Profit slips at Seven, but CEO buoyed by “decade of dominance”

Seven West Media has announced a profit of $207.3 million for the 2015-16 financial year – down 0.9 per cent on the previous period.

Revenues dropped 2.5 per cent to $1.72 billion and post-tax profit was $185 million.

Television station Seven, which comprises 82% of SWM earnings, delivered earnings of $292 million on revenues of $1.3 billion after cutting costs by 1.6%.

Seven indicated the overall outlook for the television advertising market over the coming twelve months will continue to be flat.

But CEO Tim Worner was optimistic about the long-term opportunities provided by the Olympics. Claiming a “decade of dominance” he also acknowledged Seven’s production arm of original content, and flagged closer strategies with other Free to Air networks to share costs, such as those already shared in helicopters and subtitling. With an increased share in younger demos, he also said Seven’s audience was transforming.

Tim Worner:

“Starting with our television business, with its tenth consecutive year as Australia’s number
one network for both ratings and revenue, Seven can now claim a decade of dominance.

“Seven recorded a 38.9% revenue share for the fiscal year to June, and 39.2% share in the six months to June. We think there is more to come as we close the gap on our power ratio. This calendar year to date, Seven has expanded its ratings leadership with a 40.4% commercial audience share. Outside of share, we have now set ourselves the challenge of increasing the number of people watching Seven year on year. That’s excluding the Olympics. And we are not talking about viewing on phones or tablets. That’s more people watching Seven this year than they did last year. And we think we are a chance to do it.

“How can we aim for this? By delivering a consistent line up of premium content to our audiences. Twelve of the top 20 regularly watched programs are on Seven. The two hour block between 5 and 7pm is well up on last year. My Kitchen Rules, with series 8 in production, and House Rules, now casting our fifth series, big multi night franchises, are holding their audiences.

“This has certainly been a factor in Seven currently leading in every key demographic. This ratings year to date, we have snared a 37% plus share of both 25-54s and 18-49s, well ahead of commercial shares we’ve held in the past five years. The composition of our audience has completely changed. We have also recaptured the number one position in News. Seven Year Switch, Wanted and First Dates, all new to the schedule this year, delivered strong ratings in key demos. They will all return next year.

“Six months ago, I announced to this audience the launch of our new FTA channel, 7Flix, which focuses on premium movies, comedy and drama content. 7Flix is designed to complement our existing demographic performance. Well, it has done more than that, now delivering a 2.8% audience share in the short time it has been operating.

“Australian drama remains a core pillar of our programming strategy and an area of leadership for Seven with another year of top performing programs including Peter Allen, Molly, and 800 Words. Home & Away, now in its 28th year, is holding its audience year on year.

“This is a super result delivered against the Ashes cricket, Rugby World Cup and the Australian based Cricket World Cup in the first half. Those events will not be there in FY17 and we will use Rio as a springboard for the run to the end of the season.

“We have been greatly encouraged by the Government’s decision to reduce our licence fees and we are looking for further reductions from the upcoming spectrum review. We believe the Government understands that local broadcasters are seriously disadvantaged relative to over the top global competitors and that even after the recent fee reduction, the licence fees paid by Australian broadcasters are still well in excess of those paid in any comparable jurisdiction.

“Our response to this challenging environment is to continue to focus on costs, without compromising what is at the very heart of our company, quality content. For the fourth straight year we have reduced our operating costs, while still investing for our future growth in production and program rights. We have secured a huge portfolio of live events out to the Tokyo Olympics in 2020 (with an option to extend), and this will help power our ratings and revenue momentum in coming years.

“We continue to see a strong market internationally for our programs, demand for which has driven double digit growth for the past four years. In 2016, we have almost doubled the revenue we generated from content through our 3rd party productions and program sales.

“Our flagship program, My Kitchen Rules has completed production in the UK and the US and we have also been commissioned to produce two new series in other territories. All of these productions are being undertaken by Seven.

“7 Productions, 7Wonder and 7Beyond are now producing over 750 hours of scripted, factual, kids and reality programming per year. As you can see from the chart on slide 21, this is a rapidly growing revenue stream.

“We have expanded our presence further in the UK with a drama production company investment that I referred to earlier. We are in final stages of the launch of our New Zealand production company and there are several other production opportunities we are progressing in new territories.

“We have undertaken a wide range of digital initiatives and investments which both grow our audiences and enhance the value proposition for our consumers and our advertising partners.

“These initiatives are all supported by Seven’s premium content, which through these platforms is being incrementally monetised.

“One of these is Presto which has delivered strong growth with subs up 193% during the year. This business is benefiting from Seven’s content production strengths and there are more commissions in the pipeline.

“We have also launched new digital products. These include 7Sync, 7Everywhere, and 7Audiences. We know that our viewers love using their mobiles whilst watching our shows on television and with 7 Sync we can now ensure that the creative of our partners and sponsors is carried across companion devices ‘in sync’ with our live broadcast. 7Audiences delivers a 1st party big data solution to our partners and sponsors. 7Everywhere pushes our content to social digital platforms. It allows for direct selling of branded content across the leading social networks.

“Our online presence is actually enhancing Seven’s position as the highest rating commercial broadcaster. OzTam’s Video Player Measurement (VPM) is a world first and delivers a total audience number, regardless of screen. This now enables us to truly monetize all of our audience, wherever they may be. Nowhere is this more evident than with Seven News which is now the highest rating television news offering across all platforms. Number one in commercial on air, number one in online and social.”

Source: Fairfax