When you have bad news it’s always handy to have another, vastly different message on hand to sell. And while the Ten Network had the Coonan-inspired media circus to distract from its poor earnings and sales, it did manage to slip out a new approach to targeting its ratings attack next year. There’s no real growth left in the 16 to 39 age group — Ten has that sewn up — so the network is heading to the 18 to 49 group. The justification was: we lead it in the main 6pm to 10.30pm prime time ratings zone this year anyway.
Ten revealed that 2005-06 had been a bad year, with earnings down sharply on lower sales (down 8.9 per cent to $764.6 million): EBITDA fell 27.6% to $229.1 million and a sales margin of 30% for the year (it was 37.6% in the 2005 year). That still left Ten the most profitable Network on a margin basis, but Seven earned more ($256 million on a margin of 26.1%) and Nine less, $215.5 million (and a margin of 24.7%).
But the big story was the major change in approach to its ratings pitch next year. In fact it could be as significant as its move to concentrate on the 16 to 39 age group about six years ago, if the advertising industry listens. The 18 to 49 is the favoured demographic for US networks and advertisers and Ten’s new Fox deal will see it picking up a number of new programs in this demographic.
The move will put Ten into a direct battle with Nine and Seven in a demographic that accounts for 75% of ad dollars spent in the major metro markets in Australia. Nine and Seven target the 25 to 54 group which accounts for a bit more, around 80 per cent.
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Two years ago Ten tried to make the 25 to 54 group a secondary focus for the 2005 but failed. That failure cost the network dearly in terms of lost sales and lower ad spend this year (which was reflected in the poor revenue and earnings figures). By going for a much bigger pool of ad spend; Ten believes it can drive revenue and earnings faster, especially with its well-known cost controls. Ten’s costs in the 2006 year were originally forecast to rise five per cent but ended up just 2.3 per cent or around an extra $12 million in a total expenses figure of $641 million.
Besides the Fox output deal, it has been the success of programs like Thank God You’re Here (returning next year for two series) which has skewed to a much broader demographic that has convinced Ten to widen its target audience. Ten CEO, Grant Blackley, says the network started working this approach earlier in the year with some signals to the ad market but will go for the bigger push in rate negotiations that are now starting.
The Ten move threatens the Nine Network, which is the weakest of the three networks and has viewers and advertisers who Ten and Seven reckon they can attract with better programming and sharper deals. Nine doesn’t have the programming strength that Seven has, especially in programs appealing to this demographic. Nor does it have a strong group of US sourced programs coming in 2007.
Coupled with the ownership shuffle and the added debt, plus the costs of going digital and moving studios and facilities in Sydney and Melbourne in the next couple of years, Nine will be under added pressure to meet the Ten challenge and reclaim ground from Seven.