It’s time for an Australian media reshuffle
It’s homework-marking time at Nine, Seven, and News Corp this week, and there’s been a few ‘see me after class’ performances of late.
Facing shareholder fury at Nine’s annual general meeting this week for swimming against the public tide when it comes to gambling ads; for Domain’s struggle to climb the property-website ladder; and for countless other woes at Nine, new-ish chair Catherine West and acting CEO, Matt Stanton, promised (or pointed out, much like Tony Blair once did) that things can only get better.
They have a plan. West explained: “We have a strategic and operational review under way,” and that Stanton and co. were “working on a project to improve the efficiency of the overall business”.
To that end, there were coded references to re-bundling the various parts of the business. At the moment, 9Now and Stan each sit separately to Nine’s free-to-air TV stations – this will all fold in under a broader TV offering, alongside Nine Publishing, and Nine Audio – plus the 60% of Domain they own.
It makes obvious sense to bundle the business into Nine TV, Nine Audio, and Nine Publishing, especially given the “challenging external environment” that West referred to numerous times during her speech.
“Our financial performance in FY24 reflected the difficult year experienced by the broader Australian economy and the advertising market”, she told shareholders. Which is true – Nine’s profits were down 31% for the year, as advertisers tighten their belts.
Nine’s net profits continue to drop, down 28% year-on-year during the first quarter of FY25, dragged down by a still-plunging TV advertising market and increased competition for those scant recession-era advertisement dollars.
But that’s all depressing. So, fittingly, in her chair’s address at the Nine AGM on Thursday morning, West focused on the audience numbers rather than the pesky financials.
Live audiences for free-to-air and 9Now increased in 2024. Stan now has 2 million-plus paying subscribers after “better-than-expected post-Olympic/Paralympic churn to date”, meaning some people who signed up for Stan Sport for the Olympics alone decided to stick around.
Digital subs for The Age, the Sydney Morning Herald, and the AFR passed half a million, and 3AW and 2GB are winning the radio ratings in Melbourne and Sydney, respectively. Domain audiences are up 10%.
“Advertisers and sponsors belong at Nine”, West told shareholders, who have seen a 45% plunge in their Nine stock since January, and therefore no doubt agree.
Shareholders want Nine’s 60% of Domain sold off though. That much was clear from the comments at the AGM.
“Something is wrong with Domain,” K Capital analyst Charlie Kingston said.
“Arguably, it’s been a bad investment for Nine,” he said, questioning “the future of that stake”.
West admitted the investment hasn’t “brought the increase in the core business that we planned”.
Nine bought 60% of the real estate listings company in late 2017 when the company was valued at $2.2 billion. Today, it’s worth $1.74 billion.
For comparison’s sake, REA Group, which publishes realestate.com.au, is worth $30.9 billion. Nine itself is worth $1.79 billion, with over half of that value pegged on its Domain stake – despite Domain making up roughly a fifth of its earnings. So, yeah, sell it.
Just last month, Domain’s chief marketing officer, Rebecca Darley left for TPG, while a week later CEO Jason Pellegrino announced he was stepping down after six years in the top spot. They have seen the ‘For Sale’ sign in the lawn, so to speak.
With a proposed sale in mind, this quote from West’s address jumped out: “We continue to see opportunities for Nine and Domain to work more closely, to build audiences and data-backed insights to the benefit of both companies.”
Domain may be a better business partner than business asset. Especially if Nine is siloing neatly into TV/ publishing/ audio. No room for real estate there.
Let’s move along to News Corp, which has also been vocal about selling off property, namely, its 65% stake in Foxtel Group.
News Corp enjoyed a first quarter earnings record of A$623 million, up 14%, and “driven by REA Group’s Australian success and strong digital book sales,” according to their financial release.
REA Group, in which News Corp holds a 61% stake, saw a 22% revenue increase, while digital book sales at the company jumped 15%, driven by a 26% leap in audiobook sales.
“Key titles in the quarter included Hillbilly Elegy by J.D. Vance,” the report notes. Interestingly, given the apocalyptic times we are living through, “Bible sales were also strong.”
Profiting off the Bible is easy, though.
News media revenues at News Corp decreased by 5% in the quarter, as did advertising revenue, “primarily due to lower print advertising revenues at News Corp Australia and lower digital advertising revenues at News UK”.
Foxtel Group saw revenues up 3%, driven by “increases in both volume and pricing” for Kayo and BINGE. Earnings for the quarter, however, dropped 1% “primarily due to $11 million of Hubbl costs, higher sports programming costs related to contractual increases, and higher production costs.” Fair enough.
Foxtel’s total closing paid subscribers were over 4.6 million, which is the real metric News Corp is flagging for the benefit of shareholders and perhaps anyone interested in buying their 65% per share, maybe, possibly?
News Corp’s CEO, Robert Thomson, announced “third-party interest in a potential transaction involving the Foxtel Group” during the company’s fourth-quarter results in August.
“We are evaluating options for the business with our advisors in light of that external interest,” he said.
On Friday morning, News Corp shared the following update, tucked into ‘Other Items’ under the sub-heading ‘Strategic Review’: “In response to third party interest, the Company is continuing to assess strategic and financial options for the Foxtel Group, including its capital structure and assets. There is no assurance regarding the timing of any action or transaction, nor that the strategic review will result in a transaction or other strategic change.”
Do you know which third-party is currently working on bundling all their TV assets together, Hubbl-style, and may have a huge chunk of change left over if they sell their stake in Domain for anywhere near the $1 billion it’s currently worth?
Do you know which third party spent its recent Upfront reiterating the importance of their TV audience reach to advertisers (while giving the recent cultural review findings roughly 15 seconds of airtime)?
It’s Nine of course, whose chair opened her address to shareholders this week by reminding them that “the Nine brand has been part of Australia’s social fabric since 1956 when we introduced television to the nation,” and repeated the phrase “Australia belongs at Nine” throughout like a mantra.
Maybe Foxtel belongs at Nine.
What about Seven West Media? Hell, maybe it belongs at Nine, too.
Or at least its television arm – as Nine is planning on doing, Seven underwent a major restructuring in June, splitting into three prongs: Digital, Television, and Western Australia (Stokes’ mighty WA newspaper monopoly).
Seven West Media, all three prongs of it, is valued at $253.96 million – one-seventh of the market valuation of Nine – so a Nine takeover of its TV assets is not as far fetched as it would seem. A single local broadcaster to take on the Paramount-owned Ten, plus Netflix, Disney, Amazon, Google, Meta, TikTok, Disney, Spotify, books, human contact, old copies of Vogue, et al. Seems like a good idea – and possibly the only means of survival over the next decade or three.
Chairman of the Seven Network, Kerry Stokes, admitted to being swamped by the overseas giants at the company’s AGM on Thursday morning.
David Kingston from K Capital(them again) said to Stokes: “Seven West Media shareholders have been punished with large capital losses and also no dividends since 2017. The issue here for shareholders is, is there any hope?”, asking if they should “give up”.
“Unfortunately, I actually agree with you,” Stokes said, surprisingly. “There’s nothing you’ve said that isn’t true. We live in an environment which has changed dramatically, and it has changed because of streamers like Amazon, Google and Facebook, who are eating our lunch.”
Seven’s net profit for FY24 was down 69%, to just $45 million. In a grim and muted trading update lodged with the ASX shortly before their AGM, Seven noted revenue would likely drop a further 6.5% in the first half of FY25.
On top of all this, Seven’s debt rose from $257 million in FY23 to $301 million, due to a $67 million investment in ARN.
So, time for an Australian media reshuffle.
Nine can buy both Foxtel Group and Seven West Media’s television assets.
Of course, they’d need to free up some capital first, so maybe they sell their 60% of Domain to News Corp to sit alongside its 61% of REA Group. Sure, the monopoly-poo-poo-ers at the ACCC may have some gripes about that, but it’s only a matter of time before Amazon Bricks or Meta Dwell or whatever tech-owned real estate portal decides to launch here after noticing the REA Group in Australia is responsible for most of News Corp’s international good fortune and it’s open season, so best to break earth on that as early as possible.
Maybe Seven West Media can use that TV money to buy Nine’s Publishing arm – Seven have been very vocal about their incursion East since launching the Nightly – this would shortcut the slaughter. Plus, Fairfax newspapers and Nine were never a happy fit.
And, News Corp can invest in warehouses for all those extra Bibles they’ll sell during the second Trump era, funnel these real estate purchases through Domain to prop it up somewhat, while reporting in its mastheads that Nine is once again, bringing television to the nation – which Seven Papers won’t argue with, because they’ll be too busy taking credit.
It’s a nice idea.
Enjoy your weekend.
Keep up to date with the latest in media and marketing
Got a tip?
Nathan Jolly is the Features Editor at Mumbrella. He joined the team in July, 2023.
Linkedin
Have your say