James Packer: PBL's new CEO

James Packer is well on his way to putting his own stamp on the Kerry-built PBL empire. Wealth Creator examines the life of one of Australia’s most high profile sons. James Packer, the richest man in Australia with an estimated net worth of $7.1 billion, has a vision all his own. His first move was to scrap the company’s plans for a $4 billion joint venture in a Singapore casino. The next move was to sign off on a joint venture deal struck with Betfair to move into Tasmania. Packer has ambitious plans to use the media entities under the Publishing and Broadcasting Limited banner to break
new ground.

When his father Kerry passed away in December 2005, James was left with one of Australia’s largest diversified media and entertainment groups. Market capitalisation is more than $11 billion and owned entities or part-owned entities include:

• 25% of Foxtel
• 50% of subscription television content provider The Premier Media Group, producer of Fox Sports 1 and 2
• 50% of Internet portal, ninemsn.com.au
• 25% of employment business SEEK Limited
• 41% of carsales.com.au
• 100% of Ticketek
• 100% Sydney Superdome
• 50% of Hoyts
• 25% of Hollywood cinema and television production company, New Regency

You’d be forgiven for thinking that James may have rested on the laurels of the work done before him, but like any true entrepreneur he is keen to move forward and create his own legacy and to step out of the shadow of his father by making PBL a ‘James Packer-run’ conglomerate. “I think if I try to be a mini version of Kerry then I’m going to fail because he was such a larger than life character, so I’m going to do my best being myself.”

On the range

James Douglas Packer, born September 8, 1967, was educated at the exclusive Tudor House School in Mosman, Sydney and the Cranbrook School, Sydney. He was posted there when he was just 10 years old, following in his father’s footsteps (Kerry was sent to boarding school at just five years of age).

Like his father he was stubborn and determined to succeed. He also had the backing and mentorship of some powerful men, but first there was the little matter of toughening up.

Upon receiving his HSC, instead of going onto university, Packer senior sent his son to Newcastle Waters Cattle Station in the Northern Territory, famously saying, “Why would he want to go there (to university)? To learn to smoke marijuana?”

So from 1985 James spent a year on the farm. He didn’t learn to smoke marijuana; he learnt was the grit and toil it took for Kerry to build on the empire his father Sir Frank began a generation before. James mustered the cattle and sheep, took part in roping, shearing and learning the life of the land. The experience taught the young Packer organisation, hard work, how to communicate and how to deal confidently with situations and people.

This was tempered by the completely opposite experience of a stint in London with Rothschild Investment Bank. So James was armed with polar experiences when he began working in the advertising department of Australian Consolidated Press (ACP), the family company which was established in 1933 and publishes Women’s Weekly, Woman’s Day and The Bulletin, among many others.

James cut his teeth at ACP, drawing as much as he possibly could from his father, who in turn pointed him towards mentors such as former ACP and PBL CEO Brian Powers and Sunbeam Corp. CEO Al ‘Chainsaw’ Dunlap, so named for his boardroom ruthlessness.

At his father’s funeral he said, “Dad was my mentor and my teacher, but above all, he was my father and that is my greatest fortune …”

He told Graham Davis of ninemsn.com.au, “My dad occasionally gave me a hard time but I must say that when I needed him to be supportive, when I needed him as a son or a businessman, when I needed his support, he was always supportive. I think he’s very smart in the sense that you know when on the occasions, and it wasn’t often, when on occasions he gave me a tough time, it was only ever when he knew I could handle a bit of practical encouragement.”

It was Al Dunlap, who next to Kerry, arguably had the biggest influence, who told his young mentee, “You have to determine whether you are a James or a Jamie. If you want to play polo and take out a different model every night and go skiing, you can continue to be Jamie. But if you want to learn how to run a business you have to become James. And James, I believe you can be a world class executive if you want.”

Until 1998, when he took over as Executive Chairman of PBL, James positioned himself as someone who could succeed his father. There were long stints managing the stable of ACP magazines, as well as Channel Nine, and casino and entertainment complexes in Melbourne and Perth.

James was forging his own career within the walls of the PBL empire and making his own decisions. His goal was to position the company as an online and gaming giant, while introducing financial services to the fold. His portal ninemsn.com.au is Australia’s most visited site.

There is no doubt that James has a steel all of his own and Kerry may rest in peace knowing the company is in strong hands.

The big mistake

There have been several times when James has gone against the wishes of his father; the purchase of Burswood Casino in Perth and perhaps the one move that made him question his ability was his venture into telephony with One.Tel. The company was declared insolvent in 2001 and cost PBL and
partner News Corporation $1 billion.

At the liquidator’s inquiry into the scandal, he said that he had learnt ‘painful lessons’, but fell short of apologising for his own personal conduct, instead “making an apology for accepting the bona fides of Mr Rich and the executives of One.Tel.”

One.Tel proved an investment nightmare for both James and his friend Lachlan Murdoch. In 1997, despite early success – One.Tel reported revenue of $148 million and before tax profit of $7.5 million – the wheels would soon fall off. Problems arose in 2000 when One.Tel spent $253 million on additional spectrum licences. The Packer and Murdoch families provided another $280 million. Australian investors poured $340 million of funding into it. By the end of the financial year the company had lost $291 million and the share price plummeted below $1. Meanwhile both Rich and Keeling were drawing an annual salary of $560,000 and a bonus of $6.9 million.

In January, Kerry Packer saw the writing on the wall, telling Rich “You ran out of money with Imagineering, and you’re going to do it again.” Merill Lynch predicted the company would go bust by April. However, in a final attempt to bail the company out of trouble, News Limited and PBL agreed to subscribe to a rights issue at five cents per share to supply another $132 million. The companies reneged on the agreement when the full financial plight of One.Tel was finally revealed.

An administrator was appointed in March 2001, stating the company was insolvent and terminating 3,000 employees.

It was a harsh lesson for the young Packer: a bad investment and too much trust in bad management. Yet he has followed in the footsteps of many entrepreneurs before him who have made mistakes, then gone onto bigger and better things. Suzi Dafnis lost $40,000 in the first year of Pow Wow Events. They lost $60,000 on their first speaker and took two years to recover. Today they run an international company and represent Robert Kiyosaki. Flight Centre’s Graham Turner suffered cash flow problems in the late ’70s. “We bought too much too early and weren’t able to capitalise,” he told Wealth Creator. “We got through it and it taught us a lot about the basics of business. One was having good financial recording.”

Making mistakes is a rite of passage; every entrepreneur makes them and learns from them and some lessons are more harsh than others. Some entrepreneurs (Alan Bond, Christopher Skase) with all the confidence in the world never recovered from their mistakes. However, James has a clear vision, and that coupled with his lesson after the One.Tel affair, has seen him come out with reputation intact. As his father had moved from newspapers to broadcast media, James was sewing the seeds for the company’s next growth phase, and although that phase saw the collapse of One.Tel, James has moved forward and is heavily pursuing his gaming and online interests to take PBL into the future.

The succession

It isn’t as if James changed the company’s direction after the death of his father. He had slowly been positioning himself and his interests since his father appointed him chairman in the late 1990s. Like any true entrepreneur he wanted to boldly go where no Packer had gone before. James began diversifying immediately. The company’s flagships, Channel Nine and
ACP magazines, remained dominant, but it was James’ move into gaming that really pushed the company forward. A known gambler, Kerry was against the purchase of Crown Casino, however the move has proven to be a financial coup. Casinos now contribute 40% of PBL’s revenue.

Another exceptional move was to partner online job advertiser SEEK Limited, and to partner Microsoft in the creation of ninemsn.com.au. James was well and truly exerting his influence
long before his father passed on. James has a similar presence to his father, now he needs to build the legend. He may not create something comparable to one day cricket, but he will certainly leave an indelible mark. To help him he has put some significant weight onto the PBL board including Qantas Chief Geoff Dixon.

So let’s have a look at the achievements of James Packer.

• He has the ability to recognise new markets
• He surrounds himself with only the best people (and they are all on the PBL board)
• He knows the value of hard work, and although he likes to play, he knows what he wants from the company
• He has exceptional leadership qualities
• He has made big mistakes and learnt from them
• He has a vision for the future
• He knows how to negotiate a deal

Packer  is now moving into Asia, already having done deals with Asian gaming company Melco to open casinos in Macau and Singapore. However, shortly after Kerry’s death, James quashed a deal with Melco to open the Singapore casino stating; “The expected returns are insufficient to justify the higher projected capital cost.” It seems he is a little more cautious these days and the better businessman for it. The Macau casino is shaping to be a huge profit earner.

There is no doubt expansion plans are well under way and Asia is a prime target. PBL, which once changed so vibrantly under Kerry’s leadership, is set to transform once again and at the helm will be James Packer, a man all his own.

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