Happier times: Kerry Stokes, chairman of Seven West Media (right) with chief executive Tim Worner

Happier times: Kerry Stokes, chairman of Seven West Media (right) with chief executive Tim Worner

The internet marks the end of free to air commercial television world-wide.

I hope commercial television dies soon. It’s ads, which take up 20 minutes of each broadcast hour, if you count sneaky promos beyond the 15 minute legal ad time, are responsible for the poisoning of the masses through mindless uncontrolled promotion of junk foods, Coca Cola which is a poison to the masses, and mindless uncaring multi-nationals like Woolworths, Coles, McDonalds- all the processed food and processed drink hawkers of the twentieth and twenty-first centuries.

 

Australian Financial Review

For Seven, Ten and Nine: it’s the end of the party

 

Seven West Media CEO Tim Worner's ad forecasts didn't go down well.

Seven West Media CEO Tim Worner’s ad forecasts didn’t go down well.

 

by Neil Chenoweth

“On Thursday Ten Network chief executive Paul Anderson spelt out what everyone else in television already knew – that the party, that long splendid display of hubris, excess and good times that has marked the industry for decades, is over.

Seven West Media chief executive Tim Worner made the same point the day before, though he didn’t actually put it like that. What’s really telling is that he tried to say the reverse.

How is television advertising? It’s looking a little stronger for 2017, Worner told analysts, and Seven shares promptly got a kicking, down 9 per cent at one point.

Stronger ads? Not so much, Ten said in a guidance update on Thursday: “The advertising market remained extremely short in terms of forward bookings”. Yet despite signalling a dreadful result for the half, its shares closed just 3¢ down.

Of course this is television, so while the three networks say what they must for analysts and fund managers, their most powerful messages are to each other.

Seven and Ten were sending a simple signal to Nine Entertainment’s new chief executive Hugh Marks.

Musical chairs

The falling television advertising market now resembles a game of musical chairs, and when Mr Marks releases his first set of results next Thursday, this round he’ll be the one left standing without a chair.

Seven’s half-year report cites KPMG Free TV figures that metropolitan TV advertising was down 4.5 per cent year on year for the December half. SMI data shows that fall continuing in January, down 4 per cent.

Whatever else is happening in television, this is the critical figure. If the size of the total pie is falling, the nature of the industry changes.

Despite all this, Seven said it saw “growth in February and March for the first time since 2014” and “the market beginning to trade longer”.

Deutschebank, Macquarie, UBS and Credit Suisse analysts appeared to treat this like a press comment by Kellyanne Conway.

To be fair, Seven’s television income in the December half was up $36 million, or 5.4 per cent, though that was with the Olympics, but television costs were up $78.4 million, or 16.4 per cent.

Read between the lines

When an industry is in decline – as it is when television advertising continues to fall – the focus switches to cutting costs and stealing market share … which probably explains Ten’s curious guidance update on Thursday.

At its annual meeting in December, Ten’s Anderson said first-quarter revenue was up 1.9 per cent, with costs up “middle single digits”. That suggests half-year revenue up $4 million and costs up about $16 million, which would cut EBITDA by about $12 million.

Thursday’s update said that half-year sales would be up 1.2 per cent, and EBITDA would be down $10 million to $15 million, and into the red. That’s pretty much smack on line with the previous guidance. It’s a terrible result, but why the update?

As damage control after Seven’s mauling, it was useful to confirm to the market that the damage at Ten was no worse than previously noted. Ten shares opened at 90.5¢ and dipped to 82¢ before recovering to 87.5¢.

It also underlined the key point that Ten had not lost market share. If television advertising was down 4.5 per cent overall, and Seven revenue was up $36 million, where did that increase come from? They hadn’t taken those sales from Ten.

It was a little message to Hugh Marks. Seven’s gain must have come at Nine’s expense. A spokeswoman declined to comment but pointed to remarks at the annual meeting that Nine always knew the Olympics would affect revenue.

It’s a Pyhrric victory for Seven. For decades the networks have bid up sporting rights to outlandish levels, sure in the knowledge that rising ad revenues will cover them. Now it’s a new industry, and that boat might not float.

Read more: http://www.afr.com/business/media-and-marketing/tv/for-seven-ten-and-nine-its-the-end-of-the-party-20170216-guemu5#ixzz4YqYyO1y7

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