As Seven West Media again dominated free-to-air advertising revenues in the six months to December 31, and Ten recorded its lowest share ever, there emerges a worrying, longer-term trend for the sector to confront, as figures compiled by accounting firm KPMG show.
Thanks to an unexpected sharp fall in the December half-year — when the industry had been looking for a small rise — the full 12-month figures show a total lower than what it was in calendar 2009. December half-year ad revenues fell 3.1% to $2 billion, after the 1.2% rise in revenues in the June half-year to $1.8 billion. But the total revenue for the year of $3.8 billion, was down on 2013’s $3.9 billion, and well under the 2010 total of $4 billion, the highest the figures have been.
Ad revenues account for the bulk of the annual revenues of the networks, but there’s growing income from other sources, such as online and money earned from making and selling programs (as Seven is doing with Home and Away) and handling market campaigns in-house, which all three networks are now doing. But ad revenues are vital to the bottom line of the networks, and the share prices (all of which hit 52-week or all-time lows in the past year).
There’s no growth — and hasn’t been for the past five years — and yet their costs continue to rise as they head towards blockbuster reality-event type programs, such as The Block and The Voice on Nine, House Rules, My Kitchen Rules, both on Seven, and I’m A Celebrity … Get me out of here! on Ten. These programs are slowly increasing their proportion of the network’s costs and revenues because they generate high ratings and big bursts of ad revenues.
This is a dead-end business if it continues like this for much longer. Pay TV ad revenues also fell last year, according to informal estimates from the sector, so there’s no joy anywhere. Compared to the growth in ad revenues in the UK and the US, the local industry is on hard times.
Seven accounted for 40.4% of the revenues according to the Free TV Australia figures — up from 39.74% in the last half of 2013. Seven’s share fell half a per cent from its first-half share. Nine grew its share from 38.74% to 39.2%. Ten’s share fell from 21.52% to 20.4%.
Sydney media analyst, Steve Allen said in a note to clients this morning:
“Seven are hanging doggedly on to a disproportionate revenue share, compared to 16-54 audience, and their sales ‘monetising’ index, is at the highest point in this series. No wonder Network Ten made a pleading case in their 2015 ‘up fronts’, for fair and equitable revenue in line with audience share, and this shows how seriously undervalued Ten presently are. Ten’s results, 25% below audience share, is the lowest in this series. The big end of town, Media Agency wise, is playing Ten off at the break. To arrest this serious decline, Ten needs to generate a solid and good ratings year, to break out of this pattern. Ten enjoyed the best 16-54 audience share in 2 years.”
And to do that, Ten needs to resolve its ownership (or have it resolved for them) and needs to find more cash to allow it to build up a group of new programs for 2015 and 2016. At present, it doesn’t have the money to do that.