Green shoots postponed: What we learned from Nine and ARN Media’s financial results yesterday

BY Tim Burrowes

February 22, 2024 10:23

Green shoots postponed: What we learned from Nine and ARN Media’s financial results yesterday

Welcome to an end-of-week update from Unmade. Today: Downbeat updates from Nine and ARN Media cause a rout on the Unmade Index.

If you’ve been thinking about attending an Unmade event, it makes even more sense to become a member. Your membership includes:

Member-only pricing for our HumAIn (May 28) and REmade (October 1) conferences;
A complimentary invitation to Unmade’s end-of-year Compass event;
Member-only content and our paywalled archives;
Your own copy of Media Unmade

‘Very close to the bottom’: As bad as it gets (or as good as it gets?) for Nine and ARN Media

Downbeat day: From left, Sneesby, Stanton and Stephenson call b

You had to feel for ARN Media boss Ciaran Davis yesterday. With ARN and Nine both releasing their financial results on the same day, attention in the market was only going in one direction, and it wasn’t Macquarie Park.

Nine’s management team of Mike Sneesby, Matt Stanton and Michael Stephenson were due to front a live investor call at 9.30am eastern, which meant that ARN Media’s 9am stream was not the party the cool kids wanted to attend.

Davis had just one investment analyst on the call willing to ask a question; and it felt distinctively like that analyst (and it’s not fair to name him, as I presume he’s a junior) had been given the job at the last minute.

Seemingly oblivious to ARN Media’s current takeover bid for Southern Cross Austereo, the analyst wanted to know why ARN had invested in its competitor.

Then, seemingly oblivious of the recent long term contracts signed by Kyle Sandilands, Jackie O and Christian O’Connell, that same analyst wanted to know whether ARN thought about talent risk at all.

Not that many people were listening, but Davis was exceptionally polite in both answers.

We’ll come back to the ARN numbers later.

Yesterday, the market’s focus was very much on Nine, the weather maker for Australia’s media sector.

With Standard Media Index numbers providing monthly transparency on advertising revenue there were no surprises. Nine had a pretty rotten half.

With EBITDA profits of $316m (the red line) down 15%, and revenues of $1.371bn (the green bar) down 2%, it was the company’s worst first half since the first year of the merged Fairfax Media and Nine operation.

The analysts were most interested to know about television. Nine’s Total TV division saw revenue fall 9% to $602.1m for the half. Profit for TV fell an ugly 26% to $159.9m. And that’s for a company that’s executing well.

Was that as bad as it gets? Last week Seven West Media predicted that although this current quarter will be miserable, the next quarter will be better.

Chief sales officer Stephenson wouldn’t quite make that prediction. But he did venture: “What I am increasingly more confident about is that we are, if not at the bottom, certainly very close to the bottom of the ad cycle.”

Sticking with TV for a moment longer, Stephenson also made a comment which may make the next board meeting of industry body Think TV an awkward one.

“Linear television, free to air TV, has found its level and we’re confident those audiences can maintain broadly where they are through the next part of the cycle as we continue to invest strategically in content.

“I think we can do a better job, to be totally honest, around promoting that as an industry to both agencies and marketers alike, because the power of television is unrivalled. In combination with BVOD it’s even stronger but it is linear television, free to air television, that drives both of those businesses.”

Similarly to TV, perhaps the radio advertising cycle is hitting bottom.

Nine’s Total Audio division – including flagships 2GB and 3AW – delivered a profit of just $3.8m (down 41%) on revenue of $49.6m.

That $3.8m must be the hardest slice of profit the company makes.

If things are as bad as they are going to get in TV and radio, I find myself wondering whether things are as good as they are going to get for Nine’s publishing operation, including the Australian Financial Review, Sydney Morning Herald and The Age mastheads.

Thanks to price rises, subscription revenue was up, while advertising was down. That included the, often brand led, print advertising (down a not-terrible 6%) and digital (mostly programatic) down by 17%.

In an environment where Meta looks set to walk away from its News Media Bargaining Code agreements soon; where AI will destroy search traffic by answering questions directly; and print buyers continue to go away, it’s hard to see a route to the publishing division growing again. What is unclear from the outside is whether the serious strategic work to be ready for that moment is underway.

Meanwhile, over at ARN Media, the glacial takeover bid for SCA makes it feel like everything else is on hold.

The second full year results since the takeover of regional radio player Grant Broadcasting were negative.

ARN Media’s profit was down 13% to $71.6m and revenue was down 1% to 334m.

But the takeover bid provides a distraction from that bad news. Two slides of the investor deck offer some new clues, which could be taken as a hint that ARN thinks SCA management are slow walking the deal.

ARN Media wants SCA to get on with due diligence

The update indicated that four months on, SCA is still not giving ARN all the data it wants for due diligence ahead of making a binding offer. Well, they are direct competitors. No doubt there’ll be plenty of questiosn about that for SCA’s management at their market update next week.

ARN Media’s prediction of executing a transaction by late next month looks optimistic.

Mind you, optimists are exactly what the media industry needs at the moment.

Horrendous day on the Unmade Index

Investors punished Nine’s stocks yesterday, wiping 8.7% off the company’s market capitalisation based on the signal that it could be months yet before the TV market starts to recover.

Nine’s market capitalisation fell below $3bn, for the first time since 2020.