As more Aussies turn to streaming services, traditional TV networks like Seven West Media (ASX: SWM) are facing tough times. Less people are watching TV, which means less money spent on ads, hitting Seven’s finances hard. Last year, Australian TV ads dropped by 8%, while the total TV market declined by 9%, reflecting the trend away from traditional TV.
As a result, in H1 FY24, Seven West Media reported a group revenue of $775 million, marking a 5% dip compared to the previous year. Earnings (EBITDA) plummeted by a staggering 40%, clocking in at $124 million. Statutory net profit after tax settled at $54 million, while underlying net profit after tax, excluding significant items, nosedived by 49% to $63 million.
SWM Managing Director and Chief Executive Officer, James Warburton, said, “SWM successfully executed on our strategy during the period to deliver consistent and engaging content to drive audience growth and revenue share across the total TV market. Despite this progress and our disciplined management of costs, our financial performance reflects the weakness in advertising markets, particularly as the second quarter progressed.”
Warburton highlighted notable successes, citing audience growth across both linear and BVOD (broadcaster video on demand) platforms. It saw a linear audience uptick of 2.2%, buoyed by flagship programs like SAS Australia and Farmer Wants A Wife, alongside significant viewership spikes during major sporting events such as the AFL Grand Final and cricket tournaments. The FIFA Women’s World Cup 2023 delivered extraordinary numbers on 7plus and its tentpole programs saw a 36% increase in live minutes watched year-on-year.
The Company’s foray into digital realms shows promise, with BVOD viewership witnessing a substantial surge, driven by live events and premium content. Additionally, strategic partnerships, such as the integration of NBCUniversal content, have diversified SWM’s audience base, particularly attracting younger female demographics.
Warburton added, “We see a significant opportunity to grow our digital earnings with the recent launch of VOZ finally pushing TV audience measurement into a comparable position versus other media channels. We are also excited by the game changing addition of digital rights for the AFL and cricket later this calendar year; together, they will add an estimated four billion minutes of content a year to 7plus and allow us to capture an estimated 45% revenue share.”
Seven’s costs for the period were as expected, mainly because it invested more in content during the first half of FY24. The Company is making good progress on its plan to save $60 million in costs, aiming for $25 million in savings this year. Costs for FY24 will go up a little, around 1-2%. But if advertising stays weak, Seven will rethink its cost-saving plans.
The Company is still optimistic about TV gaining its market share, but Australian viewing habits point to a different direction.
During the period, Seven bought back $4 million of shares and decided to keep the dividend as it is, considering how the market is doing.
Looking forward, Seven expect costs to drop by 4% in the second half, which would save the Company $20-25 million compared to last year.
Alinda is a Business Reporter for The Sentiment
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