Ten minus two: the painful lost years

Ten Network's results have gone from 'unacceptable' two years ago to even worse now. And new boss Hamish McLennan's statements have an eerie familiarity to them.

Almost two years ago to the day, Network Ten chairman Lachlan Murdoch publicly declared that the performance of the Ten Network at that time was "not acceptable".

His reasoning: group revenue was down 2.2 per cent to $489 million for the first half of the 2011 financial year, TV earnings before interest, dividends, depreciation, and amortisation was down 13.4 per cent to $95 million and net profit attributable to members was down 15.6 per cent to $49.5 million.

At that time, early April, Ten’s share price was sitting around $1.30.

His actions: fire then chief executive Grant Blackley and appoint Seven sales and digital chief James Warburton. As we all know, Warburton’s hire was subject to legal action from former employer Seven, and Warburton didn’t end up starting until the start of 2012.

In the meantime Murdoch took on chief executive duties. In his words, Ten was at a “crucial juncture in its history”, with a five-year history on “unsatisfactory financial performance”. Murdoch was “committed to restoring shareholder value” and “refocusing on core strengths” through developing a “winning culture” via the “best leadership team”.

Fast forward to April 2012 and once again Ten was in front of the market revealing similar results. Group revenue down over 10 per cent, group earnings down over 40 per cent, television EBITDA had plunged over 40 per cent and group net profit was down. What was in 2011 “not acceptable” had gotten a whole lot worse.

Warburton, in the role for little over three months, blamed tough advertising markets for the decrease. Later in 2012, Ten would offload out-of-home ad company Eye Corp.

Despite the advertising market being soft and showing no real signs of any bounce, little appeared to be done at Ten to diversify revenue streams. For instance, for the duration of 2012 the company had no chief digital officer, Nick Spooner having left Ten in mid-2011 to join Salmat. For such a key area for any media company, it was an odd seat to leave unoccupied.

Later in 2012 Murdoch dusted off the ‘unacceptable’ line and used it again, this time in regards to Ten’s dire ratings performance in the back half of calendar 2012. He stated “the board believes that the company has been responsive and is taking immediate action to address its ratings and financial performance” and at the same time dubbed James Warburton “one of the best media executives in Australia”.

In February 2013, James Warburton clearly wasn’t considered by Murdoch or the Ten board to be one of the best media executives in Australia and on February 22 he was relieved of his duties at Ten, a year after he started. Former Young and Rubicam global chief executive Hamish McLennan was appointed to the top role.

Anyone with access to OzTam ratings could see that executive changes were imminent at Ten. It had a brutally difficult end to 2012 and given its sole reliance on TV advertising revenue and the TV market's predictable correlation between ratings and ad revenue, it was clear that the first half of financial year 2013 would be worse than the same period a year prior.

Yesterday we saw the extent of the damage as Ten unveiled their fiscal year 2013 first half results to the market. It was a concise presentation which demonstrated that performance for Ten keeps getting worse despite the continued claims that the company was strategically set for a stronger future.

TV revenue was down 15.8 per cent to $301.7 million while EBITDA dropped from $56.8 million in first half 2012 to $34.9 million for the same period in 2013. Ten has moved from a net profit of $14.8 million to a net loss of $243 million in terms of first half performance. The best performing program Ten could celebrate in the calendar year to date was the Australian Formula One Grand Prix, with a result of 1.24 million viewers. The other bright spot was Ten’s performance to date on Saturday nights – generally the weakest of all nights in terms of viewers and a slot that is sure to be affected by big ticket AFL and NRL games broadcasting through to October on competitors Seven and Nine.

The question is, if in April 2011 Murdoch deemed Ten’s performance not acceptable, what would he use to describe it now?

Since then the TV business has fallen 33 per cent when it comes to revenue (down from $401 million in 2011 half year to $302 million in 2013 half year), television EBIDTA has dropped over 60 per cent (down from $95 million in 2011 to $34.9 million in 2013 front half) and net profit attributable to members has dipped from $49.5 million in 2011 to $6.8 million in 2013. These half year results make 2011’s situation seem resoundingly positive. Meanwhile, the share price has dropped from $1.30 to a little over 30 cents.

McLennan stated that Ten was “clearing the decks and preparing for the future” but you can’t help but think you’ve heard the same tune before. The efforts made to create a winning culture at Ten since 2011 have created anything but, revenue-wise the business is in worse shape and people-wise it has indirectly created a revolving door in its executive ranks with almost all key management personnel changing at least once within the past two years. Neither of these things contribute to a positive culture regardless of the spin applied. Plus there’s the share price situation and the damage this has caused with investors in terms of financial loss and the erosion of confidence in the board. 

Combine this with the uncertainty around the Southern Cross Austereo regional TV affiliate partnership and the lack of insight offered around future developments regarding programming and the digital space, and the reality is right now as it stands Ten doesn’t appear to be offering much confidence that its rapid two-year regression has any signs of stopping.

Ben Shepherd is a media and technology consultant. He blogs at Talking Digital, can be found on Twitter @shepherd and LinkedIn http://linkedin.com/in/shepherdieu

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