General | Feb 03 2006
Network Ten (TEN) has posted a shocker. While every broker expected some decline in revenues over the first half of FY06, most were caught short in their pessimism.
Television revenues in particular were grim. As advertising revenues in general have been on the wane for free-to-air TV for some time, a poor result was anticipated, but the numbers served to highlight just how much ground Ten has given up to the new king of the airwaves, the Seven Network (SEV).
Ten has always operated as a niche market player in recent times, specifically targeting 16-39s and trying to keep costs down. It hasn’t tried to be “Number One”, like Nine used to be, because it just wasn’t worth it. To date this had proven a successful formula.
The problem is that the aforementioned 16-39s have been courted by Seven, or have just stopped watching as much FTA tele. Ten needs to respond, and it is putting a lot of faith in what it has to offer in the second half and beyond.
Sport is a major factor. Ten was understandably nobbled by the Winter Olympics last half, and has not been a major sporting station for a while. To kick off the second half, it will still have to suffer the two-week ratings drain from the Commonwealth Games.
But come 2007, that might all change. Ten will join Seven as co-broadcasters of the AFL for at least five years. The indications are that AFL viewing has been growing beyond the confines of Victoria, and Ten will be hoping AFL continues to cement itself as the national code of choice given it was party to the richest sporting rights deal ever negotiated.
Ten has paid an awful lot for AFL. Two factors will be important in the network seeing a good return. Firstly, while rugby league enjoys weekly season success in NSW and Queensland, and rugby union enjoys significant ratings for test matches in same, soccer (sorry, football) has snuck up and surprised everyone.
I myself was one observer who was surprised as well. Okay, I’m a rugby man, but I just thought the A-League was always wishful thinking when good players shoot straight off to Europe and where underlying ethnic rivalry has always cast a pall over the code in this country. Well done Frank – I was wrong.
Soccer is the only real contender to AFL as a truly national winter sport, and it is played by more kids in this country, particularly at a young age, than any other. And this year brings not only the World Cup, but Australia’s first participation since 1974. Sure, it will all go on in the wee small hours, but if ever the A-League needed an additional marketing boost, this is it. (Note also a Rugby World Cup in 2007).
Secondly, real success in the AFL ratings stakes relies on one team – the Sydney Swans. While diehards in Victoria, SA and WA are prepared to wait about two hundred years for their side to get up, Sydneysiders are a fickle bunch of fair-weather friends. Sydneysiders will hitch their wagon to any local side that is performing at the time – Swans, Sydney FC, Waratahs, Wests Tigers – and dump them if they’re not. Sydneysiders are not loyal, they just like winners.
For the first time in eighty-something years, the Swans won the flag in 2005. AFL ratings went through the roof when the most populous state got on board with “their” team. So significant to the AFL is Sydney, that management raises the issue every year of a second Sydney team. For Ten to derive a valuable benefit from AFL rights, they desperately need the Swans to be around come finals time – every year.
The next leap of faith is the two-year content deal with Fox. Again Ten has put its hands in its pockets, and the network will dearly want to hope Fox has something to offer that will stymie the drain of younger viewers away from FTA in general.
The last leap of faith is Ten’s reliance on its tiresome and tiring stars of the stable – Big Brother and Australian Idol. Yawn. Okay, they have never been my cup of tea, but the signs are that the glory days of both programmes are behind them. Ten even had to resort to gratuitous titillation last year to rekindle any interest in the ageing BB franchise.
So this is what lies ahead. What do the brokers think?
In short, the brokers are split between those who have pretty much written Ten off (declining ad revenues, declining ratings, overpaid contracts) and those who hold a candle (operating costs are impressive, it can’t get much worse), and with a few on the fence. The FN Arena database shows 3 Sells, 4 Holds and 2 Buys for a Market Sentiment rating of minus 0.11 (range +/- 1.00).
Interestingly, the poor result did not actually evoke any ratings changes from the FN Arena broker universe. The reality is that Ten has the challenge of a long road back, and as so much depends on the success or otherwise of its offerings it is hard for analysts to be committal in the short term. Some ascribe to the faith, some are non-believers.
What is known, at least at this stage, is that Ten is very much about the old and fading medium of FTA TV. While Nine has ninemsn, and Seven has its deal with Yahoo!, Ten is yet to look ahead to the new frontier. This, as much as anything, may well have a bearing on Ten’s future.
