On October 17, 2012, David Gyngell was blessed with two gifts.
The first, and most important, was the birth of his first child Ted. However, at the same time as his wife was giving birth, Gyngell was playing a central role in another miracle – reducing the significant debt burden that had been hanging over his Nine Entertainment Company for the better part of the past two years and was threatening the very survival of the business in its present form.
The debt for equity deal saw a large portion of Nine’s $3.2 billion debt wiped – which, combined with the sale of ACP Magazines to Bauer, resulted in Nine now carrying a reported $500-800 million of debt as it enters 2013.
This dramatic debt reduction and the sale of the ACP business remove two significant headaches for Gyngell. For one, the drama of the Nine debt situation and the predicament of its then owner CVC were a distraction that was getting more attention and column inches than most things Nine was delivering through its core business.
Secondly, ACP had battled through a brutally difficult past three years as the Australian magazine industry completely lost its way in a media environment which had rapidly evolved. Getting ACP back on its feet would have been an expensive task – both financially and time wise – with no promise of any enduring return. If you ask media experts where magazines will be in ten years, the general consensus is that at its current momentum the magazine industry (alongside newspapers) will be significantly smaller.
This allows Nine to focus on, and further realise, its strongest assets. Despite all the drama of the past two years, Nine has continued to refine its core assets and build new ones.
The flagship Nine TV network had a very strong 2012. The Block continued to deliver strong numbers in all key demographics; The Voice outperformed all expectations and became one of the largest domestic TV phenomenons of the past decade. The Howzat! docu-drama was well received, as was Sunday night's new drama House Husbands. In news and current affairs Nine and Seven were neck and neck all year – the Olympics delivered strong ratings and while Seven won the year in the 'all people' category, Nine won the year in key ad demographics 15-54, 18-49 and 16-39. This is a significant turnaround; in 2011 Seven won the year in both 'all people' and 'all demographics'. Despite countless pronouncements of its death, TV is more alive and important than ever.
Meanwhile, the Ticketek business remains strong and reliable. The live entertainment market in Australia has been growing significantly over the past five years, and while 2012 was somewhat flat, the unprecedented box office success of tours such as Pink (who has sold out 40 shows and over 450,000 tickets across Australia) and One Direction, plus festivals such as Stereosonic and Soundwave (both easily selling over 220,000 tickets each nationally) demonstrate that there is an appetite for live entertainment and tickets in Australia.
Australia outperforms almost all other international markets for live entertainment expenditure in a per capita sense, and Ticketek as the leading ticket supplier is involved in the majority of transactions. The complexities of ticketing and the unique traits of the live entertainment companies and promoters make the Australian ticketing market impenetrable, ensuring that for the foreseeable future it will remain a high yielding duopoly for Ticketek and Ticketmaster. Plus, the insights and data it gives Nine are unique and highly valuable, and the emerging area of dynamic pricing gives Ticketek a growth area to explore.
Nine Live (helmed by former Ticketek MD Geoff Jones) is another to watch in 2013. It is promoting the One Direction tour and is also involved in other music and entertainment events. Nine Live is a natural extension for Nine – through Ticketek it has intimate knowledge of the intents and habits of the ticket buying public, from price points to categories, when they buy, how they buy and where they live. Through Nine and Ninemsn it has strong data around which acts, bands and events capture audience attention. These data points give Nine Live a unique advantage over the rest of the live entertainment players – most of which are operating off a mix of gut instinct and habit. Nine Live has the very real potential to seriously disrupt an industry worth almost $1 billion dollars in Australia alone. After all, what other live event entertainment company has its own TV network and digital platform that reaches the majority of the population?
Ninemsn rebranded in 2012 as mi9. It has launched the Microsoft Ad Exchange and also relaunched, over the past 12 months, most of its strongest content assets. Rate City and iSelect continue to grow and the mi9 position of imagination and intelligence is a smart one. Cudo remains an unknown, with the group buying area increasingly volatile.
The task for Gyngell in 2013 is to bring all of these strong individual assets together. All four assets are complimentary and possess insights and audiences that can benefit others in the group in a significant way. However they presently still exist, on the whole, as individual entities. Gyngell needs to find a way to glue them together in a manner that can deliver increased ad revenue and yield and maximise non advertising based (read, end user) revenue.
The other big challenge is to contain costs. Gyngell has been accused in the past of taking big bets and letting costs at times get out of his control. The ad market remains unpredictable, with minimal growth forecast, and the Ticketek and Nine Live businesses are relatively low margin yet high volume businesses that will require continued strong cost management and lean operations to thrive. The year 2013 will need to be one of considered investment.
The position Gyngell is in now is a strong one. With Nine Entertainment Company he has either the market leader or number two player in TV, digital and ticketing, and with Nine Live he has a entity that could grow into a leading live entertainment player within the next three years. For 2013, Nine is the media company to watch.
Gyngell's chance to change the plot
Despite all the drama of the past two years, Nine has continued to refine its core assets and build new ones. David Gyngell's next challenge is to bring the strong individual arms together.
On October 17, 2012, David Gyngell was blessed with two gifts.