Category Archives: Consumerism & advertising

Downloading a movie is wrong, but is it the same as stealing a car?

Perhaps you remember this ad:

It was an anti-piracy commercial warning the DVD viewer that downloading pirated movies was the same as stealing a car, or a handbag or a television.

People who downloaded movies were very bad people, the ad insinuated, a message that was replicated around the world in similar campaigns like this:

illegal download campaigns2

M-Tv anti-piracy ad

I was reminded of this campaign strategy after reading that the Australian government under the direction of Attorney General George Brandis planned a fresh move to crack down on movie pirates. Mr Brandis said:

“The government will be considering possible mechanisms to provide a legal incentive for an internet service provider to co-operate with copyright owners in preventing infringement on their systems and networks.

“This may include looking carefully at the merits of a scheme whereby ISPs are required to issue graduated warnings to consumers who are using websites to facilitate piracy.”

It’s unlikely this will succeed.

In 2012, an Australian High Court ruled that internet service provider iiNet (the second biggest ISP in Australia) was not responsible for the conduct of its subscribers and could not be ordered to terminate services of repeat copyright offenders.The five high court judges in the case ordered Warner Bros, Disney, Fox and Paramount Pictures and 29 other companies including Australian independent distributors and TV networks under the umbrella of the Australian Federation Against Copyright Theft to pay $9 million in court costs.

In addition, prosecutions of individuals who pirate material remain rare and are primarily restricted to those who make and sell pirated DVDs (the kind you can pick up overseas or in a dodgy market for a few bucks) and the websites that host them.

Campaigns like “You wouldn’t steal car…” and more recent ones by the Intellectual Property Awareness Foundation which appeal to the public’s guilty conscience have also failed.

Australians are downloading pirated movies and TV shows in record numbers, as seen in the recent download stats for hit HBO show Game of Thrones, where they accounted for the highest proportion (around 11 per cent) of the 7.5 million people worldwide who downloaded the finale of season four within days of it being shown on pay television, according to website Torrentfreak.com.

By comparison, about 500,000 people watched the episode legally on Foxtel when it premiered.

thrones-cast

“Australia, I am sorry to say, is the worst offender of any country in the world when it comes to piracy,” Senator Brandis told the Australian Senate.

But, contrary to what’s being said, people who download or stream movies illegally (between 25 per cent and 55 per cent of Australians depending on what survey you read) are not also stealing cars or handbags or televisions. They’re not trying to put someone out of work (about 6,000 jobs are lost each year as a result of piracy) or send a production company bankrupt.

Most go to work, pay their taxes, pay their mortgage, pay for their groceries at the checkout counter and pay for their petrol after filling their tank. They’re your friends, your work colleagues, your bank manager, the guy making your chai latte at your favourite cafe, your kid’s kindergarten teacher – everyone is doing it.

The main reason people download shows illegally are convenience, to save money and anger and frustration at the cost of paying for it legally.

The internet has made it incredibly easy and safe to download or stream favourite show just by clicking on a link.

Many people are rebelling against the high cost of movies (now above $20 for some time slots), and the inflexibility and arrogance of providers like Foxtel, which does not allow subscribers to pick and choose their movie channels they want (channels are bundled) and which has a virtual monopoly on pay television in Australia, (though this is being challenged by online competitors).

There’s also the anger at service providers like Apple iTunes, which charges Australian customers between 50 and 100 per cent more for movies and music than they do customers in the US (as highlighted in the ABC’s The Checkout) for the same products

The relative cost of buying the movie "Life of Pi" in Australia and the US (from The Checkout)

The relative cost of buying the movie “Life of Pi” in Australia and the US (from The Checkout)

There’s nothing like the feeling that you are getting ripped off to encourage you to try and get something for free.

There’s also the harm factor. While some Australian companies may be impacted by lost revenue to piracy the public will also be aware that the really big entertainment companies are still doing rather well despite it.

Time-Warner reported revenues of US$7.5 billion for the first quarter of 2014 and earnings of $1.5 billion primarily from shows like Game of Thrones, True Detective and The Lego movie. Nobody at Time-Warner is crying poverty.

Australia’s biggest entertainment group, Seven West Media (owners of Channel 7) reported a 4 per cent rise in television revenue to $683 million for the six months to December 2013 and profits of $190 million.

Foxtel – half-owned by Rupert Murdoch’s News Corp – has 2.5 million subscribers (not far off one in two Australian households) and last year had revenues of $3.1 billion and earnings of almost $1 billion.

Add the $20 – $30 million plus some Hollywood stars get paid to appear in a single movie  and you can understand why some people’s attitudes to movie piracy is this:

illegal download campaign - parody

Or this:

illegal download campaign - parody2

Intriguingly, while pay television companies, cable networks and cinema owners shake their fists at the public for being pirates and Australian attorney general George Brandis threatens tough new measures, others are taking a far more realistic view.

Jeff Bewkes, CEO of entertainment giant Time-Warner, owner of network HBO, which produces Game of Thrones, said during an earnings call last year that having the most pirated show of the year was “a tremendous word-of-mouth thing” and “better than [winning] an Emmy.”

He wasn’t alone. Game of Thrones director David Petrarca said piracy contributed to the show’s “cultural buzz”, while author of the novels, George R.R. Martin also called it a “compliment,” (though one he would rather not receive).

Mr Bewkes compared piracy to “cable-splitting” (illegally sharing a cable subscription) and said it had in fact contributed to HBO subscriptions and greater penetration of the HBO brand.

Also interesting to note is that US movie streaming service Netflix uses piracy data to decide which shows to buy, a back-handed compliment to the tastes of online pirates.

And perhaps also a concession that piracy is part of the entertainment industry like popcorn and paparazzi – and something that they will have to learn to live with even as the authorities threaten a clampdown.

All the news that’s fit (and not fit) to print: new buzzwords in journalism

read all about it“It’s not change. It’s a f*cking revolution,” said a media analyst in the brilliant New York Times documentary Page One.

He was referring of course to how the online world has ripped up the traditional business model of newspapers replacing highly profitable print advertising and classifieds ads (the so-called “rivers of gold”) with cheap, interactive and intuitive online offerings.

Fairfax journalist Pam Williams did a brilliant job telling this story in her book “Killing Fairfax” – reviewed here – but is by no means the whole story.

The wheels of change continue to spin and at an even faster rate.

Two of the hottest and most provocative concepts becoming entrenched in the new age of publishing are “native advertising” and “corporate journalism”.

‘Native advertising’ – where paid-for, sponsored or branded content is produced and published on news sites to have the look and feel of a genuine article  – was the focus of a recent episode of the ABC’s Media Watch 

“Corporate journalism” – content produced by an in-house editorial team focusing on issues that matter to the corporation and its stakeholders – was in the spotlight following the launch of ANZ Bank’s new website BlueNotes in April, billed as “the first corporate digital publication for news, opinion and insight of its type in the Asia-Pacific region”.

The launch of BlueNotes sparked healthy debate on Twitter kicked off by Australian Financial Review columnist Christopher Joye who wrote that the ANZ site was likely to be “part bank brand-building, marketing and spin, opening up a new channel through which to project ANZ’s voice; and part bona-fide research and insight that will be of value to ANZ’s constituencies”.

What BlueNotes was unlikely to be, Joye wrote, was independent journalism of the sort produced by Fairfax and other traditional independent media. Nor would it be an “intellectual free-for-all that interrogates issues and disseminates opinion on topics germane to ANZ’s customers, but which can also conflict with ANZ’s profit motive”.

I tweeted Joye’s article and said that I agreed with him that BlueNotes is “not really journalism” to which former AFR senior journalist Andrew Cornell, the managing editor of BlueNotes, responded that it then begged the question: “What really is journalism?” and…was it restricted to “no-for-profits?” (A cheeky remark surely alluding to the fact that once-powerful media empires can’t seem to make a buck out of journalism anymore).

Cornell is a firm believer that corporate journalism – of the kind produced by his team – is the future of business journalism. It was a remark he repeated often in his last few weeks at the AFR.

twitter conversation1Amanda Gome, a former colleague of mine at Private Media and Fairfax, and now head of strategic content & digital media at ANZ, tweeted that BlueNotes was “new journalism” or “corporate publishing” – (and in another tweet, that it was definitely not native advertising).

twitter conversation2

Paul Edwards head of corporate communications at ANZ said if the site “started doing ads” then it would “fail”. Rather, he said, it aims to “engage thought leaders not sell stuff”.

twitter conversation3

On reflection, I agree with Christopher Joye that there is merit in what ANZ is doing with BlueNotes.

The views of its experienced executives, economists and commentators while slanted towards the bank’s view of the world,  are insightful and important (though I would argue they are better served as part of a balanced article in the mainstream media drawing on the views of others as well).

Only time will tell how many people find value in its offering, but it should find a niche among the myriad of online news and commentary sites finding an audience in Australia ranging from academic sites like The Conversation to mummy blogger uber-site Mamamia.

In its defence, corporate journalism like BlueNotes does not attempt to hide the fact that is an ANZ-produced publication, focusing on issues that are of important to the bank, its shareholders and clients.

But native advertising is less honest, muddying the waters between news and commercial interests and breaking down the traditional editorial division between church (editorial) and state (advertising).

Farhad Manjoo, a journalist with the Washington Post wrote of the deceptive quality of native ads that while they “usually carry a tag identifying them as ‘sponsored,’ they appear alongside and share the look and feel of the search results, tweets, status updates, blog posts and other content that you don’t immediately suspect of containing paid messages”.

He makes the point that there is a place for native advertising provided that it is clearly branded as sponsored content (he mentioned a story paid for by Toyota about 20 coolest hybrid animals to promote its hybrid cars that ran on BuzzFeed as a good example) but is sceptical of how this will play out over time.

buzfeed

The Buzz Feed ad/content created for Toyota

Native ads he says, “create incentives for misbehavior by advertisers, publishers and services like Facebook—and, over the long run, the incentive structure is sure to translate into looser disclosure standards and generally trickier content”.

The agenda of BlueNotes on the other hand is all in the name – unless of course you’re looking for a Miles Davis record.

Have you paid too much for your iPad?

ipadFinancial institution CommSec recently published an interesting global retailing index called the iPad Index.

The index ranks the cost of a buying an Apple Air 16 GB wi-fi iPad in 51 different countries converted into US dollars at prevailing exchange rates, mirroring The Economist’s much more famous Big Mac index.

The latest iPad Index shows Australia slipped from 4th cheapest country to purchase the popular computer tablet in September last year to 13th on the latest list – still (surprisingly) one of the cheapest places in the world to buy the gadget.

The fall down the list reflects a decision by Apple to lift local pricing rather than currency fluctuations – the Australian dollar was around 94 US cents when the index was compiled, hardly changed from an exchange rate of 94.3 US cents in September last year.

Untitled

The Apple iPad Index

Malaysia at $494 is actually the cheapest place for Australians to buy an iPad, saving you around US$68 off the Australian price ($562). Canada and Japan both add sales taxes to their purchases, pushing their iPad prices well above $500.

As the index shows, you certainly wouldn’t want to buy an iPad while visiting  Brazil for this year’s Fifa World Cup while much of Europe is also a no-go zone for cheap iPad purchases, mainly because of high taxes.

Alternatively, if you’re a Kiwi heading over to Australia for the Bledisloe Cup, you could save yourselves around $90 by purchasing an iPad over here.

Even if you’re not planning any overseas trips, the fall in Australia’s iPad Index ranking is interesting for a number of reasons:

Firstly, it could be interpreted to reflect Apple’s gouging of its Australian customers at the same time as its also gouges those who purchase songs and movies on iTunes (ABC show The Checkout highlighted this recently and provided a way around it), whilst gouging the Australian Tax office by shifting all of its taxable profits offshore. If you’re not feeling the Apple love, perhaps a Samsung or Google Nexus device will do instead.

Secondly, in the word’s of CommSec chief economist Craig James the index reflects why “on-line shopping sites and the power of travel are putting pressure on Australia retailers to remain competitive”. “If local pricing isn’t responsive to exchange rate changes then Aussie shoppers will increasingly look overseas to purchase imported items,” James says.

Thirdly, for investors, the current index could be interpreted to mean that the Australian dollar is overvalued if you compare it with the cost of an iPad in California ($543) but undervalued if you compare it with what it costs in China ($578) where all iPads are manufactured.

Fourthly, the higher price may also reflect higher Australian freight costs, tariffs and mark-ups.

So it’s a useful index both for retailers who want to remain competitive and for consumers, if they’re planning a holiday in the coming months and want to upgrade their tablet.

Alternatively, if you’ve got a friend visiting from Argentina or Brazil or Europe, a visit to an Australian Apple store might be a good suggestion.

Cinema ticket prices: the profits in the popcorn

Ticket2This month, for the first time, some cinemas in Australia started charging $20 for movie tickets.

Explaining the need to push up prices, one cinema owner, Benjamin Zeccola of Palace Cinemas – the independent upmarket/arthouse chain – defended this by saying it was primarily because of the rise in the illegal downloading of movies, (plus high wages).

According to research by the Intellectual Property Awareness Foundation (an organisation representing film and television companies campaigning against online content theft), more than a quarter of young Australians illegally download movies or TV shows, among the highest rate in the world.

There is little doubt that illegal downloads are having a massive impact on cinema house revenues. At the same time, the cost of having a night out at the cinema has skyrocketed in recent years (as a kid in South Africa in the 1980s I paid 1 Rand for movies as part of the Ster Kinekor club – about 50 Australian cents), which partly explains why illegal downloads are so high.

The other factor behind the rampant illegal downloading of movies is that the notion that you are “stealing” has never really sunk into the collective consciousness of downloaders, and may never do so. You can say it’s the same thing as riding off on someone elses bike or filling up your car with petrol and driving off without paying for it, but people that download movies illegally, probably don’t visualise it in that way because its free, easy to do and the chances of getting caught are virtually zero.

A $20 movie ticket seems high (and it is), but it’s somewhere in the mid-range of what other comparable countries are charging:

  • In Manhattan, an adult ticket at the AMC Empire cinema is US$13 (A$14) – 35 per cent cheaper than the $20 Australians are now expected to fork out.
  • But in London, a movie at the Odeon on Leceister Square in the heart of the West End, will set you back £15.50 – a whopping $28 in Australian dollars, or 40 per cent more expensive.

But the ticket is only part of the cost. When you factor in the popcorn, drinks and snacks, you’re unlikely to see much change from a $50 note, and nothing from a $100 note if you take a family of four to the movies.

Running a cinema though is an expensive business.

Most cinemas are in shopping centres, which charge among the highest rents in the country. Then there’s the cost of renting the film from the distributors, staff wages, maintenance costs, utility bills and equipment and goods to pay for.

According to a 2013 article in the UK’s Independent newspaper, the cover price of a cinema ticket is consumed by film rights (40-60%), staff salaries (20%), rent (15%), utilities (5%) and other costs (10%). Add that all up and there’s no margin to speak of.

Which is why you pay ludicrous prices for popcorn, drinks and snacks.

According to the same article, “in order to remain competitive, a multiplex’s main source of profit actually comes from the concessions stand, rather than the box office”.

Or to quote from Arrested Development – “the money is in the banana stand”.

Just consider that you can buy a 375 packet of unpopped popcorn kernels – enough to make three or four jumbo sized popcorn boxes – for $1.34 at Coles, but the cheapest box of a popcorn at the cinema will set you back at least $5. Add the choc-top ice-cream and drink to your purchase and even if you use a “combo” offer you’re likely to fork out $10 to $15 more on top of the $20 movie ticket.

No wonder then, that so many people are buying enormous televisions – which get cheaper and cheaper, bumping up their broadband download allowances and illegally downloading movies for the cost of a monthly internet connection.

Snake oil: Door-to-door salesmen and other scams

snakeoilIf an alien crash landed on earth, probably the first thing that would happen to him is he’d get scammed and he’d have to fly back to his faraway planet in just his space undies. That’s if someone hadn’t stolen his identity and sold his space-craft already.

My wife and I were the proverbial ‘aliens’ a couple of years, when we flew into Cairo for a week’s visit as part of a round-the-world trip in 2010.We figured since it was so short a visit and all we wanted to do was see the Pyramids of Giza, the Egyptian Museum, take a cruise on the Nile and wander around the ancient streets that we’d not bother to buy a guide-book and just wing it.

Big mistake!

We got conned on our way to the pyramids.We got conned wandering the ancient streets. I got conned on an evening stroll when looking for a place to eat. Conned. Conned Conned. By old kindly looking men. By young boys. By exuberant fathers with stories about their children. It was incredible.

camel ride

Riding a very expensive camel in Cairo, October 2010

The scams were not sophisticated in the way they are in Australia and other westernised cities and “harmless” in the sense that all you lost was a bit of dosh. Looking back they were somewhat endearing (or perhaps pitiful) and assumingly thought-up as a means of getting by in a very tough city.

Back in Australia, it’s a far more dangerous proposition with greed the primary motive. There are scam-artists waiting on the telephone, in the letter box and at the front door. It’s so bad that the government has a dedicated website called Scamwatch to warn you about each of them with real-life stories and advice.

Our home phone, which we hardly ever use except for our internet service is a constant source of dodgy phone calls. We hardly ever answer it now, figuring that if it’s an important call, people will try our mobiles or Skype.

The other day I picked up the phone and  a woman proceeded to tell me she was from Microsoft support and that I had downloaded a virus on to my computer. She implored me to go on to my computer and search for a certain file to verify this. I could hear she was talking from a faraway place, and with a strange manner of speaking English, so I just hung up the phone. Sure enough this was a scam as described on this UK website with the end result that you download a real virus that steals all your personal information.

Then’s there’s the door-to-door energy salesmen trying to get you to switch energy accounts.

Twice this has happened to us in Melbourne. The first time the salesman identified himself as from an energy company, the second time was more sinister.

Last week, just before dinner, a guy appeared at our door with a clipboard. He pulled out a spreadsheet, told me he was from Jemena and said he needed to see my last energy bill to compare what I was currently paying.

Jemena is an energy infrastructure company which provides electricity and gas to homes. This electricity and gas is then on sold to consumers from retail suppliers like Origin Energy, who are our gas and electricity supplier.

The salesman gave me the impressions this was all very official and pressing so I rifled through a cupboard full of documents and on my iPad until I found an online bill. The man stood there quietly, smiling with his clipboard. I showed him the bill and he studied it. Then he said something like “Oh my god” and went on tell me I was paying 20 per cent more each month then  I needed to. He said he would sign me up and that I would save money from next month.It was then I realised this wall all a deceptive little scam.

He wasn’t from Jemena, but from a retail energy supplier called “Simply Energy”. I told him I wasn’t going to sign up to anything on my doorstep and he left with a piece of paper on which he had scribbled his mobile phone number in pencil in case I changed my mind.

I googled Simply Energy. The reviews were scandalous. It got an average rating of 1.4 out of 5 from 235 reviews on productreview.com.au with stories of customers being overcharged, having their gas and electricity supply cut and even contacting a customer’s current supplier to say they had switched to Simply Energy even when they never agreed to.

They use to call these people snake oil salesmen, referring to travelling charlatans selling miracle cures and quack medicines. Now the scams have become far more sophisticated and devious.

Have a look at the Scamwatch website, there are dozens of scams preying on the naive, weak-minded, plain unlucky or vulnerable from online auctions, to pharmaceutical products to real estate scams.

One of my most popular blog posts was about a letter I received in the post over a year ago covered with Spanish stamps and postmarks. It was addressed to me in person, offering me the chance to share in an inheritance of an oil magnate called “Albert Schlesinger” who had apparently died in a car crash in 2004.

Seems ridiculous right? Who would fall for that? But every year thousands of Australians do.

A program on the ABC’s 7.30 Report reported that every month, Australians lose $7 million just through internet scams.

They’re impossible to avoid unless you choose to live like a hermit, never answering the phone, turning on your computer or answering the doorbell.

Missed opportunities: a review of “Killing Fairfax” by Pamela Williams

killing-fairfaxI read Pamela Williams’ book Killing Fairfax about four months after joining Fairfax Media as a property reporter on the Australian Financial Review (AFR).

The book about the online maelstrom that sucked the life out of Fairfax and the part James Packer and Lachlan Murdoch played in facilitating this was published to great acclaim at just the time I was in discussions about a role on the AFR.

It certainly caught my attention as I contemplated moving from an online venture, Property Observer, to a newspaper group; so I made a mental note to read it once I’d settled in.

On the cover pose Packer and Murdoch with a distinctly smug expressions, the apparent victors in a battle against the old foe, Fairfax.

By backing three websites – seek.com.au, realestate.com.au and carsales.com.au – they helped destroy the “rivers of gold” – the classified advertising revenue that funded Fairfax’s journalism and its newspaper empire.

The distaste both have for Fairfax is apparent in the opening pages. Williams describes a triumphant lunch at famed Sydney dining spot Rockpool in August last year:

“Fairfax just didn’t see any of this coming. They thought it was all beneath them. They thought we were idiots. You know I think we killed Fairfax.” said James Packer.

The two men looked at each other for a moment.

“I think so,” said Lachlan Murdoch.

One lifted his glass in a toast. And then the other

Also sitting at the table though not mentioned in the narrative was Pam Williams. The reference notes at the back of the book state “author present”.

A 26 year veteran of Fairfax, where she had risen through the ranks to become one of its senior journalists, I wonder how Pam Williams felt at this celebratory lunch. It surely must have been an uncomfortable moment.

Hello Pam

I spent my first week at Fairfax in the Sydney office at Darling Point Coincidentally, sitting in the cubicle next to me was Pam Williams. I introduced myself and we spent a few pleasant minutes chatting about common acquaintances. As the day wore on and people paused to chat with her, I formed the view that she was highly respected by her colleagues and a formidable presence in the office.

“Killing Fairfax” is a page turner, a corporate thriller about billionaires with giant egos and the battle for control of Australia’s media industry through buyouts, takeovers, deals, schemes and plain good luck.

In a wider context, its one of many stories about the impact the digital age and social media has had on traditional print journalism – or to steal from a media analyst quoted in the New York Times documentary “Page One” –  “It’s a fucking revolution”.

Large newspaper groups like Fairfax and countless others around the world have struggled to shift their business models in the face of the emergence of online “pure plays” as Williams terms online publishing businesses with a singular focus.

As a Fairfax employee, the narrative grated at my nerves as I thought about what might have been had Fairfax taken the opportunities to invest in the three start-up entities when they were worth nothing. Time and time the opportunities came along to buy controlling stakes in realestate.com.au (now called REA Group), seek.com.au and carsales.com.au, but were lost or spurned.

The great power of Williams is her ability to use her burgeoning contacts book (the back of the book details all her information sources – emails, conversations, meetings she attended) to take you right into the Fairfax boardroom and the very private, wood-panelled meeting rooms where James Packer and Lachlan Murdoch struck their deals.

A dysfunctional boardroom

Certainly, the impression of the Fairfax board that Williams creates from the early 2000s up until recent times is one of complete shambles and dysfunction with rival factions, egos and hidden agendas – think the Labor Party under Rudd and Gillard. It reaches its apex following the merger between Rural Press and Fairfax and the appointment of Rural Press boss Brian McCarthy (a man who apparently refused to use email program outlook to schedule meetings) as chief executive in 2008, replacing the forward-thinking David Kirk.

As Williams writes:

“But it was in the boardroom where the real divide occurred, in ways almost unparalleled in corporate sagas of dirty washing. From the very start, tensions between the directors from Rural Press and everyone else had revolved around power, the company’s debt and whether making acquisitions for future growth had been the right or the wrong strategy.”

The other great aspect of the book is its chronicle of the changing media landscape with every major manoeuver chronicled including James Packer’s decision and the steps he took to sell out of the media empire created by his father and grandfather to get into casinos (disastrously at first), the battle for control of pay television, how the three start-up websites came into being and grew into giants, Lachlan Murdoch’s fight to convince his father that realestate.com.au should remain a key part of News Corp and the unsuccessful attempts by mining magnate Gina Rinehart to gain control of Fairfax.

What becomes clear is that Fairfax certainly was not oblivious to the growing threat of the internet as some have claimed – the company set up a string of its own websites – Domain, Drive, Mycareer  and made online acquisitions (TradeMe being the biggest)- before the nimble start-ups began eating into their revenue.

Fairfax, like so many other newspaper groups, was caught up in the bind of how to invest in new online businesses, which offered advertising ten times cheaper than print, without cannabalising its own earnings.

In hindsight, it may have seemed obvious to invest in independently run start-ups with strong brands, but looking back, most things appear that way. For a company the size of Fairfax, with its proud newspaper history, it was never going to be easy to change so profoundly or at  a speed to capitalise on these opportunities.

Who is James Packer?

But what of Packer and Murdoch? Should they really be so smug?

One of the most interesting aspects of the book is the portrait of James Packer that Williams paints: a sensitive, highly emotional and physically aggressive character struggling to emerge from the shadow of Kerry Packer, it’s certainly neither a sycophantic nor a sympathetic portrait of one of Australia’s richest and most powerful business leaders.

One particular incidence sticks in my mind – when Packer confronted former Fairfax chairman Ron Walker at the opening ceremony of the Commonwealth Games in 2006. Walker, chairman of the games organising committee, saw Packer – an old friend – and invited him and his girlfriend Erica Baxter into the enclosed VIP area with the possibility of meeting the Queen:

[Walker] lifted the red tape to beckon them in.

But Packer had something else on his mind: he purposefully took the long way around the tape to Walker; and then put an arm around his neck, pulling him tight and close in anger. Packer was completely furious…

The anger was the result of Walker welching on a deal to buy Packer’s ACP’s magazine group in New Zealand, which he considered an act of bad faith while conveniently forgetting that he’d tried to gazump Walker on a deal to buy NZ website TradeMe (after saying he had no plans to buy the business).

The irony was not lost on James Packer, he later apologised to Walker for his strong-arm tactics.

Earlier in the book, Williams describes Packers agony at the collapse of One.Tel and his suicidal decline at the shame of this very public failure. It’s hard to feel sorry for some born into privilege, unimaginable wealth and opportunity, but when you consider who his father was, you feel a slight twinge.

While Packer and Murdoch should rightly be lauded for having the vision to invest in the “pure play” businesses that cost Fairfax so dearly, Williams reminds readers that James Packer lost around $1.7 billion through disastrous US casino investments on top of the One.Tel fiasco.

Less is divulged of Lachlan Murdoch apart from shrewdness and an eye for a good opportunity – but the impression one gets is of men playing with the billions inherited from their fathers (It reminds me of one of Ghandi’s seven deadly sins: “Wealth without work.”)

For both James Packer and Lachlan Murdoch, it seems their ambition is to make more money with money rather than producing anything of value for the greater good of society (They are true capitalists).

Fairfax, despite its depleted ranks, decimated earnings and challenges employs some of the hardest working people in Australia. I know because I work with them every day. Journalists on Fairfax publications recently took home a clutch of Walkley Awards – testimony to the quality of the work they do.

Among the Walkey Award winners was Pam Williams, who deservedly took home the Book of the Year award for this very entertaining and thought-provoking corporate saga.

In her acceptance speech she declared that Fairfax had in fact not been killed – I wonder what James Packer made of that comment?

The ‘free dinners’ making Wenatex shareholder a motza

Have you recently received an ‘Exclusive Dinner Invitation’ from a company called Wenatex in the letter box?

The letter says:

In order to satisfy the ever-increasing demand, we would like to invite you and your partner as our personal guests to one of our entertaining information evenings, which includes a wonderful dinner. While dining…we will inform you about current trends and new scientific research into the subject of healthy sleep…attending guests will receive a fantastic gift as an additional thank you.

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The Wenatex $50 mystery gift voucher

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Wenatex free dinner voucher

While reading this letter, my thoughts drifted to a hot day in Koh Samui in April 2010 and how my wife and I had been duped into giving up our afternoon in the hope we’d make some money for our back packing holiday. This is what I wrote in my journal:

Tuesday 6th April 2010: Chaweng Beach, Koh Samui:

“While walking back to our hotel room for an afternoon siesta, stopped by tanned English couple on motorbike. Gave us scratchy cards.  Surprise! We’d won a great prize – cash, laptop, camera or dream holiday Next thing, we found ourselves in a cab on our way to 90 minute timeshare presentation…

That afternoon, after the sales presentation (so boring, the memory of it is completely erased from my consciousness, but it must have happened as it’s in my travel journal) we were shown around expensive holiday resorts, given free cocktails and then subjected to the “hard sell” for timesharing that would have cost tens of thousands of dollars.

When the salespeople finally gave up, we received our prize: a voucher for a holiday at a resort in Thailand, not valid for immediate use. My guess is everyone gets that voucher. (A year ago I found it in an envelope among some travel mementos. It had long-expired.)

It struck me that the psychology behind the Wenatex dinner invitation is almost exactly the same as the Thailand ‘con’ we had experienced three years ago. You think you’re getting something for free (a fancy meal + gift or expensive prize) but what you really get is a high-pressure sales pitch designed to make you part with thousands of dollars.

Wenatex Australia has been offering their free dinners all over Australia and New Zealand since coming here in 2002 from their home base in Saltzburg, Austria.

Their high pressure selling techniques were exposed on NZ current affairs show, Fair Go, which snuck cameras and two reporters into a Wenatex dinner and information evening. The video showed a lady giving the sales presentation and suggesting, outrageously, that a Wenatex sleep system had cured a man previously confined to a wheel chair.

For more of the flavour of these evenings, you can read comments on consumer forums here and here (My suspicion is that some of the more favourable reviews are written by Wenatex staff.)

So just how successful is Wenatex at signing up customers at these free dinners?

The answer, emphatically, is: Very!

I obtained a copy of Wenatex Australia’s most recently filed annual accounts.

They show that for the 2007/2008 financial year the company earned a whopping $30.8 million (up 25% on the $24 million earned the previous year).

wenatex3Assuming an average spend of $10,000 for a Wenatex sleep system, that’s more than 3,000 customers who have been convinced or coerced into parting ways with a big chunk of money on a supposed free night out.

Profit for the year was a shade over $2 million with the biggest expense – not surprisingly – being sales and marketing (those free dinners) which totalled nearly $9 million.

wenatex4Of the $2 million worth of after tax profit, nearly ($1.8 million) was paid to shareholders, which comprises a company called “Iways Pty Ltd”

There are four equal shareholders in Iways. They are Claude Wernicke, the CEO of Wenatex Australia, and presumably his sons –  Stephen, Michael and Justin Wernicke.

Split four ways, the Wernickes each took home $450,000 in 2007/2008, that on top of any salaries earned. And that was five years ago. Given their rate of growth, they could conceivably be earning $1 million each by now.

Carpet salesmen-origins

The Wenatex sales strategy and the Thailand scratchy card/time-share ploy are essentially sophisticated, dressed-up versions of what you’ll experience if you venture into a carpet shop or trinket store in Morocco, Egypt or India – where you will be offered free tea, and a tour of the factory “just to look” before the big sales pitch and relentless bargaining begins and previously very friendly shop owner turns less so. (In Essaouira, Morocco in 2010, my wife and I found ourselves having our photos taken dressed up in full traditional Bedouin costumes before having carpet after carpet thrown at our feet despite out protests.)

Of course – just as we did from that carpet shop, you can go along to the Wenatex dinner, stuff your belly, listen to their spiel and walk away. But as the annual accounts show, thousands don’t. Instead they part with thousands of dollars for mattresses, quilts and pillows that they never really needed.

Do yourself a favour. Tear up the Wenatex invitation. Splash out a $100 of your own money and enjoy a guilt-free, relaxing fully paid for dining experience.

Unless you’re really keen to spend $10,000 on bedding!