What
a difference a year makes in the volatile world of network
television.The Nine Network has not only lost its number-one ratings
slot to Seven, it has now been overtaken by Ten in profits and margins.

But as hurtful as the loss in ratings prestige has been, it’s
the downturn in profitability and margins at Nine that has hurt most in
the Packer empire, where profits are paramount and their own former
CEO, Nick Falloon, is showing how it can be done at Ten.

Ten
became the most profitable commercial TV network in the country with
earnings (before interest, tax, depreciation and amortisation) of $194
million in the six months to February 28, $22 million more than Nine
($171.3 million) in the half year to December. Ten’s profit margins
were simply fabulous – 44.7%, or 47.7c in every dollar of revenue
turning into gross profit. Nine’s weren’t too shabby – 35.1% – while
Seven lagged because of its poor year last year with a margin of 17.6%.

The contrast between Seven and Ten’s margins reveal the
importance of two ingredients in the TV business: good management and
good product. Despite losing audience share this year, Ten will
maintain its profitable number-one spot simply because it’s much better
at extracting higher profits from every dollar of revenue through tight
cost control.

And as 2005 rolls on and revenue slows, cost
control will become more important. Nine has started cutting back and,
like Seven, is trying to run lean while spending money on prime time
shows. But to achieve the sort of margins now being generated by Ten,
the managements of both networks have only one option – slash costs
deeply.

Peter Fray

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