CEO Hugh Marks Admits Nine Had “Disappointing” Year, Predicts Drop In 2017 Ad Spend

CEO Hugh Marks Admits Nine Had “Disappointing” Year, Predicts Drop In 2017 Ad Spend
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Speaking at the Nine AGM this morning, CEO Hugh Marks expressed disappointment in Nine’s performance this year, which came off the back of two major issues facing the broadcaster.

CEO Hugh Marks singled out these two issues as, “A soft free to air advertising market, and our own weaker than planned FTA ratings performance.

“While we worked hard on our cost base, we weren’t able to absorb both impacts, resulting in a disappointing performance at the bottom line.

“As much as our performance in FY16 was impacted by the overall market, it was impact by our own disappointing share. Share is something we can directly control.”

But Marks said 2016 was the year they made new progress to reshape the business to put them “in a good stead for the years to come”, citing 9Now digital platform, the SVOD venture with Stan, launching fourth channel 9Life, and locking in long term broadcast rights for NRL through to 2022.

“Both our digital and broadcast businesses are currently investing in leading edge ad management systems that will ensure maximisation of yield and efficiency of delivery for our advertisers. We expect both systems to be operational before the end of this financial year.

“In terms of the financial outlook for FY17, it would be fair to say that the advertising market continues to be short and difficult to predict. After a Q1 market decline of around four per cent it appears likely metro FTA advertising revenue will be down in the low single digits for FY17.”

Marks committed to having at least 50 per cent more premium local hours in 2017, along with a continued investment in its digital publishing business, adding more verticals into the existing mix and enhancing “monetisation of this content including across video and mobile”.

“The ownership and exploitation of content rights will be a key priority in the current year and in the futire with a number of key owned content franchises being available for exploitation in 2017.”

Marks spoke to the six per cent dip in group revenue for the year to June 2016 off the back of a “weaker FTA market and Nine’s lower share”.

Marks added the group paid a four per cent final dividend taking full year dividends to 12 cents, making it a payout of 86 per cent. Nine also sold the stake in Southern Cross for a $30 million pre-tax profit, with Marks saying “our balance sheet remains solid”.

“This will become more pronounced as we work through calendar 2017 with proceeds from the sale of the Willoughby site and recoupment of our previous NRL payment across calendar 2017, offsetting the recent prepayment relating to the new agreement.”

Looking at divisions, Marks also noted TV revenue was down seven per cent, metro FTA markets were down by two per cent, and regional down six.

“Nine’s slow start to the 2016 season resulted in a 37 per cent share of metro revenues for the 12 months to June, in line with the guidance we provided in April. Other revenues include those from the NRL simulcast arrangements with Foxtel.”

Chairman Peter Costello also conceded to the network not boasting the best start to 2016, but that it’s recovered as the year progressed, despite licencing issues hindering FTA.

“Our Free To Air business has successfully overcome a slow start to the 2016 ratings year, with consistent post-Olympic victory across all of its key demographics and the promise of further incremental local premium content for 2017,” he said.

“Of course, licence fees remain a key cost of the business. While we welcomed the reduction… our licencing regime remains unfair to Australian broadcasters. Not only does the Australian FTA industry remain liable for [consumption] taxes but of course it has local content and production requirements as well.

“The licencing regime is anachronistic, it was conceived for a media world that has passed and is out of step with arrangements in other comparable markets.”

Costello stressed that “re-addressing Australia’s licence fee regime” is the most pressing issue facing FTA right now, with international benchmarks the key to creating a fair playing field.

He also insisted that Nine would remain supportive of wider media reform that would allow “local industry to evolve without artificial barriers”, claiming it would “seek out commercial opportunities where they present themselves”.

Harking back to the wildly controversial issue the 60 Minutes incident in Beirut in April, Costello added, “Following this incident, NEC commissioned an extensive independent review of the events leading up to the incident to ascertain what had gone wrong and what should have been done better.

“We have subsequently committed to enhanced processes relating to story selection and approval, how we approve contracts and payments, and the way we conduct risk assessments.”

 

 

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