, so they must be cheating
A lot of cant is talked about this, partly because local airlines in rich-people countries are very good at placing PR stories in the media, and partly because it’s the only area where rich-people country airlines and airline staff have aligned incentives. The general story is that it’s grossly unfair that airlines like Qantas are losing out, because their rivals in less-rich-people countries are “government sponsored foreign airlines with unlimited piles of cash”.
Anyone using this lie should be banned from aviation commentary. It is a bullshit excuse used to defend the incompetent management & overpaid staff of legacy airlines in rich-people countries from profitable foreign rivals.
Looking at airlines that could be considered Qantas’s competitors, Emirates is immensely profitable; it does not have any state subsidy. Singapore Airlines and Air New Zealand, both major shareholders in Virgin Australia, and Cathay Pacific are all slightly less profitable, but also unsubsidised. The remaining foreign government-controlled airlines that run on subsidy are basket cases that can’t fill their seats anyway: Malaysian Airlines, Air India, Alitalia.
The alleged indirect subsidies that critics like to pretend Qantas’s rivals receive are also illusory. Yes, fuel is cheaper in Dubai than it is in Sydney. But the economics of long-haul air travel are such that you have to refuel every time you land, so a Qantas flight that goes Sydney-Dubai-London has exactly the same fuel cost as an Emirates flight that does the same. It’s also true that company profits are taxed less in Dubai than they are in Australia, but you need to be making a profit in the first place before anyone taxes it.
The problem is, if you are an airline with new planes, new IT systems, and staff recruited on current contracts, you have a hell of a cost base advantage over an airline which doesn’t. This is highlighted by, um, Jetstar and Virgin Australia, never mind the foreign rivals. The foreign rivals also have the advantage of being on the way between somewhere and somewhere (with the exception of Air New Zealand, which really doesn’t).
The “cheating” narrative exists, of course, because it’s a first step in the one cause that unites unions and management everywhere: extorting money from the taxpayer to preserve unviable business models. Once you’ve established the trope that it’s unfair of Emirates and Cathay Pacific to steal all of Qantas’s international passengers using their home advantage, a subsidy to ‘level the playing field’ is a logical next step. To the current Australian government’s credit [**], it doesn’t so far seem to be showing any signs of playing ball.
Portrait of the CEO as a doomed man
Alan Joyce said in the results statement, “We expect a rapid improvement in the Group’s financial performance – and a return to Underlying PBT profit in the first half of FY15, subject to factors outside our control”. Note that ‘factors outside our control’ here means whatever he wants it to, like Humpty Dumpty. And note that he has said variations on this theme at almost every results announcement so far.
Things should be less terrible for the airline going forward. The various doomed attempts to forge new Asian carriers seem to have been dropped; Qantas has addressed some of the terrible usage patterns of its international fleet (no longer leaving $300m aircraft parked up in London for 20 hours a day), 2,500 of the 5,000 layoffs in February have actually been made; and the write-off to aircraft values will save about $200m a year in depreciation charges. If not quite profit, that would seem to be enough to keep the airline’s loss manageable given its cash in the bank.
But while Qantas’s future is reasonably secure, Alan Joyce’s surely can’t be. The results today were greeted with near-universal incredulity that he hadn’t been sacked already, given the sheer number of times he’s come forward with another round of sorry apologies, another insane unworkable Asian solution, and failed to save money on the core business. He’s a hate figure for the airline’s staff and the Australian public.
So why hasn’t he been, then? There are two possible alternatives:
1) As with the sacking of BP CEO Tony Hayward following the Deepwater Horizon disaster, there is no point in bringing in the untainted CEO until the worst of the disaster is over. Joyce’s head needs to roll, but this might as well happen in six months when the current cost-cutting program is complete and it’s time to make longer term strategy decisions again; or
2) Australian business is utterly nepotistic and corrupt, with supine boards made up of drinking buddies who cosily tolerate each other’s incompetence no matter how gross.
We’ll see which it is over the next 12 months. Meanwhile, if I were the chairman at Qantas, I’d offer the Australian CEO of Abu Dhabi carrier Etihad, James Hogan, all of the money in the world and total free reign over all decisions to come home and repeat some of the magic he worked out in the desert.
[*] Fatal or hull-loss accident since the start of the jet era.
[**] Given the current Australian government’s performance at literally everything else, you have no idea how much this pains me to say.
It’s been Good Times Online as Crikey gets hold of a copy of News Australia’s detailed management accounts for fiscal year 2012-13 (I’ve uploaded a copy here, since the Crikey version, hilariously, is paywalled).
As a way of demonstrating its commitment to journalism, News has threatened to sue anyone who reports on the topic. The fact that The Australian loses $27 million a year (almost as much as the Guardian, despite being a barely-read Canberra local paper rather than a major global news organisation) has been noted as particularly hilarious.
If you try and frame The Australian as a newspaper in the traditional sense, of using content to sell readers to advertisers, then the level of fail here is baffling. News is a private company, not a charitable trust dedicated to furthering the cause of journalism. The continued existence of The Australian (and the continued employment of its coterie of gibberingmorons at an average wage of $174,000) is a mystery.
But I don’t think that’s what’s going on. The News Australia accounts show that the actual value in News Australia comes from its pay-TV businesses.
News Australia’s profit for FY12-13 was $367 million. Its share of profit from pay-TV (Foxtel, Fox Sport and Sky New Zealand) was $230 million. Add in REA (which runs realestate.com.au)’s $146 million profit, and you’re already above total group profit. The newspapers in total – even including the profitable regional tabloids – contribute less than nothing [*].
That breakdown isn’t entirely fair, since it ignores $75 million of parent company costs – which are mostly, but not wholly, newspaper focused – and also $40 million of amortisation costs related to the Foxtel stake (whose accounting treatment I don’t understand). But it makes clear where the financial heart of the business lies, and it’s not in dead trees, or even their digital equivalents. It’s in having a monopoly on pay-TV delivery in Australasia.
Hell, it’s probably the only business of any real worth in the whole of News Corporation, since its assets outside Australia now consist solely of dead-tree businesses.
What are the ongoing risks and opportunities for pay-TV? Well, the biggest opportunity is in gouging people out of even more money for it, and the biggest risk is that people stop subscribing to it. Both of these depend mainly on government: the more draconian copyright legislation is, the more stringently it is enforced, the harder it is for you to just get things from Netflix and iTunes, the more crippled the ABC is, and the slower your broadband Internet is, the more value Foxtel has.
So that’s what The Australian is for. When you’re defending $230 million of annual profit, paying $27 million a year to shape the opinions of Very Serious People in Canberra regarding copyright law, competition law and telecoms policy isn’t a bad investment at all.
[*] per pages 3, 13 and 14 of the accounts. These are complicated by the fact that stakes in the various businesses changed over the year, with some some Fox Sports revenue counting as operating income and some as income from investments.
“We’re really excited about this Russian-language film festival we’ll be hosting with you guys. But, um, we’re a bit uncomfortable with the fact that Putin’s rights-abusing and civilian-killing government is contributing to the funding. Their grant is only GBP1,400 so it’s no biggie; we’re happy to make up the difference ourselves as long as you turn down the donation.”
“THAT’S OUTRAGEOUS AND WE REFUSE. YOU ARE RACIST AGAINST ALL RUSSIAN SPEAKING PEOPLE.”