“Hugh Marks: Advertisers responding to Nine-Fairfax merger, market improving
By Max Mason
13 Jan 2019 — 11:00 PM
A month into the merger of Nine and Fairfax Media, advertisers are already setting up campaigns across television, print and digital and the advertising market looks to be improving so far in 2019, Nine chief executive Hugh Marks says.
Mr Marks, who estimated Nine would write about $45 million in revenue from its first broadcast of the Australian Open, said the integration and set-up of a new sales structure in the recently merged business had happened swiftly and lined up with a strong result in negotiations with media agencies booking advertising.
The Nine boss singled out a bumper Christmas period for subscription video on-demand service Stan – which he said would end 2018-19 on a profitable run rate – earnings momentum in Fairfax's former Metro Media assets including The Australian Financial Review,The Sydney Morning Herald and The Age, and the hold-up of prime-time TV ratings despite Nine's no longer having the cricket.
"A lot of the big advertising deals coming through now are including television, digital and print. That's happening already": Nine chief executive Hugh Marks. Louie Douvis
"We've had a very successful period of agency negotiations where we've been able to bring print and the traditional Fairfax Media assets into our agency arrangements – the timing of the transaction worked very well for that," said Mr Marks.
"That scale relationship means it's easier to bring that into the mix. Then we run the same argument with print as we do with television to support the market, which is [that] advertising in print media really works."
Nine has wraparound ads on the Herald and Age on Monday to promote the kick-off of the Australian Open. The new commercial team structure was implemented in December and combines high-level salespeople across the group with specialists in different platforms.
"A lot of the big advertising deals coming through now are including television, digital and print. That's happening already," Mr Marks said.
He said Nine would look to work with rival News Corporation to promote the effectiveness of the industry to advertisers.
The Nine share price has struggled since the merger plan was announced on July 26 and the stock has fallen a further 15.5 per cent to $1.42 since the deal completed in mid-December.
Mr Marks admitted the stock's performance had been frustrating, saying he believed the new Nine was undervalued taking into account all the assets it now held and the profitability of the business, which has a price-to-earnings ratio of 5.9 times.
"The thing we've got to do is make sure we communicate: a) the early results we're getting, and b) the long-term strategy and how shareholders will benefit from what is clearly, we think at these prices, we're pretty fundamentally undervalued. Ensuring we get some reward for our shareholders has to be a real focus," Mr Marks said.
The sharemarket has been poor and the consumer market, to which Nine and Domain are highly leveraged, has been soft.
"No one would be surprised by that – by where we are now – but it's not bad. I think we'll see a more positive quarter this quarter, and I hope that that will translate into the fourth quarter. Certainly there have been some one-off factors that have contributed to the TV market, most notably the split of cricket between pay and free, and no Ashes [cricket]," Mr Marks said.
He added that with the banking royal commission, financial institutions had reduced their spend in the final three months of calendar 2018.
Despite not having broadcast rights to cricket, the share of total audience during prime time – from where 70 per cent of revenue comes over the year – was largely on par with the previous year, he said. He expected a boost from the tennis during the next fortnight.
"I think we'll end up writing $45 million or so into tennis, which is a very good result, considering a normal cricket year would have been $70 million," he said. "So with the difference in price we've paid for the rights and production costs, from a profitability perspective, we're very pleased with the decision we made.
"We need to deliver a great outcome for audience. They need to turn it on and go 'You know what? Nine, you've done a great job on the tennis'. If we can do that, audience will be happy, programmers will be happy, network will be happy, shareholders will be happy, advertisers will be happy. There's no letting up on the pressure of performance on delivery, of what that production needs to look like."
Mr Marks said Stan had "really nailed" the summer period in terms of subscriber acquisitions, although he did not comment on the number of adds, thanks to the combination of a deal for Disney content and the release of original programming, such as Bloom.
"What we now need to do is go and prove to the market that we're not going to denigrate those assets, we're actually going to invest in them for a profitable future. We'll be taking some steps on that front, I hope, over the course of this first quarter as well," he said.
Nine has targeted 60 per cent of its earnings to come from digital by 2022, a goal Mr Marks said was achievable.
"That's not to say the traditional media assets will decrease their profitability. In fact we should be able to maintain profitability and use those assets to help grow these other businesses. That's the model – it's not rocket science," he said.
"We've just got to get on and execute it, and use television, radio, print and digital to grow Stan, 9Now, Domain and digital publishing more generally. If we can do that, this business will have a profile, in terms of its earnings mix and in terms of its growth profile, that I think the market doesn't yet appreciate, and that's what we've got to get out there and communicate."
(20min delay)
