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Nine’s Google deal key to future of newspapers, says outgoing CEO

Miranda WardMedia writer
Updated

Key Points

  • Revenue ($m) 1165.1, down 2.6%
  • Pre-tax profit ($m) 257.0, up 96.6%
  • Net profit ($m) 181.9, up 108.4%
  • Interim dividend (c) 5.0
  • Date dividend payable April 20 

Deals with Google and Facebook will ensure Nine’s publishing business, which includes The Australian Financial Review and The Sydney Morning Herald, will return to revenue growth and keep journalism jobs, CEO Hugh Marks said as the parent company swung to a net profit of $182 million.

The company, which has assets in television, radio and newspapers, defied the COVID-19 pandemic, reporting earnings before interest, tax, depreciation and amortisation of $355 million in the December half, up 42 per cent on the same period last year.

Net profit after tax and minority interests was $178 million, up 69 per cent. Revenue was down 2 per cent to $1.2 billion. It will pay a fully franked dividend of 5¢ a share on April 20. Investors reacted favourably, pushing Nine shares up 10 per cent to $2.95 and the market value above $5 billion.

The company pledged to repay the JobKeeper allowance received by wholly owned subsidiaries since the inception of the scheme, totalling $2 million. This does not include benefits paid to part-owned Domain.

The results are the last for outgoing chief executive Hugh Marks. Alex Ellinghausen

It was expected Nine would use Wednesday’s results presentation to formally announce a deal with Google, having signed a letter of intent with the search giant for a reported $30 million-a-year deal last Wednesday. Talks have also resumed with Facebook following the social media player announcing it would resume news on the platform on Tuesday.

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Mr Marks said the reported $30 million figure was wrong and Nine should be getting a higher rate from the search giant than rival Seven West Media, which signed its own deal reportedly worth $30 million.

Nine’s deals with the platforms were integral to the future prospects of Nine’s publishing business which houses the Metro Media business (The Sydney Morning Herald, The Age, The Australian Financial Review), nine.com.au, Pedestrian Group and Drive.

He said it created a licensing revenue stream to complement existing print, digital and subscription revenues.

“If I look at that over 10 years, I can see the path that will take and that will take the publishing business back into a revenue-growth model,” Mr Marks said. “When you’re in revenue growth, then you’re able to make decisions to invest further for the future.

“It basically provides the difference to enable us to participate in that consumption in a way we can monetise so we can invest for the future.

“If we had not got to an outcome, we would have been stuck in this terminal print decline. I can’t underestimate how significant it is for the future of that publishing business.”

The publishing business posted a decline in revenue in the fiscal half of 9 per cent to $263.4 million, with EBITDA up 27 per cent to $68.1 million.

Across the Metro Media business there was a 26 per cent growth in digital subscription and licensing revenue. Nine does not break out subscription figures for the individual mastheads.

Nine chief financial officer Maria Phillips said reader revenue at the mastheads now accounted for 60 cents in every dollar of revenue.

On the future of the printed newspapers, Mr Marks said he believed print offered readers a “broader experience” than on digital.

“That is why print will always have a future, because the actual experience of the printed paper is a wonderful experience,” he said. “It will fragment ... but print will always have a future and I don’t see that changing on any horizon I look at.”

Marks’ last results

Wednesday’s results are the last to be fronted by Mr Marks. He announced his resignation in November after revealing he was in a relationship with former Nine executive Alexi Baker.

Mr Marks said when he was appointed as CEO of Nine in November 2015 the company “was lost as to its future”.

“The future is now patently clear,” he said. “It’s up to those that will take the business forward to continue to execute on that future.”

He is confident the transition from free-to-air television company to a content business is complete.

“When I started we were a television business, but I said to the team early on, ‘we’re a content business, ignore the platform, think about creating great content’,” he said. “What digital does is it enables you to reach audiences in different ways. We just needed to change our mindset.

“That part of it, we are at the end of it. We are a business that can create content, we can shift it out to any platform, we can monetise it across all those platforms, we can benefit from that content creation like no other business in this market can.”

Nine is in the process of appointing Mr Marks’ replacement, with four candidates in the mix including Stan chief executive Mike Sneesby, Nine chief publishing and digital officer Chris Janz, former Endemol Shine boss Carl Fennesy and the former president and CEO of ViacomCBS Networks David Lynn.

Broadcast and Stan

Stan, which is run by CEO-contender Mike Sneesby, drove the growth of the business, with revenue up 28 per cent to $149.1 million for the half, and EBITDA of $36.5 million.

The platform, which competes with the likes of Netflix and Disney+, reported current active subscribers of 2.3 million. In September, it bumped up its subscription cost, with premium plan subscriptions going from $17 a month to $19, helping drive revenue growth.

Nine’s broadcast division, which comprises the Nine Network, 9Now and Nine Radio, reported EBITDA of $207.4 million for the fiscal half.

Revenue for the broadcast division was down 1 per cent to $621.5 million, driven by declines in the radio business. The metro radio ad market slipped by 19 per cent across the half, with Nine’s gross ad revenues declining by a similar quantum.

Nine Radio reported EBITDA of $3 million for the half. Revenue at the Nine Network was down $8 million for the half, as the free-to-air ad market struggled before beginning to show signs of recovery in the December quarter.

9Now posted revenue growth of 30 per cent, equating to a 45 per cent share of the broadcast video on demand (BVOD) market. 9Now was previously reported in the digital and publishing segment.

Mr Marks said Nine had the option to invest more in either 9Now or in Stan dependent on market conditions, and that Stan Sport and its originals would allow the streaming platform to differentiate itself as the streaming video on demand market grows.

“Stan will remain the number two player in the market ... as the market continues to grow, Stan will grow,” he said. “What we’ve seen is not Stan’s market position declining but just the market pausing given the huge growth that happened in the earlier period.”

On Stan Sport, Mr Marks said the company would “acquire sports and subscribers profitably”.

“I don’t compare us to Kayo who have huge sports cost that they’re trying to amortise over a new platform,” he said. “We look at it on a different basis – what sport can we acquire that should add incremental audience to Stan Sport and if we can acquire that profitably, we’ll look at it.”

Domain, which reported its results for the fiscal half last week, posted revenue of $136.9 million, down 7 per cent, with an EBITDA of $54.4 million.

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Summary | 1 Annotation
If we had not got to an outcome, we would have been stuck in this terminal print decline. I can’t underestimate how significant it is for the future of that publishing business.
2021/02/24 05:06