Peter Costello’s sudden exit as chairman exposes deeper crisis at Nine

Nine is now moving toward full-blown crisis mode as the media company lacks the authority to deal with its deep-seated cultural issues.

Peter Costello at Canberra airport last week. Picture: Liam Mendes

As soon as The Australian’s Liam Mendes hit the ground at Canberra airport on Thursday, Peter Costello’s eight-year tenure as Nine’s chairman was finished.

However, the clash has also set off a chain of events that are likely to expose far deeper problems at the television and publishing company.

Costello, the former treasurer, had become the story, and no matter how it was spun, he was badly damaging the Nine brand. In fact, one ASX chairman tells The Australian, Costello had been lucky to make it this far into the long weekend.

Following a special board hook-up, Costello resigned on Sunday afternoon. Former UK Sky legal executive Catherine West has been named the new company’s chair, effective immediately. She now has a massive task ahead as the media company heads toward a full-blown crisis.

Costello was already on borrowed time and a shoulder tackle to reporter Mendes delivered a disappointing message. This is even worse given it comes from someone who sits at the top of a media company with hundreds of reporters in the field every day doing the work Mendes does.

Peter Costello.

It is disappointing that, in his exit statement, Costello still refused to acknowledge the Mendes incident, apart from thanking his board members for support over the “last few days”. This denial will certainly limit his prospects of securing other board roles for now. But the sudden exit of Costello has now left Nine without any authority of leadership. That leadership had already been weakened as allegations of sexual harassment piled up in recent weeks around the powerful former Nine news boss Darren Wick, who left earlier this year.

But it is the apparent longstanding cover-up of the alleged behaviour that has exposed serious holes in Nine’s governance and management.

Chief executive Mike Sneesby is now mostly sidelined while an independent investigation is underway into who knew what about the alleged behaviour of Wick and how his exit and payout was handled. It is still unclear what the timing of findings of the investigation will be.

Costello on Sunday said Nine has set up “a robust process to investigate historical complaints, which has my full support. I believe it will get to the bottom of any unknown issues”.

All this comes just in time for the Olympics and advertisers will surely be turned off by the uncertainty and governance stench starting to form around Nine’s television operations. The sudden exit of Costello and the cloud hanging over Sneesby also highlights the network’s lack of succession planning.

Costello’s vocal support of Sneesby – including on Sunday – only serves to highlight the lack of bench strength in Nine’s management ranks. Costello remains well aware of this.

The search for a new chief executive might arrive much earlier than new chair West or the board anticipates.

Peter Costello with Anthony Albanese at the Australian Open tennis. Picture: Tennis Australia/ Aaron Francis

This is the second top-level scandal under Costello’s watch. Former boss Hugh Marks, who engineered the buyout of Fairfax Media, quit abruptly nearly four years ago after it emerged he was in a consensual relationship with the media company’s commercial director. At the time, Costello said Marks had not breached any company code of conduct. Still, Marks made his own call to fall on his sword.

After the upcoming Olympics, Nine will face some tough calls. As the 30 per cent share price fall over the past year shows, it is not a company that has growth in front of it.

Broadcast television, once seen as the answer, now faces at least a decade of decline as competition for eyeballs through streaming and technology platforms intensifies. So too, Nine’s publishing platforms through the Sydney Morning Herald and The Age remain cost heavy with subscriber growth slowing.

Costello had believed Nine’s future lay in streaming over broadcast, just as the likes of Netflix, Disney and Amazon were throwing billions around in a costly grab for market share. That’s why he picked Sneesby, who had built up Stan streaming platform, for the top job.

Now it is clear Nine’s streaming arm is only as good as its next content deal, and it now faces even more competition as Hollywood studios take back control of their own libraries.

New chairman West will need to move quickly to try to stamp her authority on the company, and after long being closely aligned with Costello will need to define herself an independent. She will need to take charge of the Wick mess in order to rebuild Nine’s credibility. All this could have been easily avoided by giving Mendes a quick interview.

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Originally published as Peter Costello’s sudden exit as chairman exposes deeper crisis at Nine