Nine's new boss tuned in to profits John Lehmann and Lara Sinclair February 10, 2006
PUBLISHING and Broadcasting Ltd's new Nine Network boss Eddie McGuire has been told to develop a new operating model that puts profit generation above a ratings-at-any-cost approach.
He also signalled that the PBL executive team, led by chief executive John Alexander, would manage Nine more tightly in the wake of Kerry Packer's death and look to further exploit synergies between the network and the company's magazine, internet and gambling assets.
"There's a focus that Channel Nine is very much going to be part of PBL in the future," he told The Australian, soon after being appointed to Nine's top job.
Mr McGuire said he had been instructed to "come up with a model" that strikes a finer balance between cost control and creative programming.
"One of the key things we have to do at Channel Nine is provide profit for PBL," he said. Mr McGuire comes to the top job at Nine as the network has been forced to drop its net rates for some big advertisers below last year's prices in order to compete with the Seven and Ten networks.
For the first time in years, Nine is caught in a revenue squeeze between two competitors who are considered more desirable by many advertisers: Seven because rate increases of about 7 per cent have kept its prices reasonable despite having the year's hottest program line-up, and Ten because of its focus on the under-40s audience.
Last year, Nine's full-year revenue share fell from 38.7 per cent to 37.3 per cent of the $2.8 billion metropolitan television advertising market, still well ahead of Seven, which ended the year on 32.2.
Credit Suisse is forecasting full-year earnings before interest and tax for Nine of $195 million, a 22 per cent drop on last year's result of $250.5 million. With Kerry Stokes's Seven Network armed with its strongest programming schedule in years, Mr McGuire said Nine would go into the ratings season beginning Sunday determined to defend its long-held No1 crown.
"There's no doubt Channel Seven has emerged in the last 12 months and they've got some strong programming, and there's still no doubt Channel Nine is No1," he said. "We will defend that position as strongly as possible but, as I've said, that model we want to achieve now going forward is one of strong profit, and at the same time being able to come up with creative shows and get the revenue up as much as we can." Asked if he would be embarrassed if Nine lost its No1 ranking to Seven but increased its profits this year, he said: "No - I won't feel embarrassed at all about coming up with the model that we think is the right one going forward for Channel Nine and PBL."
John Sevior, the head of equities at Perpetual Investments, which holds an 8 per cent stake in PBL, said investors wanted to see a renewed focus on lifting Nine's profitability.
"In the past, it's been run to be No1 one and I think now we'll see a stronger focus on profits," he said.
Kerry Packer built Nine into a ratings powerhouse with his lieutenant Sam Chisholm in the 1980s by developing a high-cost system of star personalities backed by exclusive sports content.
Mr McGuire, 41, will take the helm on Monday from Mr Chisholm, who returned to Nine on a temporary basis last May.
Mr McGuire said Nine's costs during the past nine months had been "tackled with a fair degree of success".
"But that doesn't mean it's not an ongoing situation - there's no doubt that revenue is tight in the industry, and when revenue is tight you look at your costs but at the same time look to grow revenue," he said.
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