“I’m a celebrity.. get me out of here!” has helped Ten lift its ratings, but the audience improvement has yet to lift its advertising revenues. Photo: Network Ten High hopes: Can Masterchef with its judges Gary Mehigan, Matt Preston and George Calombaris extend recent ratings gains and boost Ten’s share of the TV advertising market? Photo: Supplied
Pressure is tightening on Ten Network Holdings to raise cash and conclude its tortuous strategic review after the embattled broadcaster warned investors it could run out of money if it misses revenue forecasts amid a volatile advertising market.
Ten plunged $264 million into the red at its half-year after writing down the value of its television licences by $251 million, following larger rival Seven West Media, which impaired the carrying value of its own licences in February.
Ten’s earnings before interest, depreciation and amortisation fell from $10.1 million a year earlier to $7.5 million on revenues down 2.2 per cent to $324 million as the network’s improved ratings failed to translate into a materially higher share of the advertising market.
Ten’s board has run a six-month auction process aimed at securing its long-term future.
The company told investors on Thursday it was operating within the limits of its $200 million loan, which three of its billionaire shareholders – WIN Corp owner Bruce Gordon, News Corp co-chairman Lachlan Murdoch and Crown chairman James Packer – guaranteed in October 2013.
But it warned of “material uncertainty” that the company will be able to continue as a going concern if its revenues miss forecasts. Nevertheless, the company was confident it will hit forecasts and, if not, could raise the debt or equity finance necessary.
“There a range of things you can do in the business and raising money is just one of them,” executive chairman Hamish McLennan told Fairfax Media. “But the simple fact is we are within our $200 million working fund.”
Local pay-TV monopoly Foxtel is close to agreeing to a deal through which it would take a 14.9 per cent stake in Ten. It is believed Foxtel is prepared to inject about $75 million at 18¢ a share into the broadcaster, with Ten prepared to raise a similar amount from existing shareholders.
Mr McLennan said the network had managed to lift its audience ratings this year through the Big Bash cricket and reality TV shows including I’m A Celebrity … Get Me Out Of Here!
“Since the start of the 2015 ratings year on February 8, Network Ten is the only commercial network to increase its 25-to-54s and total people audiences, with growth of 25 per cent in 25-to-54s and 22 per cent in total people,” he said.
“They are obviously doing a very good job with ratings. The question is whether they can continue that momentum and convert it into revenue share,” said Alice Bennett, media analyst at CBA, who has a 14¢ target price on the shares.
Ten’s shares closed unchanged at 20.5¢, having fallen 9 per cent this year. ‘Reform media ownership laws’
Mr McLennan urged the government to scrap all restrictions on media ownership, saying they applied only to terrestrial TV, radio and newspapers and not global technology giants such as Netflix and Google. This was hurting Australia’s traditional media companies, he argued.
Communications Minister Malcolm Turnbull has suggested abolishing the “reach rule”, which limits coverage of any TV network to 75 per cent of Australians, stopping metropolitan broadcasters – Seven, Nine and Ten – from merging with their regional affiliates.
Mr Turnbull said the so called “two-out-of-three rule”, which bans a company from owning a radio station, television network and newspaper in the same market, could also be scrapped.
However, hopes of reform have been dampened because the Abbott government is unwilling to propose a package unless it gets broad support from media moguls that it currently lacks, and a smooth passage through the Senate.
Mr McLennan said the government needed to present a broader media reform package. “The two-out-of-three rule and the audience ‘reach’ rule are hurting Australian media companies by inhibiting our ability to grow and compete,” Mr McLennan said.
“However, piecemeal reform, such only removing the ‘reach’ rule, will make the situation worse. Allowing some companies to pursue consolidation while continuing to restrain others will exacerbate the damaging impact of the remaining rules.”
Mr McLennan and his counterparts at Seven and Nine and pay-TV monopoly Foxtel met with Prime Minister Tony Abbott earlier this month and called for broadcast licence fees to be scrapped. Mr Abbott agreed to review the fees.
Mr McLennan said paying the licence fee, which is 4.5 per cent of a broadcaster’s revenue, on top of corporate tax was “unreasonable”.
“Australia’s licence fee regime is the most punitive in the world,” Mr McLennan said. “Every dollar we pay in licence fees is a dollar we cannot spend on local content.” Ten goes after AFL, NRL
Mr McLennan said Ten was determined to participate in the broadcast right bidding for the AFL and NRL, both of which are running simultaneously after the NRL brought forward negotiations with networks.
Mr McLennan said Ten had a record of thinking “creatively” to seal sports rights. He said the network had secured a “fair chunk of cricket” with the Big Bash, “recut” its Formula One deal with Foxtel and acquired V8 Supercars, which had been held by Seven for much of the past decade.
“The negotiations with the NRL and AFL don’t have to be absolute. We don’t have to trade for everything,” Mr McLennan said.
“We are flexible and creative with how we deal with these rights. I’m not going to tip my hand on how we are going to approach these negotiations. But we have suffered by not having a winter sport.”
When asked which code he favoured, the NRL of AFL, Mr McLennan said “we like all sports”.
“But we could end up with nothing. It might get too expensive. We have a plan for a winter sport and one without. We are not going to blow our brains out.”