Nine boss: ‘We are the only ones with a decent-sized digital business in this market’

Nine is the only operator with a “decent-sized digital business” in the Australian market, according to CEO Hugh Marks.

In an interview following the financial results, Marks told Mumbrella the digital side of the business was its key differentiator, adding he would focus his attention on growing its share of revenue in the coming years.

Nine boss Hugh Marks says his business is the only operator with a ‘decent-sized digital business’

His comments followed Nine’s financial results this morning, which saw television revenue decline for the first half, but revenue for digital assets such as 9Now, Stan and Metro Media’s print and digital business, climb.

“We are the only ones with a decent-sized digital business in this market,” Marks told Mumbrella. “Seven doesn’t have it. News [Corp] have a successful business in their publishing business, but they don’t video. We’ve got the mixture of great journalism, great masthead brands, long-form and short-form video and scaled businesses in each of them, and that is the differentiator of our business over others.”

Nine’s digital and publishing arm, which includes Metro Media titles The Sydney Morning Herald, The Age, The Australian Financial Review, Pedestrian and Car Advice saw growth for the first half of FY19, according to pro-forma results.

Revenue for the first half of FY19 was $327.5m, up 4% from last year’s $315.3m for digital and publishing. EBITDA climbed by almost 40%, from $43.2m to $60.2m.

Nine Digital’s revenue was up 86.652 from last year’s $83.4m, and EBIT was $20.68m, while Metro Media grew by 4% after three years of decline, from $231.9m, to $240.8m. EBITDA is now at $9.675m. Nine’s broadcast video on demand service, 9Now, grew its revenue by 51% to $29.1m, and subscription video service Stan grew by 50%, from revenue of $43.4m to $65.2m, with EBITDA loss at $21.8m.

“There was a slide we put in the presentation about the percentage of revenue that we derive from growth assets as opposed to what people would perceive as legacy media businesses, like broadcast,” Marks said. “In this result, it was about 46%, and we want to see that shift to digital media continue, and we are going to go aggressively as that over the next couple of years.”

The split of Nine’s growth assets versus its ‘traditional’ businesses

One of the main areas Marks hopes to achieve this growth is with subscription service Stan, which was previously a joint venture between Fairfax Media and Nine. Following the merger of the two businesses, Nine became sole owner.

Nine have been out in market promoting the service, which recently signed a deal with Disney, and marked up its subscription price from $12 to $14.

But today he remained coy as to what that deal entailed, and whether Disney would acquire a stake in the business. Disney is set to launch its own subscription service, Disney+, at the end of 2019, which has raised speculation around the terms of the agreement with Nine’s Stan.

“We haven’t announced the term of the Disney deal to the market and wouldn’t, because that’s confidential obviously to us. But what we’ve been saying is the value that is being created, is the value in the brand that is Stan,” he said. “Stan has multiple supplier relationships, and might have different relationships in the future. We certainly hope that Disney will be a long term part of Stan, but Stan will succeed based on its own branding over any other.”

When asked whether a business like Disney would acquire a stake in Stan, Marks added: “Stan as a business will have a bunch of people interested in how they might get involved in that business in a broader way.

“There’s a whole range of potential ways you could explore that, and I certainly think it’s a business that will get that focus, including from people like overseas content suppliers, so it will be interesting to see how it does shape up over the next three to five years.”

He admitted he was interested in those commercial relationships, if it made sense to shareholders. He also said the price spike in Stan was “fair”.

Last year, Nine touted subscription-based online platform, Future Women, founded by digital content director Helen McCabe. It was not split out in today’s results. Marks suggested there was potential for the publication to work with Nine’s other subscription titles, like The Australian Financial Review.

“It’s a very small component of what is a very large business now, so it’s not really something that warrants calling out specifically,” he said. “For us, again, it’s a commitment we made around subscription product, trying to move our revenue base more into subscription territory, rather than just ad revenue.”

Marks sees growth potential in the Metro Media division, pointing to the fact advertising revenue was less than the combination of digital, subscription and circulation revenue. He said when digital, subscription and circulation revenue brings in more than advertising revenue, it is a sign the business is stabilising.

“What they’ve been successful in doing is building their digital revenues and if you look at that combined digital and publishing business – I put circulation into digital revenues because generally people are buying a bundle – almost 80% of that business is digital revenue, so it’s got real long term growth potential.”

He also expects television revenue to recover, despite the tough market conditions this half. “People judge us by a $3b television market, and we are positioning this combined business to participate in a $13b advertising market, and that’s the way we are going to operate,” he said. “We can already see the benefits coming through.”


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