Nine CEO Hugh Marks on 2017 ratings and revenue

Nine CEO predicts next hit, talks NRL, 9Now, Ninja Warrior and more

 

At the release of the Nine Entertainment full year’s results last week, chief executive Hugh Marks spoke to Mediaweek about hit programs, ratings, sports rights, building online audiences and the investment in Stan.

Since your Australian Ninja Warrior forecast, a lot more people are taking notice of your ratings predictions.

If we look at the market at the moment, big event television, if it’s different and it’s got real clarity around what it is, works. The audience is always looking for that new thing that’s different, is clear what it is and it’s appealing. The show was recorded in December, and I’d seen it, I’d been there. It was always going to be a sexy show – the people, the stars of the show, the talent are just really good, talented people and that was always going to resonate and they’ve all got good stories. Having been around the business a while you kind of get a view about whether it’s going to work or not.

Ninja Warrior looked expensive.

The production company did a fantastic job getting that look and the people that made the sets did a fantastic job. Also the talent…you can underestimate how important the look of those people in the show is and the way they were dressed…the whole thing came together brilliantly – just a great team effort.

Will you deliver extra episodes of Ninja Warrior in 2018?

You need the right format for the right show. The Block has the potential for multi-night stories because it’s a real journey for the competitors. Ninja has less of that potential. Ninja is more of a blast of entertainment, so it’ll never run as long as The Block or Married At First Sight. It will always sit there as a premium event. If we ran it too much and too long it would lose that premium nature. Next year we’re going to have the same people coming back, the same contestants, it’s going to be back on Ninja Island, the suspense leading into it will build, it’ll become like the Olympics. It’ll be better than the Olympics.

We’re in the fortunate position that we don’t need to over-egg Ninja. We’ve got stability and strength throughout the whole year now.

Could Nine win the year?

I don’t know – I haven’t looked at the total people numbers, I focus on the demos and we’re smashing it out of the park at the moment, so that’s what we’re focused on. If I suddenly turned around, if we won total people and changed my language to ‘how good is it? We won total people’ I’d be a hypocrite. Demos are very important to us. Publicity might tell you if we win all people, I won’t be.

You look at that premium Seven’s had in ad share for the last few years. They seem to get extra from that total people win.

We’ve changed a little bit of the mix of both of sales performance and our demos performance. What we’ve really focused on this year is primetime Channel Nine. Primetime Channel Nine is 65 to 70% of our revenue – that’s why we decided to focus in on that. If you really want to understand the demo performance year on year, look at the primetime main channel performance and that’s where we’re getting revenue growth. Seven maybe outsold us for a number of years and we’re now doing a better job with our premium revenue, our client partnerships, all of that work that’s actually important delivering outcomes.

When we can prove to the market that dominance in the demos leads to dominance in revenue, other people will start looking at that as well.

In May, June and July you were number one in SMI, in terms of TV ad share. Because the market’s short, do you get some quicker results these days in terms of ratings success?

Last year the share came off us a bit quicker than it may have done in the past and this year the share’s coming back a bit faster than it may have in the past. Obviously there are levers you can pull to influence that. We always felt that we were going to have a successful year in ratings, so we’ve built our business to enable us to re-acquire share but I think the real benefit will come through in the next calendar year.

We don’t like everyone saying oh, 37.5% seems low, why are you going 37.5? It’s also important we become known for delivering what we say we’re going to deliver and I think that’s also something we’ve done fairly successfully over the last 12-18 months.

9Now has four million registrations. What does that mean for revenue?

It’s a very long-term play. We made a decision to introduce a sign-on for people to watch our content – our competitors didn’t. Having said that, they can always change that pretty quickly and at any given time and ask anyone to watch content to sign on, but it talks to the importance of data as a sales underlay in the future. I’d encourage you to have a look at the data work we’ve done and the product that we’re now taking to market because it talks to the interesting and the changing competitive landscape. In the past, maybe 30% of our sales was data driven. In the future 100% of our sales activity will come with data. Having that sign-on and that investment in a single sign-on will pay long-term dividends.

We’ve got flexibility now. We’ve got a free-to-air business, we’ve got an AVOD business, we’ve got an SVOD business and no one else has got that in this market. We still report in television and digital and segments, but now we manage the businesses as one. We’re now looking at every commission we make or investment we make, the benefit of that investment across that total revenue…total cost, rather than by segment and that’s the way you’ve got to look at it.

Digital revenue is still very small for the company. How fast could it grow?

It’s difficult to show the transition of the digital business. We have gone from an impression-driven Microsoft default traffic business to what is now a content business in its own right. So that’s actually been a huge shift. Some of the television revenue that we write obviously benefits from having a digital business because we can go to clients with a much broader proposition. The interesting thing as we go forward will be: What are the components of that digital income? How much of it is video? How much of it is display? How much of it is programmatic? Etc.

Tim Worner has been pushing pretty hard on what he said were unsustainable sports rights. Do you share that sentiment?

MORE: Seven CEO Tim Worner talks sports rights, ratings and much

I’ve been pretty clear for a while now that, certainly in cricket, we’re paying a fair price for the rights that we get, more than a fair price. In a market, in free-to-air sense that’s got 1-2% decline, 3.7% decline last year, to imagine that you’re going to continue to pay more and more for sports rights, there’s a break in that logic. A bit like we’ve changed the model with our entertainment product, we need to also change our relationship with sports providers so that we can start to work more collaboratively with them. Where they want to grow their revenue, we want to grow our revenue – that must be the relationship going forward.

In terms of free-to-air there has to be some rationality in terms of key sports rights, and the opportunity for sports and for us is to change the nature of the relationship like we’re doing with the rest of our product.

How concerned were you at any stage during the cricket player contract negotiations that the summer might have been in jeopardy?

We were confident and, obviously in our discussions with Cricket Australia and the Players Association, felt confident there would be an outcome. We’ve got good relationships with everybody. Obviously the more it dragged on, the more pressure it got and later in the period obviously it was impacting our ability to lock away sponsorship arrangements, but the same thing was happening with Cricket Australia’s sponsors so they felt the same revenue pressure we did.

There’s been a lot of chat about why NRL crowds are down. The NRL says, well, it’s a TV game now. What are your thoughts on that?

I actually have a view that attendance at a game is important to the event and the spectacle, which will help television. We’d love to see more full stadiums and we’re a big stakeholder in that. We’re talking to the NRL, we’re talking to the clubs and trying to work cooperatively with them for everyone’s benefit.

The NRL TV schedule is being blamed by some for smaller crowds.

Have we wrecked rugby league? I don’t know what people are saying that. There’s a whole bunch of competing factors. There’s rights fees, there’s payments for the clubs, there’s payments for the players and professionals in the game. We’ve got to ensure that we get that balance right as we go forward. We remain open to any constructive suggestions that people think are positive for the outcome of the game and we’ll be a participant in any discussions.

Media law reform. Will it have a material effect on Nine? Either way.

Not immediately. I’ve been saying we have the benefit that, at least for the next few years, we’re masters of our own destiny. There are things that we can do to improve the performance of our business, we know what they are, we’re doing them. We’re getting the right results with the things we’re doing, so media reform is not critical for our business. I don’t expect us to be out there just because of media reform doing a whole bunch of mergers. Again, our destiny’s in our own hands but, having said that, we’ve been a big supporter of it happening and occurring and removing that uncertainty from our industry. It is important and we remain a supporter of those reforms passing.

The original Stan target was for 1.5 million customers. They are halfway there. Is that figure still achievable?

If we look forward at what we think the total potential market is and what Stan’s share of that market should be, our targets for end subscriber numbers are more than one and a half million. We roughly think there will be, in the near three- to four-year period, five years maybe, at least eight million subscriptions in the market. Stan’s in a good position, over time, to get to a better outcome than one and a half million.

The cash flow break-even was FY18. Is that still going to happen?

Yes, we’ve always said at some point in FY18 we’ll get the cash flow break-even and we’re still expecting that will be the case.

You talked about formats you co-own the rights to. What’s included in that?

Family Food Fight, which will be on at the end of the year as an example.

What’s your forecast for Family Food Fight?

I haven’t seen it yet, but the interesting thing is it’s a very multicultural cast. The judges talk to the quality of the food that’s being cooked, so it’ll be a five-week run at the end of the year. It won’t be a very crowded program environment at that time so the show’s got every chance. I think it’ll be another successful format.

You’ve still got room for maybe one substantial franchise for your 7:30 slot because it didn’t all go according to plan in the first half of this year.

We do and don’t expect me to announce it to you now. We’ve actually done a lot of work, not only for next year, but for the year after. We’re very well progressed on our planning and having a long lead time really pays dividends when you come to execution of programs.

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