MARKETS SPECTATOR: Ten's jammed signal

Turnaround stories are a hard sell for management and even harder to execute. So it is with Ten Network.

The company described its earnings in the first six months of the financial year as “unsatisfactory”. That’s being kind. Television revenue fell 16 per cent to $301.7 million. Earnings before interest, taxation, depreciation and amortisation plunged 39 per cent to $34.9 million.

Ten’s loss after tax was $243.3 million compared with a profit of $14.8 million for the previous period.

The company’s fundamental problem, like other free-to-air broadcasters, is that its target audience of 18 to 49 year olds prefers the internet. Advertising dollars are leaking to social media websites such as Facebook. Ten’s new chief executive Hamish McLennan said on a conference call with analysts today the channel was looking to attract a wider audience.

But how?

McLennan suggested more sport on Ten would help. Live sport is cheap content and one of the few surefire ways for free-to-air broadcasters to bolster ratings. The right to broadcast cricket is now being fiercely contested by Ten and its competitors. But Channel Nine has that contract and “will be hard to budge”, admits McLennan, because it has the right to be the last bidder for the rights.

Few other sports in Australia apart from cricket ignite the public imagination. It’s hard to see the British and Irish Lions rugby tour, which Ten has the broadcasting rights to, doing that. Questions remain whether Ten’s commitment, reiterated today by McLennan, to a diet of drama and reality TV can attract viewers.      

Moreover, Ten is in the midst of negotiating with its affiliate Southern Cross. Southern Cross writes a $65 million cheque each year to Ten. When asked whether a deal will get done by the time the contract lapses on July 1, McLennan declined to comment.

Still, McLennan expects advertising spending to pick up in the second half of the year because of September’s federal election. Some analysts expect Ten’s audience ratings, in freefall, to stabilise.

At 2.11 pm AEST Ten’s shares were up 1.7 cents to 31.2 cents, as it trimmed its 49 per cent decline over the past year, compared with the 15 per cent gain in the S&P/ASX 200 Index.