BOTW: James Warburton, the lucky general; Amazon moves in; Where’s your reputation, Alan? (It’s behind you)
Welcome to Best of the Week, mostly written on Friday, at various points between the Qantas lounge in Sydney and Evandale, Tasmania.
It regularly surprises me the amount of confidential information executives share during conference calls from the lounge.
If you work for a resource company and on Monday you’re told to be more careful with your expenses, you really should take the advice. They know exactly what you did, as do half of the other guests of the lounge. Your boss didn’t seem to understand that raising her voice to make herself heard on the call would also make herself heard across the lounge. If your company wasn’t scared of more bad publicity after that other fraud incident that made it into the newspapers, the cops would already be involved.
It’s not the first time. I’m starting to think I should pre-print a business card to hand to people in the lounge, saying “I’m a journalist and I can hear you”. At least it would bloody shut them up.
Happy International Anti-Corruption Day. Really.
Today: Did James Warburton do a good job?; the end of Alan Jones; and adland starts a new tradition.
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A good tradition
Tim Burrowes writes:
On Tuesday night, I braced myself for what I half feared would be an excruciating evening. Pulled together by industry charity UnLtd and the IAB’s CEO Gai Le Roy, the Australian ad industry staged its first pantomime.
Held at the Seymour Centre in Sydney, in front of perhaps 400 people, it was a rough and ready, rollicking good night.
Everything was an in-joke. Every time the phrase “economic headwinds” was uttered (which was a lot) came the sound of a howling wind. And it will be the first and only time that the punchline “first party data” gets a belly laugh. Okay, maybe you had to be there. In fact, based on the industry who’s who in in the pub afterwards, you really had to be there.
The UnLtd panto may well become the unofficial start to the end of the industry’s year. That’s a good tradition.
A lucky general: How Warburton cleaned the slate at Seven
Speaking of end of year traditions, Thursday was industry body Think TV’s annual lunch for the trade press. Held in Sydney, it was conducted under the Chatham House Rule, which means the content can be shared, but not who said it.
The hottest TV topic was the announcement a few hours earlier of James Warburton’s forthcoming exit – “on or before” June 30 – from Seven West Media. Take it as read, it will be well before. It Warburton is there beyond the half year numbers release in February, I’ll eat my hat.
With chief financial officer Jeff Howard succeeding Warburton, the last thing any organisation needs is two CEOs in the building. Instead, the date reflects the six month notice period in Warburton’s contract.
By then, it will be almost five years since Warburton made his unlikely return to Seven.
In 2011, he’d walked out on Seven West Media to become CEO of Lachlan Murdoch’s Network Ten, only to be dragged into a brutal court battle over his restraint period which led to him being stuck on the sidelines for almost a year.
Warburton later apologised to Seven proprietor Kerry Stokes for the ugly exit. Thursday was different. Stokes joked with staff that this time round, Warburton will be leaving with his blessing.
When the door reopened to Warburton at Seven in 2019, after he’d redeemed himself at Supercars and APN Outdoor, he had a lot on his plate.
His predecessor Tim Worner had run out of steam, the network had fallen behind Nine in the ratings, and the company’s $500m+ debt level was starting to look alarming. Warburton’s mission was to change the trajectory. “We will be a hunter and explore M&A opportunities in both traditional media and non-traditional adjacencies that are positive for our shareholders,” promised Warburton the first time he spoke to the market.
High on the list were moves to get the debt levels down. Within weeks came a deal to sell the company’s WA radio network, Red Wave, to Southern Cross Austereo for $28m, and to sell Pacific Magazines to Bauer Media for $40m. Warburton also announced a plan to acquire Seven’s regional affiliate Prime Media by issuing shares. With an Olympics year on the horizon, Seven had regained momentum.
Then the wheels began to come off. The ACCC signalled it was minded to block the PacMags sale. Shareholders led by Bruce Gordon and Antony Catalano stopped the Prime merger.
And along came the pandemic.
From a share price of 40c when Warburton took the helm, SWM shares fell to just 6c in April 2020 as Covid took hold. It was a question of survival.
Seven now needed a wartime leader. And as Napoleon once said, the best type of general is a lucky one. Covid proved to be Warburton’s four leafed clover.
The crisis persuaded the ACCC to change its mind about blocking the Pacific Magazines sale. Bauer was forced to complete the deal on what had just become a near worthless asset.
The Job Keeper scheme saw the government pump nearly $50m into Seven. There was more from the Public Interest News Gathering Fund. And licence fee rebates too.
The government also leaned on Google and Facebook, via the News Media Bargaining Code, to give money to publishers. Thanks to its ownership of The West, SWM was a beneficiary.
The postponement of the 2020 Olympics created a year of breathing space for Seven on paying for the expensive rights. Delays in cricket and AFL created more savings.
And with most of Australia locked inside their homes, viewers were glued to their televisions. Linear TV had an unexpected Indian summer.
A lucky general indeed.
Warburton focused on paying down the debt and on finding a way of buying Prime to give the company the national reach it was looking for.
His programming strategy was about eliminating risk. Old formats, many previously on other networks, were revived. The Voice, Big Brother, Farmer Wants A Wife, Australian Idol helped Seven regain primacy in total network share, even as the linear audience continued to age.
In 2021, Seven West Media had the best performance of any ASX-listed media and marketing company. On that basis, we named him as Unmade’s CEO of the year. The company’s market capitalisation grew by $477m that year. That also meant a $7.6m payday for Warburton via his incentives.
That was the high point.
But other deals to change the shape of the company eluded Warburton. It remains at heart a TV company that happens to own a newspaper in Perth.
Crucially, nothing emerged to give Seven a hand in the paid streaming game. Before Warburton rejoined the company, Seven’s streaming joint venture with Foxtel, Presto, had been a short lived disaster. More recently NBC Universal, a key content supplier for Seven, held off on launching Peacock locally, which could have been another joint venture opportunity.
As the Covid effect receded, Seven began to look increasingly like a one note media company. And that left it more exposed than any other player when the music finally stopped this year for broadcast television.
Having bounced back in the 2021 and 2022 financial years, FY23 saw Seven’s revenues and profits begin to fall again.
Back in August I was struck by how flat Warburton seemed at the end of financial year investor briefing. “Grimly grinding it out” was how I put it at the time.
How we covered Seven’s FY23 results:
It was a low energy performance that day from both Warburton and his chief financial officer (and now successor) Jeff Howard. Warburton is normally far more of a salesman.
Howard will shortly take charge of a company with a market capitalisation of a remarkably low $389m.
Speaking of Howard, it’s notable that Warburton was the last of the free TV bosses with cathode rays in his eyes. Ten’s business chief is accountant Jarrod Villani. Nine’s boss is engineer Mike Sneesby.
Howard comes from the accounting side too. That selection by Stokes sends a signal.
The obvious alternative choice would have been chief revenue officer Kurt Burnette. The accountant gets chosen when the focus is going to be on running a company for profit, via tight cost controls (in other words, job cuts).
We don’t know whether Warburton walked or was tapped on the shoulder. But perhaps he didn’t have the appetite for grinding out years of cuts. CEOs almost always say the exit is their choice, but you don’t find out for sure until later.
The accountant also gets chosen when there’s going to be a sale or other form of transaction down the track.
It’s tempting to assume that, despite taking a 19.9% stake in ARN Media last month, its diminished capitalisation means that Seven is more likely to be prey rather than hunter.
The likelihood of Seven combining with News Corp in some form now increases. The West already carries News Corp content and follows News Corp newspaper design templates. WA is the only state where News Corp doesn’t have a news masthead.
Seven, lacking that subscription streaming strategy, is a natural parter for the News Corp aligned Foxtel, which in turn lacks a free to air arm. Nine has Stan, and Ten has Paramount+. Seven and Foxtel are already on the same team in the three legged race of cricket and AFL.
One reason Stokes did the failed Presto deal in 2015, rather than joining Nine in creating Stan, as had been the original plan, was because he wanted to keep his options with News Corp open.
Another wild card theory points to Howard’s inside track on ARN Media. He isn’t just a TV accountant. He’s already been exposed to the dynamics of radio and outdoor too. He worked At ARN Media from 2010 to 2020, during which time the company was known as APN News & Media and then HT&E.
Howard had a hand in several transactions, including the float of APN Outdoor via private equity operator Quadrant (who currently own QMS), the buyout of Clear Channel from the company’s Australian Radio Network joint venture, and the sale of Adshel to Ooh Media.
Seven’s purchase of the stake in ARN Media should be seen with all that context.
Ultimately the call on the sale of any part of the company will be that of 83-year-old year old Kerry Stokes, and son Ryan. The Stokes-controlled Seven Group Holdings owns a dominant 40% stake in Seven West Media.
The reality is that Seven cannot continue with business as usual. Based on the SMI numbers we already know that this financial half’s numbers will be historically horrendous when they’re released in February. Just as Warburton dumped on Worner in 2019; he’ll be on the receiving end of a bucket of ordure to give Howard a clean start. It’s the circle of life.
Howard is on a similar salary to Warburton. He’ll earn a minimum of $1.25m, rising to $4.4m in a good year.
In the short term, there’s a cyclical advertising downturn to deal with; in the long term, the structural changes that mean a decreasing advertising share for free to air TV. The TV networks’ BVOD and FAST offerings will pick up some, but not all of that.
That’s against a backdrop of the heavy cost to Seven of AFL and cricket rights, which get more expensive at the end of next year
Like News Corp and Nine, Seven can also expect tough times in publishing. Advertising revenues from news are going backwards again, and the Facebook money is about to dry up.
Almost as interesting as what Seven does next is what Warburton does. He’s too young to retire and too driven to start taking non executive board jobs.
When his restraint period is over, Warburton will return to business in some way. While he’s already wealthy, if he wants to join the private jet set, he’ll need to use his private equity connections to grab his own stake. That won’t necessarily be in media, but don’t bet against it either.
Warburton still has another act to come.
The TV industry need a better answer
A couple of things came out of the Think TV lunch.
First, nothing is off the table when it comes to ownership and governance of TV ratings provider OzTam, which is currently jointly owned by Nine, Seven and Ten.
Foxtel’s recently announced measurement breakaway indicates the likelihood of multiple industry currencies if it can’t be brought back inside the tent. There are some big egos involved, but the announcement has made OzTam’s owners think seriously about loosening their grip.
How Unmade reported Foxtel’s breakaway:
And second, the networks still do not have a neat answer to their biggest marketing problem.
One of the biggest challenges faced by the TV industry is that it will now always suffer in comparison to its own history. For all the talk of reach and influence, television audiences are not what they once were. An incredible medium is now merely a great medium.
In the previous decade, the newspaper industry never figured out how to talk about declining circulations without sounding like it was in denial.
There’s a massive lesson there for television. As an advertising sales story, it’s the key strategic challenge: how to change that conversation without appearing to whistle past the graveyard?
That question of how to avoid being unfavourably compared to your own history was raised at the lunch.
There was no good answer.
Amazon does cricket
A new force entered the sports rights arena on Monday.
Amazon’s Prime Video has picked up the exclusive rights to Cricket World Cups, T20 World Cups, the Champions Trophy and the World Test Championship Final.
Although Prime previously dipped its toe in the water with swimming (see what I did there?) this is a much bigger move, given that Australia currently holds the titles in both the men’s and women’s games.
The move is likely to be more painful for Foxtel than the free to air networks, as the Men’s World Cup delivered it great ratings this year. Foxtel, meanwhile, had its own announcement on Friday, announcing rights renewals for international cricket played in South Africa, England and India.
But the most interesting thing about the moves is the signal it sends.
As Prime Video prepares to launch its advertising tier in Australia next year, it’s going to be on the hunt for more rights.
With its growing retail media dominance, Amazon has quietly become a huge force in Australia.
The end of Alan Jones’ reputation?
Thursday was one of those days. Who’d have thought that Warburton leaving Seven would be only the second biggest media story of the morning?
The biggest being the publication of one of those reputation-ending Kate McClymont investigations by the Sydney Morning Herald. Alan Jones, once the country’s most influential radio personality, will now be remembered in an entirely different way. McClymont wrote a lengthy and detailed investigation alleging predatory behaviour by Jones over a number of years.
While the immediate consequences are for Jones’ own reputation, that fact that some of the allegations relate to 2GB employees creates further implications.
Jones stepped down from his show in mid 2020, a year after Nine took full ownership of the network. The allegations mainly relate to the period when the network’s proprietor was adland impresario John Singleton through his Macquarie Radio Network. MRN later merged with Fairfax Radio to become Macquarie Media, before ending up in the Nine stable after the company’s takeover of Fairfax Media.
Questions about Singo’s level of awareness of the behaviour of his top rating talent will correctly to be asked.
Positive fortunes on the Unmade Index
Seja Al Zaidi writes:
After a mixed week, the Unmade Index rose 1.43% to 603.7 points yesterday.
Ooh Media saw the healthiest rise in its share price. It rose 2.15%, while Southern Cross Austereo had a 2.14% lift, Nine 2.06%, Seven 2.04% and ARN Media 1.08%. Domain rose 0.60%, and IVE Group 0.25%.
Pureprofile and Enero Group were the only stocks to fall – 6.67% and 0.66% respectively.
In case you missed it…
On Tuesday, we analysed the winners and losers of the ratings year that was:
On Thursday, we talked to Matt Cooper, founder and CEO of global agency archive Little Black Book:
Campaign of the Week: The Sun Gets Its Own Horror Movie
In each edition of BOTW, our friends at Little Black Book Online highlight their most interesting advertising campaign of the week.
LBB’s ANZ reporter Casey Martin writes:
CHEP and Queensland Health have outdone themselves with their most recent campaign to reduce the risk of skin cancer across the state.
They have given the sun its own starring role in a horror movie. Demonstrating the dangers of not following the recommended ‘slip, slop, slap, seek, slide’, the spot showcases a few of the harrowing consequences of not being sun safe. The campaign’s tagline is: ‘You do the 5. You Survive’, and the atmosphere created is chilling to the bone. It’s completely different to any other PSA spot and the creativity is outstanding.
Time to leave you to your Saturday. Please do check out our membership offer. Our price will never be as low again.
Abe Udy and I will be back on Monday with Start the Week.
Have a great weekend.
Toodlepip…
Tim Burrowes
Publisher – Unmade
tim@unmade.media
