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Notes from the changing media landscape

Time to support David Montgomery?

What should we make of the rumoured investor revolt against Mecom boss David Montgomery? My hunch is that it's nothing to cheer for.

This weekend Sunday Times ran a story on how Montgomery is facing shareholder rebellion, about a year after the failed board room coup against him. As someone who's followed the now pan-European media company since its early days I was asked if I knew what the inside story was.

In this particular case I don't, but if we look at the objections against his leadership brought forth after last year's revolt, and Mecom's continuing poor stock market performance this year, it seems to me that the man who gained a reputation as such a brutal cost-cutter durring his Mirror-days is simply not a brutal enough cost-cutter for the investors in question. 

When six Mecom directors stepped down after the failed bid to oust Montgomery last January, Mecom's continued investment in online strategy, at a time when the current economic downturn "warranted a total focus on cash generation", was cited by the disgruntled directors as a cause for concern - along with the accountability of the chairman and the chief executive to the board.

And let's face it: some people, like ex-Mecom director and ex-Wegener Chairman Jan Houwert, must have lost a lot of money on Mecom, while few of the once so optimistic prospects for profit margins have been met. But in today's market, investing in the online future seems like the only sensible thing to do, and not doing so could easily turn out to be suicidal.

It must also be said that we've seen some really good mashups, online ventures and agenda-setting computer assisted reporting (e.g as I've described here) from former Orkla Media - the Norwegian, Danish and Polish media group bought by Mecom in 2006 - under Mecom. Some of these look promising from a commercial point of view as well, but if the company overall has been and is making the right online investments remains to be seen.

I'm in two minds about the decision to invest in another costly proprietorial content management system (CMS) in Norway for instance, especially with Mecom's Danish arm on the face of it doing well with free open-source CMS Drupal, but that's partly because I personally perfer Drupal to most proprietorial CMS's I've worked in. It's many years since I've worked in the chosen CMS, Polopoply, though, and it might e.g have advantages to Drupal when it comes charging people securely online.

It's also interesting to contemplate what kind of CEO the rebellious shareholders would like to replace Montgomery with, and what kind of spin they could put on it. I can think of a few, but even though Montgomery is hated by many who remember him wielding the axe in his Mirror days, in this instant even Mecom's employee representatives, at least in Norway, are on his side.

"The media industry is going through a turbulent time, so stability is key... You can say what you want about Montgomery but at least he represents a line we eventually are following, which means we know what to expect," Jan-Erik Schau, an employee representative in Edda Media, Mecom's Norwegian arm, told a colleague.

If nothing else, this rumoured rebellion will probably mean we'll see a lot more positive news coming out of Mecom, after what's almost amounted to radio silence in the latter half of 2009 (following a lot of negative press last spring when it was struggling to renegotiate its banking covenants and seemed to be tethering on the brink of bankruptcy). What do you think?

Update 27.01.10 11:55 CET: Börsen, the Danish financial daily, reports today that according to anonymous sources familiar with the situation, Mecom shareholders are disappointed by how the share price have not improved more despite the capital injection this spring and the general upswing enjoyed by UK media shares in the latter half of 2009. A continuing concern over the debt level - which last year's "rebels" explicitly denied was a concern - and how Montgomery is said to have signalled an interest in further acquisitons, was also cited as worrisome.


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