Nine’s Hugh Marks on fixing TV ad share, axing sports rights

• Where $100m cost savings come from, 2GB we have a problem

After announcing Nine’s results for the first half 2019/20, CEO Hugh Marks explained in greater detail to Mediaweek some of the triumphs and challenges across the various divisions.

Is it a hard thing for Nine to improve its ad share?

No, it’s not a hard thing. What I will accept is that our sales team had a lot on their plate last year – mergers and acquisitions – and I didn’t make their job easy. As we go into this year with no more acquisitions or mergers, hopefully with all the sales structures resolved, we can focus on operating performance and get out to do some basic selling. We want to rely less on market structures and more on the traditional success of the sales team which is selling the vision of where the value for advertisers is.

Michael Stephenson [chief sales officer] and the sales team have embraced that as we move into this year and we are seeing some results from that.

Is there still a perception Seven is the market leader?

Market dynamics play a role. But we should have been able to do a 40% share across the calendar year [2019]. We are not far away, but that is worth probably $20m across the year and that is the size of the opportunity we need to pursue this calendar year.

Making 9Now a stronger free on-demand platform

At 9Now we see huge traffic with programs like Married At First Sight and Love Island – the big reality shows drive more traffic. But we then have troughs around that which makes it hard from an advertiser perspective to consistently buy across the year. What we have to do is focus on lifting the troughs and content acquisition allows us to lift to a more consistent level across the year.

We won’t be making a huge investment and it’s pretty targeted. The distinction with Stan is that it plays in the premium content end of the game and the material 9Now will buy will not be high end. It will more likely be US network content rather than product more at home on cable.

Sports rights – bigger is better

We will continue with any sports we are able to have long-term relationships with. [Marks yesterday indicated the 2019 World Cup One Day cricket broadcasts last year were not financially attractive.] To be selling one-off content is harder to do. We will be much more focused on sports where we can work with sponsors across many years.

Netball is a good example of what we will keep. It didn’t have significant commercial presence and we have seen that grow with Nine. It is a consistent delivery to the audience year-on-year, and our involvement is much more than what we just put on air.

See also:
Nine Entertainment reports flat revenue as first half profit slips 10%
• Digital revenues climb, more content for 9Now, Stan subs hits 1.8m

Where will $100m of cost savings come from?

We are going to focus on where we get a return on investment. International content is the thing that really struggles from an audience perspective. If we keep paying what we have been paying in the past the industry will be killed.

As we move into North Sydney we will be looking for costs savings – we will have two technology teams, a number of finance teams, multiple sales structures and we will look at the way he produce short form video. There has to be efficiencies as we move into those premises.

Nine Radio: 2GB we (still) have a problem

There will be continual evolution at Nine Radio, but for the time being it’s about revenue and content which will be the focus. We have reset the cost base. We really need to focus on rebuilding the revenue lines that are weaker than they should be.

3AW has been performing very strongly in line with its [ratings] consistency and reliability. Meanwhile the breakfast issues at 2GB have been a real challenge. It hasn’t turned around and this is a revenue business. Audience does lead to revenue – if audience doesn’t revert to revenue you have a problem.

Revenue at 2GB remains an ongoing issue and remains a reasonably significant issue in the context of the business. Everybody needs to work from Tom Malone and Alan Jones and down to resolve that issue. If we don’t convert Alan’s fantastic audience into revenue then the business has a challenge. There have also been some Sydney-specific sales issues we are in the process of addressing.

Newsbrand business model and future of print

There are significant overhead costs for newspapers and how do we allocate that cost between print and digital? It becomes very hard to separate the businesses. Print always remains a component of those mastheads. It stands for what they are and print is a very important part of the brands. You will however see a transition of the business where more investment will go into digital revenue areas and maybe less into areas linked to the print publication.

Stan powering toward 2m subscribers

We have over 1.8m Stan subscribers on average now which includes free trial subscriptions. We have a low rate of subscriber acquisition so at the moment the number of paying subscribers would be very close to 1.8m.

That’s a great result given the activity in the streaming marketplace and indicates the strength of Stan’s brand.

Why Nine is not about to start a production business

We have had a good model by using outside production houses for our programs. The benefit for Seven has been [making] Home and Away. It’s a legacy production from 30 years ago. We don’t have one of those. Without that you can’t really support the overhead of investing in program development and associated costs. We should remain open to the best ideas wherever they may come from. Our business is then how we take those ideas and execute them with whoever it is that makes the program. We then use our distribution network to provide a revenue base for those ideas. That’s our model and we will continue with that model. I’ve been in the production business and it is not an easy business.

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