Cricket To Feel Nine’s Cost Cut, TV Channels Struggle To Profit
Nine Entertainment has revealed it will concentrate on slashing out $100 million in costs over a three year period after reporting a 9 per cent drop in profits.
The targets of cuts include the Ashes, 2020 men and women’s cricket T20 World Cups as well as international TV programs to help facilitate those expense cuts as it’s free-to-air television business struggles with decline advertising revenue.
In its first full-year results since the $4 billion merger with Fairfax that saw Nine own respected mastheads The Sydney Morning Herald (SMH) and The Age, Nine revealed revenue fell just under $1.2 billion, group EBITDA of $251 million and a net profit after tax of $114 million.
Nine’s CEO, Hugh Marks, revealed he is ‘aggressively transitioning’ from linear television and print newspapers to video services and subscription models.
Nine is also focusing on a ‘digital distribution’ model after stating almost 40 per cent of the media juggernaut’s earnings now come digital platforms, alongside digital websites of the SMH and The Age, Marks said.
It comes despite hostile competition from new streaming players including Disney+, Amazon Prime and Apple TV, with Stan growing in subscribers and revenue – bringing in 1.8 million subscribers at the end of December.
Nine’s free-to-air channels will instead concentrate on more profitable content in the digital era, including popular sport like the NRL, news and current affairs and local reality shows such as Married at First Sight (MAFS), he said.
‘Recognising this company-wide evolution, we believe there is significant potential to refocus the cost structure of our FTA business, targeting the removal of up to $100m in annualised costs over the next 3 years,’ Marks said in Nine Entertainment’s financial report released this week.
Marks also identified savings could be found in the cost of printing and distribution on newspapers, while flagging the $40 million cost of relocating the business to North Sydney next year.
Nine isn’t the only commercial TV channel struggling – Seven West Media posted an even greater loss than Nine last week, reporting a total of $67 million drop on a total revenue of $773.3 million for the first half of the 2020 financial year. Underlying net profit after tax also dropped to 22.5 per cent.
On Wednesday, Seven CEO James Warburton called on the government to urgently review the local content quotas subjected to the free-to-air broadcasters in return for their licences.
Warburton then threatened the government that the network would stop making children’s television and could be in breach of requirements which make all broadcasters must produce 390 hours of kids TV every year.
‘We’ve been clear for a long time that the children’s content quota was not a sustainable one for us and the wider commercial television industry in Australia,’ Warburton told Nine newspapers.