This week Seven West Media announced its half-year financial results for H1 2023, with the main talking points being:
• #1 national audience share in CY22 (total people, 16-to-39s)
• Total TV revenue share of 39.3% in 1H23, tracking in line with FY23 target
• Secured long-term broadcast and digital rights for AFL, Cricket and NBCUniversal
• Underlying 7Digital EBITDA growth of 35% (excluding Olympics)
• Group EBITDA of $205.0 million, down 4.8% year-on-year
• Strong operating cashflow (before interest and tax) of $204 million, up 55%
• New venture investment in View Media Group
• Reported net debt of $186 million; adjusted net debt at $223 million, or 0.7x net debt/EBITDA
Mediaweek caught up with Seven’s managing director and chief executive officer, James Warburton, to discuss the significance of these results and what they mean for shareholders.
The rise of digital at Seven
“What we were able to do over the last six months was really accelerate that digital growth”, said Warburton. “Our data play and the way in which we’re selling it from a converged point of view, you saw that in the Unilever/ Dove campaign. The way in which we’re actually bundling a total television story is very market-leading, you saw that in the overall revenue share of 39.3% for the half. That digital growth and the exposure to upside is what’s fundamentally important. With the new AFL and cricket rights coming over the next couple of years, there’s an enormous amount of growth left in 7plus. NBCU is another good example, even over the December-January period, we grew by 27%, in a market that grew by 18%. That was fundamentally driven by the NBCU content and 7Bravo as well.
“It really is a two-player market now. The strength of what we’ve created with that national proposition is there for everyone to see how we dominated through many sectors and are growing our share as well. We have ambitions for 40% plus, from FY24 and beyond.”
Warburton also pointed to the impending arrival of the TV measurement system, Voz, to the marketplace and the importance that this will put on both digital and national numbers.
“Voz is a national measure of television, you can’t actually split metro and regional easily, so it becomes the currency. That is how we generate our income. I would argue, the other players in the market, that’s how they generate their income. Their biggest client would be their affiliation deal. 40% of the country lives outside metropolitan markets. I’ve said it before, why are we having this regional split? They don’t do it in the US. They don’t do it in the UK, they don’t do it in other markets around the world. Digital, metro and regional combined is how we get our growth.”
Outlook for 2023 and Beyond
When Mediaweek spoke to Seven’s chief revenue officer, Kurt Burnette, about the forecast for the broadcaster in 2023, he said that 2023 is the culmination of many years of work. Warburtonn agreed with this.
“Our strategy is completely transforming the cost base, reducing debt, getting rid of onerous contracts, every single dollar we look at if it will it drive a revenue outcome or will it reduce debt. So really being disciplined around the deals we do in the cost base, around the sports deals, being prepared to walk away from deals that don’t make sense.”
When discussing potential economic impacts on Seven’s bottom line, Warburton believed that the company and the free-to-air broadcast industry are well placed for recovery from any downturn.
“When you look at recessions back in 9/11, GFC, and even Covid, there’s always been an exceptionally strong recovery for free-to-air. This time around, we’ve got very strong digital growth on top of that usual advertising recovery. Our expectation is it’s relatively short and sharp, and then things will improve and we’ll be in a position to unlock that growth.”
Seven’s thoughts on losing the Olympics
When asked if the Olympics broadcast deals were one of the aforementioned bad deals that Seven is avoiding, Warburton said that there were several reasons they allowed Nine to sign the TV rights to the next three Olympics.
“It’s not just the rights fee, it is $120 million of production. They are very expensive things to produce with airfares, accommodation, OBS costs etc. Then there’s hospitality on top of anywhere between $30 to $50 million depending on how big you go from a hospo point of view. It is not just a rights deal but a half-a-billion dollar commitment, we would have had to have made all the way through to Brisbane.
“Blind Freddy could see the losses we made through the period and the difference between a Tokyo Games which is in the perfect time zone, and something like Paris where there’ll be no gold medals in primetime. It’s an overnight Games. LA is even worse. The American time zones are the worst time zones for the Olympics. The winters in Italy will again be an overnight Games.
“From our perspective, it would have been a substantial increase in the losses, as it’s an unprecedented amount of money for the IOC. It was a very, very easy decision for us. We had the ability to match it with our outstanding relationship with the IOC. And it was a very easy decision.”