Spending money on big one-off but unprofitable events like Seven’s Olympics investment could hurt a media company in today’s industry environment, Nine boss Hugh Marks has warned.
Following the release of the company’s half yearly results this morning, Marks told Mumbrella Nine’s “underlying” efforts – not one off events – were what really mattered, warning against spending money without a clear return in sight.
Marks is confident the company can continue to deliver, but it’s about total revenue
It comes as Seven’s 2018 Pyeongchang Winter Olympics coverage dominates the ratings. The Winter Olympics rights – which Seven nabbed as part of a deal that included the 2016 Rio Olympics and the 2020 Tokyo Olympics – has been reported to have cost around $170, although Seven later signalled that it was unlikely to make money on the deal.
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“For me, it’s really important with this changing model that you can’t waste money on events where you can’t make money because that inhibits your ability to do everything else,” he told Mumbrella this afternoon.
“We are certainly confident we are getting growth in this first quarter. Seven trumpeted their results in that first week but that was due to the Olympics and that comes and goes pretty quickly. The underlying stuff, the stuff that really matters long term, that’s where we are really getting the results that matter.
“We’re into Married at First Sight already. The linear audience for Married at First Sight and the demos that we count is up somewhere between 5% and 10%. The really interesting thing is on 9Now the audience is up 83% which is huge.
“Second quarter we’ve got the voice coming back but we’ve buttressed around the voice with Love Island which will be a massive success particularly on 9Now again. We’ve got Buying Blind, Sean Micallef’s Talkin’ ‘bout Your Generation, which is one of the funniest shows I’ve seen in a long time and the rugby league, which will have a great season as well.”
This morning Nine revealed revenue, earnings before interest, tax, depreciation and amortisation (EBITDA) had increased year on year, with profits soaring by more than 50%, to $116m.
Overall, Nine’s revenue climbed by 9% to $720m while EBITDA rose by 51% to $181m. Nine’s television assets also saw sizeable growth, increasing by 10%, from $578.2m in H1FY17 to $636.2m in H1FY18. EBITDA rose by 57%, from $109.4m to $171.9m.
Nine’s metro television revenues were trading 7% ahead of the same time last year. Several weeks ago, it was revealed Nine had beat Seven in total television revenue for the first time in 13 years.
Although Marks wasn’t 100% sure whether the media company would dominate in television revenue share for the second consecutive year, he pointed out the business was focused on total revenue.
“Seven will get some results out of the Winters and The Comms Games, The Comm Games should be a great festival,” he said.
“But that’s not how we are defining success. That’s a nice validation of some success in the traditional linear business, but we are really focused on total revenue across the whole business.”
In this morning’s announcement, Nine also said Stan would break even for the first time at the end of fiscal year 2018. Stan is a joint venture between Nine and Fairfax Media.
Stan was a “bold” investment, but worth it
Marks told Mumbrella it was a “big” and “bold” investment but was absolutely worth it.
“The whole challenge for us and what the results talk to is content is the game and making sure that you optimise the viewing experience of every piece of content for the audience, which talks to platform, we absolutely have to be in that subscription place,” he said.
“It was a really big investment to make and a bold one, but it is certainly paying dividends and that enables us to acquire not only content that works for a free to air environment, but also content that works for a subscription on demand environment and as we go forward, we’ll be able to optimise pieces of content across those platforms for maximum result.”
Marks added digital publishers Car Advice and Pedestrian TV had performed beyond expectations. But he expects the growth from these acquisitions is yet to come. The next step will be integrating the two brands in the “whole Nine ecosystem”.
Digital publishing – which includes contributions from Pedestrian TV and CarAdvice – contributed $65.2m to total revenue, up 6% from last year’s $61.4m.
“Both businesses are above expectations. I don’t think we’ve really nailed how we work collaboratively with both of those businesses, I think that’s still upside to come but the businesses in their own right have done and amazing job so credit to the people that created those businesses.”
Pedestrian TV is one of the contributors to Nine’s digital publishing growth. Marks said it’s performing above expectations
The business also saw massive growth from its digital platform 9Now, which saw revenue grow by 86%. He expects shows like Love Island Australia – which will run on 9Go and 9Now- will help drive this audience and revenue forward.
“In February we are currently trading at about 220% of what our budget was for audience on 9Now. I expect that to continue through the rest of this year. It will take a little while for that to play out in the market and as that plays out in the broader video market that platform to continue to grow,” he said.
“But we are already getting great revenue growth and the really interesting thing is we are still not sold out. Sell through rates can be relatively low depending on how much audience you’ve got coming through.”
When asked how Nine had avoided a similar situation to Seven, which recently upped their cost-cutting exercise to $125m, Marks said they’ve also made cost savings, but in a way that is “targeted, on time and on going”.
“We go about those sorts of things in our own way. What we are doing is actually investing at the moment, but actually investing in areas of growth, not necessarily in a traditional linear environment. We’ve made cost savings as well in the linear environment, we just haven’t done it with much fanfare.”
But Marks said he loves the challenge of finding the right model and content for the business, as well as meeting with advertisers to discuss what they want.
“You absolutely have to be right in there meeting with advertisers all the time, they are – at the end of the day – the people that pay us the money to do what we do,” he admitted.
On the progress of paid subscription platform Future Women, which was announced at Nine’s up fronts, Marks said it was progressing well.
“I’ve seen the platform development that’s been going on and it’s getting close to finality. There’s obviously been people brought on board to start the whole journey and we’ve settled on a business model for it.”
He told Mumbrella it was a “different financial model” to what people may except, but wouldn’t go into further detail. The Future Women team is yet to be announced.