Terry Television examines the latest TV ad spending report

So the Seven Network remains confident that it’s on the right track, despite
figures showing that the Ten Network moved past it to become the second ranked
TV network in terms of ad revenue. Seven says its “sales team continues to
write strong business” and over the past 12 months “Seven has
retained a 30.6% share of the advertising market”.

Well, yes, and a big no. The latest figures from the Industry Lobby group
FreeTv Australia show that in the first six months of 2004 Seven had 29.9%
share of total industry ad revenues, Ten had a 30% share and the Nine Network
has cleared away to a dominant 40.1% share.

Seven’s revenue rose by only 8.7% in the six months to just under $359 million,
Ten’s jumped almost 15% to $360 million and Nine’s rose 15 per cent to an
impressive $481 million.

Seven’s share was 31.1% at the same time last year (and 41.5% at the end of the
December half in 2000, thanks to the boost from the Olympics). Seven is looking
for a boost from the Olympics in this half and claims to be experiencing strong
demand for advertising in the games.

Total revenue across Australia rose 12.89% to $1.540 billion in the six months
to June. And with the first half usually the slowest in TV because of the low
months of January and February, revenue for the calendar year will top $3
billion quite easily.The Christmas ‘back end’ to the year, as network sales
people call it, is the peak for revenue for the networks and the Nine Network
would, even now, be experiencing shortages in ‘avails’ for November-December.

These figures underline the fact that we are in the great boom in advertising
for years, much greater than anything seen in 1999-2000.
The long consumer spending boom, strong retail sales, record car sales and huge
housing market have produced a flood of media spending across all outlets.

So in this sort of market, all sorts of errors can be papered over. Seven’s
poor performance, Ten’s loss of viewers for its 5 pm news and Nine’s dismal
outing in the past three months in the 5.30 pm to 7.30 pm slots in Sydney and
occasionally nationally.
In a much tougher market context, all problems would have been tackled much
earlier and with more vigour because of the stronger hand of advertisers.

In these boom conditions, the TV channels hold all the aces. And its no wonder
pressure is slowly growing for a fourth network.
With PBL and Seven due to release full year earnings reports by the first week
of September, we will then have a good idea of how cost containment and profit
margins are going.

Traditionally in the past all networks have tended to get a little slack during
the good times so far as cost controls are concerned, but this time around all
have vowed not to make that mistake.

Ten is more focused than the others and will look to report a strong rise in
earnings by controlling costs and getting its gross margin to stay around the
38% mark. Nine wants to increase its margin closer to Ten because Kerry Packer
wants it there. So far it hasn’t been successful, despite all the moves by John
Alexander and David Gyngell. Nine’s margin is running at just over 34%.

Seven’s margin will end up around 30% to 32%, depending on costs.

You can bet your boots that Seven will make more of the revenue surge because
of the Olympics than the performance in 2003-2004 when it reports in early

The other point from the figures shows just how dominant Sydney is. A record
$433.92 million, or 28% of the national total was spent in Sydney. But of the
five main metro markets, Sydney accounted for a massive 36% of the $1.199 billion spent.

That why what happens in Sydney each night and week is so important to the
overall fortunes of the networks. In this sort of market any adverse changes
will be slow in having an impact, but if they persist for too long, an impact
will be felt.

The other point about the figures is the growing importance of regional NSW. In
total, the $149.72 million spent there made it the fourth biggest market in
Australia. It’s bigger than Perth or Adelaide, or the total state markets of WA
and South Australia after regional spending is factored in.