Nine’s Hugh Marks on a market that ‘wants to recover’ and positioning Stan for continued growth

Mumbrella's Hannah Blackiston spoke with Nine CEO Hugh Marks on the future of media in COVID-19 and the success of streaming platform Stan.

Nine’s result presentation saw it become one of the only media companies to provide a guide on expected revenue for the coming months, despite the ongoing pressures of COVID-19. The September quarter, said CEO Hugh Marks, was likely to see revenue down 15%, but he had positive words for the rest of FY21.

“I think we’ve got enough track record of this stage that we have a reasonable line of sight on certainly what’s happening in the September quarter and probably even through to December, although we didn’t comment specifically on that,” he told Mumbrella.

“The market seems to be taking an approach where it’s preparing for post-COVID and wanting to go in that direction. We’re trading on a better basis than what we’d anticipated at this point.”

Nine CEO Hugh Marks

Marks spoke with Mumbrella following a FY20 investor presentation for Nine which saw it announce $702 million of impairments, weaker revenues and earnings, but overall the vibe was a positive one with plans in place for the future of the business.

By 2024, Marks anticipates $230m of costs will be cut from the business, $60m of its overall earnings will be from its digital business, 30% of revenue from subscription and 30% from video on demand, which includes both subscription service Stan and broadcast video on demand (BVOD) provider 9Now.

This push towards subscriptions is to make Nine less at risk from choppy ad markets, further diversifying its business and ‘reducing our exposure to advertising markets’ according to Marks.

Those costs will come from continued content reviews across the business, including the NRL which Nine reviewed its deal with earlier this year. Marks said that while sport is an important part of Nine’s content strategy, ‘this reworking of the existing contract will enable us to sustainably invest in NRL for the future’.

And it isn’t just sport that will be under the microscope Marks said.

“If you look at shows like The Voice, which was a $40m cost in the schedule, as you go forward those shows get a little bit more difficult to hold onto. Over the next couple of years you’ll see some of those higher cost shows be replaced by some other initiatives which we’ll have.”

More on Nine’s ongoing content strategy is likely to be revealed at its upfronts in three weeks, now in an all-new virtual format, but Marks is sure the business can continue its plans for share growth.

“We’re anticipating growth in share in this half [FY21 H1], we have moderated our program runout through COVID, we didn’t want to fire all of our guns while the market was weak, we’ve got quite a solid slate of content till the end of the year and we’ve got plans well advanced for our content into the beginning of next year, particularly dealing with the COVID related production issues, so we feel that the business is in the position to continue to grow share over the coming financial year,” he told investors yesterday.

Stan was the shining light in Nine’s presentation, a business which ‘had a landmark year’, according to Marks, delivering revenue of more than $241m (up 54%) and EBITDA of $31m compared to a loss of $21m in 2019. It also saw its subscribers jump to 2.2m active subscribers from 1.7m for the same period the year prior.

Whether this jump in subscribers over the COVID-19 period is maintainable or not, nobody can be sure, but Marks is confident there’s still growth to be had in Stan. He told Mumbrella that the streaming industry in Australia is yet to reach the penetration of households that it has in the US and that the number of subscriptions per household is likely to grow as viewing habits become more fragmented across families.

While the business is expecting slower growth in FY21 thanks to the jump this year, growth is still the focus, no matter how Stan’s various content deals play out over the next few years.

“There are various models for Stan’s future and all of those models have different operating outcomes but all of them show a business that will continue to grow in subscribers and profitability, it’s just a question of to what extent and at what pace the business continues to grow,” Marks said.

“[We see a home for] any quality content on Stan. With Stan Originals we’re detaching ourselves from supply chains. The business is able to absorb additional content if it becomes available, but the business will continue to grow and be highly profitable based on the deals we have in place. The Originals often perform better than the shows that we acquire from overseas, so our ability to continue to invest in that space will be a key growth factor going forward.”

The Bondi Hipsters are part of Stan’s new original slate

Some darker spots in Nine’s results include Nine Radio which had a hard year, as did the wider radio industry, but with many changes already implemented across its content and radio ratings set to return at the end of September, Marks is confident that business can turn around quickly when the market does.

“Nine Radio has had a tough year, but we’ve made a bunch of changes already on the cost line which will pay dividends in FY21. What we’re seeing is an improvement in the revenue share position of Nine Radio, obviously, Sydney is doing better than Melbourne at the moment, but we expect that to normalise as the restrictions do.”

Nine Radio was of course born from the acquisition of Macquarie Media at the end of 2019, but Marks says there aren’t more acquisitions on the horizon for Nine.

“We’ve already made substantial progress [in diversifying the Nine business]. This year’s result was achieved with depressed traditional media results, and as profitability rebounds as we come out of COVID, what you’ll see is this continued disproportionate growth from the digital elements of the business. I’m pretty happy with the portfolio and how that’s going to play out.

“Obviously we’ll always be looking for new opportunities but that will be within the existing asset mix we have, rather than in M&A.”


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