As we have said previously, the FTA advertising revenue market faces major structural headwinds as audiences transition away from linear television. Both Seven and Nine reported declines in their core FTA advertising businesses in FY19 and FY20. The decline in linear FTA advertising revenue in 1H20, before COVID-19 hit, was 7% YoY. This was an acceleration of the decline compared to FY19, but the effect was of course swamped by the impact of COVID-19 in the second half. As expected, COVID-19 had a disruptive and negative impact, particularly in Q4. This is reflected in the FY20 revenue results, but will flow through into FY21 because the longer-term economic impacts of COVID-19 shutdowns have yet to be felt.

To counter this trend and the one-off impact of COVID-19, Seven and Nine are managing the decline of the FTA market by following through with their investments in digital platforms (BVOD), improving yields on existing content, developing programmatic and addressable TV solutions, and cutting costs.

SevenWest and Nine were also able to make gains in cost reduction and new revenue growth that kept them in the black. These green shoots give some hope for a digital rebound in the wake of the COVID-19 disruption. However, it will be several years before BVOD is enough to significantly offset FTA declines.

Contents

Key Takeaways

Introduction

• Nine Entertainment FY20 update
• Seven West Media FY20 update

Declining Free-to-Air market

Defending the core

Cost reduction measures making headway

Digital growth blunted by COVID-19

• BVOD
• Stan provides another lever of growth for Nine

Studios remains a steady performer for Seven

Our take

List of charts/tables

Figure 1.         NEC Group FY19 performance (A$m)

Figure 2.        SWM FY20 performance (A$m)

Figure 3.        Half-yearly Metro FTA advertising revenue growth (%, YoY)

Figure 4.        Australian TV advertising revenues by sub-segment (A$m)

Figure 5.        FTA network revenues ($m)

Figure 6.        SWM and NEC BVOD revenue (A$m)

Figure 7.        Stan paid subscriber base (in millions)

Figure 8.       Seven Studios EBIT (A$m)