Sunraysia TV, operator of the floundering Perth affiliate of the Nine Network, STW-9, is proof positive that you can lose money in commercial TV, even when you are a member of what claimed be the number two network in 2006.

It is the most incompetently run TV station anywhere in the Australia, being based in Perth but run from Melbourne by Eva Presser. So poor is its performance that it has dragged down the Nine Network’s overall performance year after year.

Now the Network’s own poor performance is impacting STW. Over the break the company issued this profit, or rather loss warning:

Sunraysia Television Limited, owner and operator of Channel Nine Perth, announced today that due to the slowdown in the television advertising market and reduced program ratings, revenue will be approximately $44.7 million for the half-year ended 31 December 2006, or 12% lower than the corresponding period in the previous year.

Sunraysia is very likely to report a loss for the half-year ended 31 December 2006.

As the program supply agreement with Nine Network Australia Limited has not yet been finalised, the company is not currently in a position to provide specific guidance on the amount of losses for the half-year ended 31 December 2006.

The company expects to be in a position to be able to provide more detailed guidance to the market before the end of February 2007. In the corresponding period in the previous year, Sunraysia recorded a $2.1 million profit after tax.

Ouch. And that previous profit was converted to a loss by a sharp slump in second half performance, thanks to losses on the Commonwealth Games and the AFL.

Last May the company warned that losses from the Commonwealth Games ($1.5 million), the AFL and falling ad revenues would produce a loss of up to $4 million after tax. On an EBITDA basis the company lost $4.4 million compared to $6.2 million profit in 2005.

The loss estimate would take into account the expected favourable impact of the Ashes cricket broadcasts in November and December which were expected to produce a bonanza for Nine. Perhaps much of the bonanza has stuck to the fingers of the Nine Network stations in Sydney, Melbourne and Brisbane and PBL and not affiliates like STW.

The latest warning means that STW Perth lost money in calendar 2006. The position of the Nine affiliate in Adelaide, NWS-9, operated by Southern Cross Broadcasting, will be better but not by much when compared to Perth. It too has been hurt by the downturn in ad revenues for the Nine Network but it has struck a new affiliate agreement with PBL so its financial position will be easier to work out going forward.

There have been reports around the TV industry that James Packer’s PBL Media wants to buy the Perth and Adelaide stations. Adelaide is saleable if Macquarie Media does a deal with Southern Cross and with another loss being revealed you’d think that Perth would be on the market.

It could be, not at the $13 a share it is currently at but around $15 a share. Presser’s interests own 48.9% of the company and Bruce Gordon’s WIN has just over 43%. Members of the Presser family have smaller holdings which would give her just over 50%. WIN, which is Nine’s main affiliate, has no board representation and has been locked out of any managerial involvement despite its big holding.

At $15 a share PBL would have to pay a total of $165 million to $170 million, compared to the current value of around $149 million.

Peter Fray

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