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Ten goes into administration

Australia’s third commercial free-to-air television network has gone into administration after its board met this morning.

The news comes after Ten went into a trading halt on the ASX yesterday, pending an announcement from the broadcaster.

Ten announced Mark Korda, Jennifer Nettleson and Jarrod Villani of Korda Mentha have been appointed as voluntary administrators of the company.

“This decision follows correspondence received from Illyria and Birketu over the weekend, which left the directors with no choice but to appoint adiminstrators,” a statement from the network said.

Citing its “transformation process” – which CEO Paul Anderson initiated after the network posted a $232.2m loss in its half-year results in April – the network said it had a plan to improve profits $50m in the 2018 financial year, and potentially more than $80m per annum by FY2019.

“In relation to the transformation process, the company has identified initiatives that are expected to have a positive impact on earnings in the order of at least $50 million in FY18 and potentially more than $80 million per annum by FY19,” the statement said.

The costs will be saved thanks largely to renegotiated content deals with US studios and cheaper licence fees, which will come about provided Malcolm Turnbull’s proposed media reform package makes it through parliament.

“In relation to the renegotiation of programming contracts, the company has agreed in principle the vast majority of the commercial terms of replacement volume content supply agreements with its US studio partners, Fox and CBS, although final terms have not yet been formally agreed. The effect of these replacement content agreements, if finalised and implemented, would be to reduce by approximately 50% the Group’s future liabilities for US content, while still allowing Ten access to the best productions of those studios over the medium term,” Ten’s statement said.

“In relation to the reduction in federal government imposed licence fees, Ten anticipates that after the changes to regulations anticipated to be tabled in parliament tomorrow pass through the parliamentary process, the reduction in licence costs for Ten in FY17 will be in the order of $22 million and, in FY18, $12 million.”

The network said it would work with administrators in a bid to ensure it was business as usual for employees, suppliers and content partners, and noted the directors regretted Ten’s current situation – which includes a potential sale.

“The administrators have advised the company that they will work closely with management, employees, suppliers and content partners while they undertake a financial and operational assessment of the business. During this period, the Administrators intend to continue operations as much as possible on a business as usual basis,” the statement said.

“The directors of Ten regret very much that these circumstances have come to pass. They wish to take this opportunity to thank all Ten employees and contractors for their commitment and enthusiasm for Ten’s programs and business. In particular, they would like to express their sincere gratitude, respect and admiration for Ten’s leadership team, who have achieved everything the board has asked them to do over the past few years in very challenging circumstances. They wish Ten and its management [team] all success in the future as the administrators look to the potential sale or recapitalisation of the business.”

Today’s announcement comes after it was reported earlier this week that Ten’s three billionaire backers – James Packer, Lachlan Murdoch and Bruce Gordon – were unlikely to guarantee a new $250m loan facility, which will be required once the network’s current $200m loan with the Commonwealth Bank expires in December.

During its half-yearly results in April, the network warned its future was in doubt unless it could source the new debt facility, cut program supply costs and get licence fee relief.

In reporting its $232.2m loss, Ten said there was “significant doubt on the group’s ability to continue as a going concern”.

“As a result of the matters disclosed, there is a material uncertainty that may cast significant doubt on the group’s ability to continue as a going concern, and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business,” the network revealed in the director’s report.

“The directors consider that it is reasonable that the group will be successful in the matters detailed and, therefore, have prepared the financial report on a going concern basis that no such asset is likely to be realised for an amount less than the amount at which it is recorded in the interim financial report.”

The network also flagged it would undertake a “transformation” program to cut costs.

“Ten has commenced a transformation program to improve all aspects of the business. This whole-of-business program will improve revenues through a range of initiatives that complement the MCN relationship and will achieve significant cost savings as previously foreshadowed, most of which will fall in the 2018 financial year onwards,” Anderson said in April.

Since the extent of the network’s financial woes was revealed in April, the Turnbull government has announced an extensive media reform package, including the abolition of the two-out-of-three and 75% reach rules and a reduction in licence fees.

The measures were part of Treasurer Scott Morrison’s Federal Budget, delivered on 9 May, however the proposed changes have not yet made their way through parliament.

Both houses of parliament are sitting until 22 June next week and are not set to return until Tuesday 8 August – after which there are less than eight full sitting weeks for both the House of Representatives and the Senate.

At the time of media reform package announcement, Anderson said money saved from the changes “will be reinvested” into Australian content.

“The government’s package provides very welcome, immediate financial relief for all commercial free-to-air television broadcasters. It provides a boost for local content and the local production sector,” he said.

“Every dollar from today’s changes will be reinvested into our great Australian content and into continuing to enhance our services for viewers across all platforms.

“Recent financial results and announcements from across the Australian media industry clearly demonstrate that this is a sector under extreme competitive pressure from the foreign-owned tech media giants.”

Anderson also noted the proposed changes were not about saving Ten, but brought legislation in line with the reality of the current media environment.

“A critical element of this holistic package is the removal of two of the current cross-media ownership rules: the two-out-of-three rule and the 75% reach rule.

“These cross-media rules arbitrarily prevent Australian television, radio, and newspaper companies from operating across media platforms. They are stifling growth and costing jobs.

“Now that we have a holistic package, it is time for parliament to get rid of these pre-internet rules to give Ten and other Australian companies a fair go against the foreign tech media giants whose dominance and influence is growing rapidly in Australia.

“This package is not just about Ten or free-to-air television. It is about ensuring that there is a future for Australian media companies – for local journalism, for Australian stories on screen and for a local production sector that provides jobs and training for thousands of Australians, many of whom go on to success on the global stage,” Anderson said. 

“Anyone who supports a future for Australian media companies must support this package and we call on the Parliament to pass these reforms urgently or risk losing local voices altogether.

“We welcome the review of the content rules also announced today. The rules need to be looked at in the context of the changing media landscape.”

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