But he added that the rule change hit at a time when many media businesses did not have balance sheets suitable for tie-ups, and the takeovers many expected were delayed rather than over.
“There will definitely be phases of consolidation … the next wave is likely to be the media orphans.”
Mr Warburton declined to say what companies he specifically considered to be “orphans” but the description fits businesses like radio network HT&E, outdoor media group QMS Media and regional television network Prime Media Group.
There will definitely be phases of consolidation … the next wave is likely to be the media orphans
Media executive James Warburton
The former Network Ten boss is working with private equity and there is speculation he is leading an effort to buy Prime in consortium with CVC Limited, which has a 4 per cent stake in the business.
He would not speak specifically about any deals coming up, but said there were “many different ways media orphans can look at M&A and diversification but ultimately it will come back to what opportunities are in front of them”.
“There will be plays. There is a need for some of these companies to diversify and scale,” Mr Warburton said.
HT&E sold its outdoor furniture arm Adshel to OohMedia last year and chief executive Ciaran Davis has since denied there are any plans for further deals on the table.
A media executive who wished to remain unnamed expected regional media businesses would be next to attempt consolidation as they “have no other option”.
“They will try and get to scale to put together a market of people that could be marginally attractive to advertisers,” the executive said.
“It’s the same with regional TV players, there’s going to be a big regional consolidation … The revenues in the regions are so soft and dropping that the only strategy for these businesses is a consolidation strategy.”
Any takeover activity in the regional areas would attract significant scrutiny from the regulators and government and is likely to prompt renewed discussion about media diversity.
Martin Currie investment analyst Patrick Potts said there were “lots of discussions going on and have been for a while” but different board strategies had meant few tie-ups to date.
“The gap in valuations and [lack of] activity might reflect that boards and management maybe do not have realistic expectations of what their companies are worth,” Mr Potts said.
“For regional TV operators it’s problematic because the natural buyer is metro TV stations but they’re getting a lot of economic benefit from affiliate fees,” he said.
Regional networks pay metro free-to-air businesses a sum to re-broadcast their content. These sums have gone up for some affiliates in part due to rising sports costs.
Prime is the regional affiliate of Seven, Nine is partnered with Southern Cross Austereo and Network Ten’s is WIN. WIN shut down five regional newsrooms in June in response to a tough market and changing viewing habits.
“[It is now about] waiting for financial year results to see what they produce and what can happen past that,” Mr Potts said.
Jennifer Duke is a media and telecommunications journalist for The Sydney Morning Herald and The Age.