The Ten Network just keeps on truckin’. No Nine-like flamboyance, or Seven-like desperation, except for, we had to say
it, Big Brother.

Another week of ratings and Nine wins, Ten trundles and Seven straggles.

But something maybe happening on Sunday night with Seven winning two weekends
in row. However Ten is setting the programming pace destroying the long
tradition of the Sunday night movie. The folks at Pyrmont in Sydney where Ten
resides, have it all over their rivals at Willoughby and at Epping at the
moment.

In fact there are some numbers in the Ten operations that drive Kerry Packer
mad with envy, and are driving the John Alexander approach to income
maximisation at Nine.

In short Nine may be the winner, but Ten is the
pacesetter. That’s not to say its all sweetness and light for the
troops led by former PBL
CEO, Nick Falloon, now executive chairman of Ten.

Big Brother, the costly pioneer of Reality TV is ailing, while last year’s late
surprise, Australian Idol, has yet to appear and run the gauntlet of an audience
jaded with the concept of any program with a manufactured version of
‘reality.’

The difference in approach between Ten, Nine and Seven is quite stark and can
be seen in their weekly ratings reports. Nine is all triumphal and full of
detail about the big picture, the big wins, the top 10 and the Nine programs
in it, the national performance and then metro markets with a look at how Nine
performed.

Seven is sort of the same, but with a less boastful approach given that they
have few wins to boast about. There’s more emphasis on how Seven is closing
the gap, especially in relation to Nine. Ten doesn’t escape Seven’s comparisons
either. Essentially it’s a ‘battler Seven’ approach.

Ten is all focus, almost exclusively on the 16 to 39 year demographic, with
some mention of the 25 to 54 group. It’s all about these two groups for Ten.
It’s a different approach and sometimes leads to some amusing situations.

Nine and Ten can both claim to have won a night. Nine will win the overall
ratings, Ten will of course win the 16 to 39 or the 25 to 54, or do so well,
that it’s, well a win in everything but the numbers. It’s a classic Warney effort.

So Big Brother for example, can do worse than last year in total viewers, but
do better by Ten’s reckoning because its getting more of the 16 to 39 age group
than last year. Which given Ten’s focus is what you’d expect.

But when it comes to giving an accurate picture of overall performance of the
Network it’s a bit misleading. The Big Brother audience is not necessarily the
audience that would watch the AFL, or some of Ten’s American drama programs:
Law and Order for example. Ten does need the older viewers.

So the overall numbers do count. But for Ten it’s enough to be doing well in its
target groups, and telling all the young marketers, that it’s doing well.

But this year even Ten admits than Nine is doing better in both demographics.
Ten is second to Nine in the first 20 weeks of ratings in the 25 to 54 group
and running neck and neck in the 16 to 39.

While Nine has improved its game in both segments, Ten has been under pressure
because of the failure of its slew of reality programs early in the year such
as Hothouse and The Resort.

This week it started a new lot of drama programs from local producers with
the first Small Claims telemovie screening on Monday night. Other programs are to
come in a similar form with the hope that that will succeed and become regular
series. Nine also has more local drama coming in the shape of The Alice.

But despite the battle of spin, the most telling area of victory for Ten is in
its margins – it’s long had superior cost controls. It’s got cheap as chips news,
no costly current affairs, but lots of re-runs and buy ins (Jamie Oliver from the
ABC is the latest example). It buys drama and local series cheaply and its
TV head, John McAlpine, is a skilled operator (who doesn’t much like David Leckie,
nor does Mr Leckie much like the Ten boss, having had numerous public and
private spats over the years).

McAlpine and Ten are busy killing off another
another long-held programming
tradition in Australian television – the Sunday movie.
Since it started running first up episodes of Law and Order: Criminal
Intent
and NCIS (another US
drama), they’ve gradually taken a bigger and bigger share of the 16-39
group,
the 25-54 and total people, culminating in a very good performance last
Sunday
night where both programs won the slot.

That will eventually force Seven to match it. The movies Seven and Nine have are
old by viewer interest, so unless they start producing made for tv movies or
telemovies to run on Sunday nights, Ten will get the jump on them.

There’s a cost advantage as well. These first run episodes are much cheaper to
buy than many of the movies and can be marketed more cannily to advertisers.

All this adds to Ten’s ability to drive its profit margins, which is what
drives Packdom nuts. Spare in fact, both under David Leckie and now John
Alexander.

Ten’s margins are fat. On earnings before interest tax, depreciation, and
amortisation TV margin at Ten was 39.9% in the six months to March, compared to
Nine’s 34.8 per cent in the six months to December. Nine’s margin rose, but
reflected the boom in revenue. Costs were up 5 per cent. Ten costs were up a
similar amount.

Ten reported earnings before interest tax, depreciation and amortisation of
$150.4 million; Nine earned $157 million, on revenue more than $70 million
greater.

Ten’s inherent better profitability stands out, hence the mantra of 16 to 39
and 25 to 54 in every comment on ratings and in any discussion of how the TV
business is going.

Nine is often derided for ‘skewing old’ as some of the younger smartie pants in
the media describe the network’s ability to attract and hold older viewers. But
they are wealthy and will retire wealthy. Nine also knows that if you attack
all demographics, you can get a good share and hold viewers as they age. That
means by the time they reach 35, they are ‘old’ in the eyes of the smartie
pants.

They aren’t, of course, but they are ready to be absorbed by Nine into their
share of the 25 to 54 demographic.

But Nine wants margins similar to what Ten enjoys. Ten has around 31 per cent
of ad revenue, but fatter margins. Nine’s share of revenue is running around 39
to 40 per cent, aiming at 41 per cent. Its margins are slimmer than its
share.That’s why John Alexander has gathered around him a group of cheese
parers, to slice and dice everything Nine does to make it more profitable by
cutting costs, lifting revenue and margins.

He has to do it. Kerry Packer is determined to catch Ten, and for Alexander
success will be the only way to be noticed in a company heading down the gaming
route.

Peter Fray

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