Nine warns of ‘short and unpredictable’ ad market as network continues to rail against licence fee costs

Nine Entertainment chief executive Hugh Marks has warned of a short and unpredictable advertising market but said the company is well placed to improve on a disappointing 2016.

hugh marks

Speaking at the network’s annual general meeting today, Marks estimated that revenue in the free to air metro ad market would fall “in the low single digits” in the 16/17 financial year.

But he added he was hopeful that a “re-balancing” would occur over where brands place their advertising dollars, with the advent of new technology potentially helping traditional players.

The remarks came after the CEO said Nine was investing in technology that will “ensure maximisation of yield and efficiency of delivery for our advertisers”.

“There is a lot of positive commentary around the allocation of revenue between the global technology businesses likes Facebook and Youtube verses traditional media,” Marks said. “[There is] a view that maybe a re-balancing needs to occur.

“We haven’t seen that yet, it’s commentary, but I think an ability to trade inventory on the same basis as those technology companies, where you can basically buy advertising at the click of a button, will start to aid in that re-balancing between the new media – although they are not media, they are technology companies – and media businesses.”

Marks said Nine was “12 months behind where I’d like to be” in terms of introducing such technology.

Addressing the state of the market, Marks said it was “fair to say the advertising market continues to be short and difficult to predict”, revealing a 4% decline in Q1 revenue.

“I’d love to stand here and say the market is robust and full of demand and growth but I think we have to focus on two things,” he said. “That is doing all we can to support the advertising environment but also diversifying our business and having a strategy that gives rise to the opportunity to create value outside of the traditional advertising market.

“I think we are doing both those things.”

Marks added that while regional, as well as metro markets, were soft, its affiliate deal with Southern Cross was outperforming expectations.

The outlook came ahead of a mini shareholder revolt against Nine’s executive remuneration package with 21.45% of eligible votes going against the motion. Bruce Gordon, who holds 15% of Nine, is thought to have voted against the report.

One shareholder urged Nine chairman, Peter Costello, and non-executive directors to “share the pain” of shareholders and reduce their own pay. The shareholder listed the salaries of executives at companies of comparable size to Nine, all of whom he claimed were not as handsomely rewarded as those at the network.

New wide nine logo

Costello, who is on a salary of $425,000 while non-executive directors pocket around $180,000, stressed the salaries had not changed since 2013 but said the board would look into the matter. Earlier, Marks said cost control would be “unwavering”.

“In light of the state of the ad market, we are now expecting FY17 TV costs to be down about 1.5% on FY16,” he said.

Marks reiterated Nine’s intention to produce more local content with “at least 50% more premium local hours”. The end of its “crippling” deal with Warner Bros – which required Nine to air certain US-produced shows – will also hand back complete scheduling control to the company, he said.

“[That is] vital in an environment of rapid change,” he said.

He told shareholders that “re-establishing momentum” in its free-to-air TV business was its “priority and immediate focus”.

“As much as our performance in FY16 was impacted by the overall market, it was impacted by our own disappointing share,” Marks said. “Share is something we can directly control. I’m pleased that our main channel performance post the Olympics, which is traditionally the feeding ground of the Olympic network, has been dominant with our 25-54 commercial share from the day following the Olympics exceeding 38%.”

Earlier in the AGM, Costello continued the battle against the cost of licence fees, describing it as “anachronistic” and a “key cost to the business”.

“Re-addressing Australia’s licence fee regime is clearly the most pressing regulatory issue facing the free to air industry at present,” he said. “Our fees must be reset to levels consistent with international benchmarks.

“We also remain supportive of broader media reform what will allow the local industry to evolve without artificial barriers and hence more effectively compete with overseas entrants. However, the adjustment to licence fees must be addressed as an immediate priority.”


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