Nine will cut $100 million in costs from its free-to-air (FTA) business, as it continues to bank on the growth of its digital offerings.
The media company posted a 5.3% lift in headline profit after tax to $114 million for the half year to December.
While the results were within analysts expectations, Nine says it experienced a softer-than-expected ad market for the start to 2020. However, strong performances across subscription and BVOD helped to offset this.
“Stan and 9Now continue to be stronger than what we maybe modeled was going to be the case. Obviously, we hoped that they would be that successful,” Nine CEO Hugh Marks told AdNews.
“The metro media masthead business, particularly the Financial Review is doing a great job of really proving its future model. So there are real standouts in that result and obviously we've got the challenge of the listings environment for Domain and the ad market for our ad-supported business.”
The $100 million in cuts to FTA, to occur over three years, comes as revenue for the division fell 6% to $531.2 million, while its BVOD platform 9Now rose 44% to $42 million.
Marks says about 60% of the cuts will come from international content rights, while the remainder will be taken from one-off sporting events, and further “synergies”.
“We have acquired content, that was the history of this business. You acquired international content, you put that out in a package service to audiences and advertisers bought that. That's how we made a margin but obviously it's the international content where audiences fragment the most. So given that's where the largest audience loss is, we need to decrease the price of that in our books,” Marks says.
“The second one is the one-off sports events that are becoming increasingly hard to monetise. They go up in price, but I always questioned whether we're legitimately driving incremental revenue. I think we saw that in the last six months. We wrote revenue into the Ashes, but it wasn't necessarily incremental. So that's another area where we need to be very focused on our expenditure.”
Marks flagged further job losses as the company moves into its new North Sydney office following its merger with Fairfax Media and Macquarie Media.
“As we move into our new premises, there's a lot of duplicated activity that happens across the group, across technology and finance, so still merger synergies to come,” Marks says.
“That's a third area of focus for us in terms of cost savings. What we're trying to do is ensure that we continue to protect and hopefully even grow our spend in core content, domestic content creation, news and current affairs, consistent sport or local entertainment.
“I think there'll be job changes as we go through this next three year period and some roles will disappear but others will be created.”
Marks is also hoping that the launch of Virtual Australia (VOZ), a new database combining audience across devices, will help traditional media claw money away from Facebook and YouTube.
“I think it [VOZ] solves a problem,” Marks says. “Television's reach declined with audience fragmentation. No doubt about it. Now if you add video-on-demand back into the equation, particularly for those core content propositions like Married at First Sight, suddenly you see is that the reach of television in fact across the two hasn't changed over a decade.
“What advertisers are doing is saying ‘reach has declined in linear, we need to buy incremental reach on YouTube or Facebook video’. Well you can't actually measure that, you don't know whether it's duplicated or non-duplicated reach, but you will be able to do that across linear and VOD. And I think that's pretty revolutionary for an advertiser, and most of them do buy reach to ensure that they're getting the reach that they need to get for their marketing outcomes. So, yes, absolutely revolutionary.”
Marks says the response so far from media buyers on VOZ has been positive, although the industry still needs to work on the sales system and technology to match the seamless buying experience Facebook and Google offer.
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