Best of the Week: A tale of two broadcasters – the diverging fortunes of Nine and SCA
Welcome to Best of the Week, written on a beautiful Friday afternoon in a quiet corner of the Byron Writers Festival.
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Happy World Rock Paper Scissors Day.
Happy days in Denison Street
This weekend I’ve been fulfilling a career dream and appearing as a speaker at a writers festival. When I last sat in the audience at the BWF prior to the pandemic it was before my book Media Unmade had been thought of, let alone written; I never anticipated being on stage myself. Yesterday I joined a panel discussing how Australia’s media got to its current state, and at about the time you’re receiving this, I’ll be wrapping up a session talking about the rise of disinformation in the social media age.
I’ve been experiencing a double dose of imposter syndrome. Sitting in the same chair that the redoubtable Sydney Morning Herald investigative journalist Kate McClymont occupied an hour or two earlier is daunting enough, until you realise that The Slap’s author Christos Tsiolkas is up next.
McClymont’s session was an entertaining one (of course).
Moderator Erik Jensen, editor-in-chief at Schwartz Media, arrived on stage looking even more bedraggled than usual, before revealing the stain on his shirt was the result of a mishap in the Green Room.
“Moments ago, Kate McClymont threw a scalding hot coffee at me,” he revealed to chuckles from the audience. “Which is an insight into her interview techniques.”
And McClymont made her own contribution to the world of media literacy, explaining how to understand the world of defamation: “When you read ‘The Herald does not suggest…’ it means ‘The Herald does suggest…’”
McClymont had one more confidence to share about The Herald. A couple of decades ago when she made blockbuster revelations about The Bulldogs breaching the NRL salary cap, NSW Police tipped her off that furious fans knew where she lived.
They told her to leave immediately. The Herald’s beancounters told her that the Medina Apartments were “too expensive”. So she suggested The Stamford, and that was “too expensive”. Eventually, she and her family were put up in a grotty hotel on George Street where she lasted one night before returning home, deciding that a meeting with Bulldogs fans was a better prospect.
These days, the Herald’s new owner Nine can afford to put McClymont in the five star safe house of her choice. On Thursday, the company shot the lights out when it released its annual financial figures.
I can’t think of an occasion over the last 15 years when I’ve reported on a better set of growth numbers for an Australian media company. The company’s revenue grew to $2.7bn, and its EBITDA profits to $700m.
Although it seems like the takeover merger of Fairfax Media was a million years ago, this was actually the first “normal” set of numbers we’ve had since then.
The merger deal was done during the second half of 2018, meaning the two companies came together half way through the 2019 financial year.
So the first time the company reported its numbers as a unified organisation, was FY2020. Covid wrecked the final quarter of that year which covered May to June 2020. FY21 was a recovery year, but still far from normal, with all sorts of different event timings.
So finally, four years on, we get to see how the merged Nine and Fairfax looks as a business. The company had a lot of following winds.
The bounceback in advertising across the market went in a disproportionately large way to broadcast television. Nine just pipped Seven with a free to air metro revenue share of 38.2% to Seven’s 38% reported last week. Presumably that means Ten achieved 23.8%. While that’s not great for Ten, it’s sometimes done far worse.
Ad-supported video boomed, and is still fast growing. We’ll see what happens to those dollars once Netflix and Disney launch their ad-supported tiers.
The radio market (Nine owns talk stations including 2GB and 3AW) improved somewhat but is not yet all the way back
But the biggest jump of the lot came in Nine’s publishing segment, which grew its profits by 53%, to $179.5m. Digital subscription and licencing income jumped by $68m. Who’d have thought that a financial reporting segment including old fangled news mastheads like the SMH, The Age and the Australian Financial Review would be where all the good news lay?
That Google and Facebook money, extorted from the platforms by the ACCC via the threat of News Media Bargaining Code designation, all dropped straight to the bottom line. Thanks, ScoMo.
If one was churlish (and occasionally one is) the area to be less excited about is Nine’s subscription streaming service Stan which appears to be nearing its peak. Just as Netflix and Binge have both gone slightly backwards on subscriber numbers, I suspect the same happened to Stan in the last quarter too, although Nine is yet to disclose it.
Stan’s revenue grew by 22% to $381m for the year. But the 2.5m active subscribers at the end of the financial year (which includes new customers still on the one month free trial) was a growth of only 100,000 (or 4%) on a year ago.
And because Nine offers less transparency than Foxtel Group and Netflix when it comes to quarterly subscriber data, my hunch is that Stan’s last quarter may even be down on the one before. There’s no reason to think it hasn’t followed the same pattern as its rivals, and I suspect that if it had bucked the trend it would have released the data.
Most of Stan’s revenue growth came from subscribers paying more, or taking the new Stan Sport package. My back-of-an-envelope calculation is the customers are now paying about $13 per month, plus GST. However, sports rights are expensive, which is the main reason Stan’s profits dropped by 28%.
In the company’s outlook, it says it expects to grow Stan’s revenue and profitability in this financial year, but it makes no promises about the actual number of subscribers. Stan’s going to need another big sport or two to keep growing. Olympics, anyone?
Still, that didn’t hurt Nine’s share price, which was up by 9% in reaction to the results on Thursday, although it fell back a little yesterday. The verdict is finally in on the merger. It worked.
A world of pain at World Square
Not all mergers do work. The market was much less in love with Southern Cross Austereo, which lost about 10% of its market capitalisation this week.
Taking the long view, since the merger of Southern Cross Media with Austereo a decade ago, the company has been in almost perpetual decline, with revenue and profit falling in all but three years.
This week some of SCA’s Covid chickens came home to roost. All that government help with Job Keeper, the Public Interest News Gathering Fund and licence fee reductions kept profits unrealistically high in 2021, and made 2022 look comparatively bad.
Revenue was down a tad to $519.7m but because normal costs came back in, profits were down by 32% to $85.6m, the first time in the company’s history that profit has been below $100m.
Bright spots were almost as hard to spot as dark ones were in the Nine result. If there was one, it came in the company’s TV ad sales performance.
Despite the affiliation switch from Nine to Ten, SCA is delivering a larger share of the ad market than it is receiving in audience share. This is doubly important because, although Ten delivers lower rating programming than Nine did, the deal means that SCA hands over a smaller percentage of its revenue to Ten under the deal, which expires in ten months time.
SCA has been clear that it would rather get out of TV, but not at any price given that it provides $30m of the company’s annual profits.
The company is now looking for a new story for investors. The organisation’s two day strategy retreat in October can’t come soon enough. Taking its audio streaming platform Listnr global seems to be the only potential growth story on the table.
Unmade Index: A blip back down
After a broadly positive week, the Unmade Index of ASX-listed media and marketing companies fell back somewhat on Friday.
Seven West Media’s share price recovered by 4% on Friday, although it remains below an $800m market cap.
Outdoor media company Ooh Media nudged back downwards after a good week on the bourse. The company released its half year numbers on Monday which were decent (revenue up 10% to $276.1m; profits up 17% to $131.8m), although they suggested the recovery of the out of home sector is slower than the TV market.
With results season behind us for the sector now, for the next few weeks most movement on the Unmade Index is likely to be because of wider shifts in the economy. By the time of the next results season in six months time, we’ll know a lot more about whether Australia is going to have that recession or not.
Time to let you go about your Saturday. I’ve now reached my favourite part of an event where the stress of being on stage is behind me and I can mooch about in the back of other people’s sessions.
Damian Francis and I will be back with the Unmade Start the Week podcast on Monday.
Have a great weekend
Toodlepip
Tim Burrowes
