One year into his appointment as the hopeful savior of Seven West Media (ASX: SWM), CEO James Warburton is delivering on his incredibly difficult task of turning the media giant’s fortunes around, with a return to the top of the Ratings charts.
Although it may seem a rather simple strategy of rehashing old reality shows, Seven has won 10 of the past 11 weeks of ratings largely thanks to Big Brother and Farmer Wants A Wife, coupled with their industry-leading transition towards digital platforms.
The first of Warburton’s three year strategy has been met with difficult trading conditions where COVID-19 has had a major impact on advertising for the network, especially with the three month shutdown of the AFL for which Seven owns the free-to-air (FTA) broadcast rights. Subsequently, Seven has reported a 14% decline in revenue to $1,227 million and 66% decline in underlying profit after tax to a $40.8m.
When including significant items, NPAT fell 39% to a $200m loss.
Albeit it has come at a price, the network’s tangible ratings have Seven in a stronger position entering Warburton’s second year than his first in a world where content is King.
“Combined with our daily content spine which is a dominant number 1 in Sunrise, The Morning Show, 7NEWS, The Chase, Home and Away, Better Homes and Gardens and Sport with the AFL and Horse Racing, our tentpole focus at 7.30pm Sunday to Tuesday is working, helping us win the content battle,” said Warburton.
“We have actioned $170 million of gross cost out initiatives across the group including the renegotiation of our AFL agreement at a lower level and for an extended term.”
“Net cost savings in the financial year were weighted to the second half with $92 million saved in the period, more than offsetting the $15 million increase in the first half.”
Seven has plans to accelerate their content strategy for the remainder of 2020 which will see the network launch Plate of Origin and SAS Australia which will follow similar programming strategies as Big Brother and Farmer Wants a Wife where the shows were integrated between FTA and 7Plus, their Broadcast Video on Demand (BVOD) platform.
BVOD in particular is playing a major role in Seven’s turnaround where the streaming platform delivered a 39.6% increase of revenue to $55.4m and 79.5% increase of EBITDA to $29.6m, boasting the largest audience among Australian streaming networks.
Seven’s digital performance was further strengthened by 7News.com.au’s emergence as the 2nd most viewed commercial news site in Australia within 12 months of its launch.
With Warburton’s focus on content proving popular among Seven’s target audiences, the Company is in the process of divesting non-core assets which include TX Australia, Seven Ventures and Studios. This follows the Company’s decision in May 2020 to sell their Perth Headquarters for $75m.
As well as its renegotiated AFL broadcast rights which are expected to deliver Seven with savings of $87m across the next three years, the network also holds the Australian broadcast rights to next year’s deferred Olympics in Tokyo.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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