It wasn’t a great 2016 for the free-to-air (FTA) players and now 2017’s looking even more calamitous than the year previous for Seven, Nine and Ten.
It’s ongoing sex scandal aside, when Seven unveiled its half year results on Tuesday – including a 91 per cent dip in profits – it set the tone for the FTA networks besieged by tired programming, falling audience eyeballs and plummeting ad revenues (SMI Data out yesterday found TV ad revenues down 4.7 per cent YOY to January).
Adding to the gloom, yesterday Ten’s CEO Paul Anderson warned shareholders of a bumpy year ahead. Anderson said the broadcaster was being buffeted by falling ad revenues, rising costs, ongoing threats from digital players and hefty license fees. “This industry is obviously under severe duress,” Anderson said before adding the network was facing a full year loss by as much as $30 million.
Nine’s Hugh Marks is next to face the music and will deliver the network’s results this coming Thursday.
At December’s ReThink TV forum that featured all the network bosses, Seven’s CEO Tim Worner made the stark admission that the quality of content produced by the FTA networks hadn’t been good enough and this was in an era where players like Netflix are making programs with the world’s best actors and budgets reported to be as high as $100 million.
Worner said at the time: “The last couple of years, with TV shows, I don’t reckon we’ve been at our best as an industry. I don’t know how the room feels about that, but that’s how I feel. (Australian TV) has been though better periods and better periods will come.”
As Neil Chenoweth writes in today’s The Australian Financial Review, Seven and Ten’s statements this week are merely a harbinger to Nine’s announcement the following Thursday. “The falling television advertising market now resembles a game of musical chairs, and when Mr Marks releases Nine’s results for the first half next Thursday, this round he’ll be the one left standing without a chair,” Chenoweth wrote.
“Whatever else is happening in television, this is the critical figure. If the size of the total pie is falling, the nature of the industry changes.”
So what will happen? The only option available to Marks, Worner and Anderson is to go at each other hard. They’ll slash their costs internally and fight and discount even harder for a slice of the diminishing ad pie. However, as Chenoweth noted in his column, ad spends may be down but the networks actual percentage of the cash hasn’t changed that much in recent years.
The other pressing problem for the FTAs is more and more audiences are tuning into SVODs which, as Ten’s Anderson again reminded everybody yesterday, aren’t beholden to the costs and license fees of the local networks. Nor do they have to produce (expensive) local content that the FTAs have to as per their license agreements.
And the other threat is Facebook and Google which are soaking up ad spends and have both campaigned marvellously well to cajole CMOs to ditch expensive TV advertising campaigns and give them the cash instead.
As Andrew Birmingham, editor of business tech site Which.50.com told B&T last year, “Ad money flows where the eyeballs go and agencies who deal with the traditional media need to understand that money is going to shift out of things like free to air TV.”
And according to Birmingham all legacy media – not just the FTAs – are, as he succinctly puts it, “f@cked”.
Birmingham said: “The players that have typically driven media spend in Australia have been Fairfax, News Corp, APN, the radio stations etc. But by the time you take Google, Facebook, Seek, Realestate.com and Sensis; you take all the money that they’re going to get in digital advertising, then that leaves absolutely nothing for anyone else.
“They (the traditional media players) are all fucked and they know they’re fucked! They’ll be fighting over the scraps after Google and Facebook have taken what they want!”