Crikey subscribers shouldn’t be surprised to read news of a cost crackdown at the Nine Network on page one of today’s Financial Review. Crikey readers first heard the news ten days ago, when the Network’s chief operating officer Mick Morris resigned and was replaced by the number-two from Melbourne, Ian Audsley.
What the paper didn’t say was that Nine, like so many other businesses, is preparing its final budgets for the 2005-2006 financial year and for the second half of calendar 2005. At times like this attention is almost totally on costs and income, and how to achieve income targets and maximise the bonuses and other rewards of senior managers. The AFR splashed the news of the cuts and claimed that Kerry Packer was reluctant to cut into the business at Nine. The article claimed staff numbers would be reviewed and that the cost-cutting program would get underway with the return today of CEO, John Alexander, to Sydney.
The last time Nine and PBL announced a targeted cost-cutting program was the now famous $30 million that Alexander wanted to slash in 2002. But the savings were never made. Alexander was determined to cut the network’s huge news and current affairs bill. Senior executives and producers were forced out, but the news and current affairs bill rose because of events like the Bali tragedy and the second Iraq invasion and war. The news and current affairs bill at Nine two years after Alexander announced his target was actually higher than when Alexander’s target was revealed.
Which makes the AFR’s extravagant coverage of the latest crackdown a joke. It has been going on for more than a month, since the Nine management “getaway” at Byron Bay decided to cut spending on non-prime-time programs and devote resources to prime shows, especially News and A Current Affair . Morris left because he was sick and tired of being the bad cop in these sorts of exercises.
Nine CEO David Gyngell, CFO Brent Cubis and Audsley have been meeting once a week to examine all spending. All new discretionary spending has been banned, and staff costs such as travel and entertainment have been curtailed or eliminated by official edict.
The big problem is that the network’s costs are still growing faster than its slowing ad revenue growth.