Let’s ignore the media gush about Seven West Media CEO James Warburton’s new cost cutting effots, and give those efforts some much needed context. The cuts — including the axing of Sunday Night: True Stories — will likely be the first of several hacks into the company’s $1.3 billion cost base, because the savings in this round do not match the hype.
The cuts were confirmed via an email conveniently leaked to outside media and investors on Wednesday. Reports of the savings vary — $10 million in some reports and $20 million in others — with unconfirmed claims that around 100 people would go. But what’s the reality?
In the year to June 2018-19, former CEO Tim Worner and his crew cut either $38 million or $41.7 million. The $38 million was a “net” figure referred to in the profit announcement, the $41.7 million seems to have been a gross figure and was referred to in the annual report. They were substantial cuts — around 3% off a cost base of more than $1.3 billion. So the first-up effort of Warburton was less than 1%, perhaps 1.5%.
All up, Worner and his crew cut the best part of $100 million or more from Seven’s costs over three years while accommodating the costs of the Commonwealth Games in 2018, the new AFL contract and the new cricket broadcast contract. Warburton’s cuts and their costs (supported by chair and 41% shareholder Kerry Stokes) are small beer. They will not improve Seven’s earnings — they will further reduce earnings for 2019-20, which are already forecast to be down 10% or so on the weak performance in 2018-19 (which itself fell around 10%). The cuts mean there is no chance of shareholders getting a dividend either.
Sunday Night host Melissa Doyle is the highest profile casualty, along with Seven’s head of public affairs Stephen Browning. He is returning to Melbourne to head up explosives company Orica’s public affairs. Browning’s departure was part of cuts to the publicity team, which will be centralised in Sydney.
The way Seven treated Sunday Night tells us a lot about the lack of programming nous under Worner. Sunday Night started with a lot goodwill and a string public affairs-focused stories, differing from those of 60 Minutes. But it soon became clear Seven had no idea what to do with the show. It moved the program’s time slot and then started preempting it to allow formats like My Kitchen Rules and other programs to run longer as a cost-saving move.
Cost cutting is all very good, and a hallmark of a new CEO who tries to put their stamp on the company. But Seven’s problems are not costs: it’s a lack of revenue growth, compounded by the worst programming for years and a growing pipeline of dud shows. That this round of cost cuts should be inflicted on the very part of the schedule that seemed to be working is vintage Seven.