Hugh Marks

Chief Executive
Southern Star 

April 2009

One of the biggest pieces of news from the media business that wasn’t about plunging profits or drastic cuts came earlier this year when Endemol announced it was acquiring the Southern Star Group from Fairfax Media. Hugh Marks, Southern Star’s chief executive, explains what the two already successful companies gain from this acquisition.

WS: What made Southern Star appealing to Endemol and what led to the acquisition?

MARKS: Endemol is an expanding company and is always looking for good opportunities, so the fact that we were for sale makes it probably as simple as that!

We’ve been working with them in this market for eight years through our joint venture, Endemol Southern Star, so we know the people well, they know us well and they know our business well. So when doing acquisitions in these uncertain times, having a lot of detailed knowledge about the people and the business was certainly a great asset for them.

We also offer them a big step in growing their international distribution operation. Our business has grown over the last 30 years and it’s now a very good-sized business with representation of Australian, English and North American product, with a fantastic sales team run by Cathy Payne. We also have different product from what is in their catalogue. They wanted to get into the scripted area, and we are already in that business in Australia and have been doing it for many years. They had key objectives for expanding their business base and we fulfill all those needs. It was a good deal for them to do.

 

WS: Endemol must have been impressed by the growth that Southern Star has been having over the past years. What has been driving those gains?

MARKS: We have two businesses—production and distribution. In the production area, we acquired businesses in the U.K., and that drove a lot of revenue and profit growth. Fairfax sold Carnival Film & Television to NBC Universal and retained the other two U.K. businesses that we owned—the factual producer previously known as Oxford Scientific Films, and the U.K. children’s and interactive producer Darrall Macqueen.

Plus, in Australia, the market for television production is as tough as it is anywhere in the world, but local product is working very well here. So there has been a real push in Australia to maximize the amount of local content that broadcasters can have on-screen, and companies like ours have benefitted from that.

And third, there was a change in the regulatory framework over here when [the Australian Government] introduced the Producer Offset. Much of this was a tax-based incentive available for drama and documentaries. That really rejuvenated the local drama market in Australia. Local drama is very important to our distribution business, so with more being produced and those series being very successful—all of the top-rated shows in Australia were the local dramas—that’s been a great growth for our distribution business. So getting more episodes of higher quality shows can’t but help your distribution. It’s a combination of those factors. We have been growing consistently for the last five or six years. No doubt, that track record was also important to Endemol.

WS: I’ve heard that when a company reaches a certain size, it has to get bigger in order to remain competitive. Had Southern Star found itself in that position?

MARKS: It’s not so much getting bigger that is the answer. You get to the point that you ask, “Well, where do we go from here?” And there are two clear ways to go, particularly with the world as it is at the moment. One is to become part of something bigger—clearly that is one option. You need the increased leverage, financial clout and resources, access to markets, all of those things that come with being part of a larger organization—they all become more important, particularly when times become tougher. The other option is to go smaller, funnily enough. For this sort of mid-sized company, it does get a bit difficult because what you can’t do as a business is stand still. If you do you get stagnant. That doesn’t provide growth opportunities for individuals, it doesn’t provide opportunities for growth for our customers, so standing still was not an option. Yes, you are right, becoming part of something bigger, or becoming something much more targeted and smaller, those were the two alternatives we faced.

I would hope that with Endemol as an owner now we’ll have more resources, more capacity and more drive to do even more than we’ve been doing in the past.