TV’s turn on the spit
The release of television revenue figures last week has underlined the fact that the industry is undergoing major changes as shrinking media spends are spread wider and wider. And news this week that the Nine Network is calling for voluntary
redundancies and instituting a pay freeze as part of a cost-cutting program highlights the challenges facing the industry.
And it’s not just Nine. All three commercial networks are said to be currently looking for A$50million in savings, and for Ten that comes on top of extensive job losses and tightening of its corporate belt in 2012.
Despite this, station executives maintain 2013 will be better after three particularly lean years, but media buyers are not so sure.
While the decline of newspapers has intensified in the past year, revenues have also fallen for free-to-air stations Seven, Nine and Ten, with drops in every capital city last year, and all regional areas with the exception of Western Australia.
Overall revenue fell 2.3 per cent to $3.81bn, down $88 million compared to 2011. The hardest hit was Ten, which had a disastrous ratings year.
Factors have combined to cause the fall in revenues and profits, ranging from social media, the internet, tough economic times, and the duopoly of retail giants Coles and Woolworths who are stressing retail producers with their price-cutting campaigns. That has seen a major drop in many marketing budgets as the two supermarket chains put pressure on suppliers to make their lines cheaper.
It is also putting increased pressure on TV production companies, who are being asked to make more with less. “There is an awesome amount of pressure on independent producers,” one senior production figure told Encore. “We know we have a robust market, but there is increasing uncertainty, and more and more cuts to our overheads.”
Leigh Terry of the Omnicom Media Group – which includes media agencies OMD and PHD – is not optimistic about the year ahead. “On a macro level it is going to be a tough year, although the election being called so far out may stimulate the market once parties get their policy positions in place, and then start communicating them,” he says. “But agencies are also recalibrating how they spend these days – social media and sites such as Google are getting more and more [share].
“TV is far from dying, but there are so many other options now. But a 30-second TV commercial can still be phenomenally successful.”
Nine sales chief Peter Wiltshire maintains 2013 will be positive.
“The downturn has not been isolated to TV,” he says. “It affected all sectors, but yes, we felt pain. But I think you’ll see 2013 stabilise instead of dropping. I don’t have a crystal ball so I can’t predict the future, but that’s what I think. And pay TV’s subscribers are down to 28 per cent (of Australian homes) from 31 per cent – some people just don’t have that $100 a month in their pockets anymore.”
Mat Baxter of media agency UM agrees with Terry about the increasingly thin spread of advertising spending. “TV is a casualty of that because it used to get the largest part of the honey pot, but now a lot of that is going elsewhere,” he says.
“And agencies are much more accountable to clients to get a return from their spends. But any talk of the end of a 30-second TV commercial is extreme. It’s just that the old rules don’t apply anymore.”
Seven’s sales director Kurt Burnette cites specifics to explain how the market is changing. “Our bookings through to March are improving, but the landscape has changed,” he says. “Fast moving consumer goods have declined by 15 per cent to 20 per cent in the past two years, which translates to $95 million less being spent, down from $460 million a year. “But there has been growth. Cars are up five per cent and retail – Coles, Woolworths, Bunnings and the like – are up eight per cent, which translates to $60 million. Government is significantly down, but that will change as the election draws closer. I’m positive.”
Ten – which is already facing questions over the ratings performance of MasterChef: The Professionals – was the only one of the three major networks which declined to participate in this piece.
What are networks to do in the long term to ensure eyes remain glued to their screens? Companion apps – the so-called second-screen experience where viewers can access detailed information about the shows and share opinions instantly – are one hope and all network are either introducing them or refining basic ones they have already developed.
Another would be to follow the ABC’s lead in developing quality catch-up services online and embed advertising in them to increase the appeal to lucrative advertisers.
But one thing is certain. Nobody is betting on growth.