Comment: Sky TV’s shareholders will be feeling pleased that they railed against and effectively scuttled the company’s plan to take over MediaWorks back in 2022.
By focusing strongly on its core business Sky has gone against the trend of declining revenues in the media industry – increasing revenue and net profit in the first half of this financial year.
Revenue was up nearly 4 percent to $392.7 million and net profit jumped 10.5 percent to $29 million.
If Sky had gone through with the purchase of MediaWorks it would have bought a company that was plagued by controversy in 2023 with the sudden closure of Today FM, battled falling sales in a depressed radio advertising market and continues to be burdened by high debt.
The price tag on MediaWorks today would be considerably lower than what Sky was lining up to pay.
Sky’s chairman Philip Bowman was cited in the profit announcement with the sort of quote a chairman of a media company dreams of being able to make but rarely can.
“Sky’s consistent performance over a sustained period has been achieved off the back of a clear strategic plan and a great deal of hard work. It is pleasing to see the determined execution delivering benefits for our customers, employees and partners, as well as investors with an increase in the first half dividend.”
Perhaps worryingly for the local free-to-air networks – TVNZ and Warner Bros. Discovery (Three) Sky’s decision to go after a bigger share of the advertising market appears to be working. Sky’s chief executive, Sophie Moloney, was upbeat about the new strategy.
“The decision to invest in advertising capability has already delivered returns. Innovative new formats to support advertisers have increased the value derived from our existing content investment. The impact was a 12 percent lift in revenue through a period where revenue for the sector fell by 16 percent. At the same time, the team developed new advertising capabilities in the digital space that were successfully launched in January.
“While the advertising market is experiencing headwinds, our long-term confidence in pursuing this strategic growth initiative is increasing.”
Sky also managed to lift its subscription prices while containing its costs to a miserly increase of 1.5 percent. A combo that few other media companies are capable of achieving.
The next big test for Moloney and her executive team will be renewing its deal with NZ Rugby which runs out in 2025. The current deal saw Sky pay significantly more than it had paid previously and it involved a “special deal” that saw NZR take a 5 percent stake in Sky. The current deal is reportedly worth somewhere between $400 and $500 million. With Spark Sport hovering in the wings it was felt NZR had bent Sky over a barrel. Spark Sport is gone but NZR will be desperate to maintain, if not increase, the size of the deal. Sky will be just as keen to pay less. – MJ
NZME undone by the economy, again
Publisher and broadcaster NZME dipped under its worst prediction for its operating profit for 2023, with the economy dragging its advertising income down longer than it publicly hoped.
The Herald and Newstalk ZB owner’s operating profit was $56.2m, down from $64.7m in 2022 and under its lowest forecast made just in November. That was on total operating revenue of $340m (down from $355m). The net profit after tax was $12.2m, down from $22.7m a year ago.
Reinforcing how tough trading conditions have been over the past year for the media industry, 2023 is NZME’s lowest operating profit yet, even worse than the $62.4m in the worst of the pandemic years.
However, in a quirk of timing, chief executive Michael Boggs saw his total remuneration in 2023 jump by around $700,000 to $2.8 million as shares and incentives kicked in from past years. Boggs becomes the firm’s 12th largest shareholder with 2.5m shares.
NZME, which through last year twice told the market it believed the advertising market was about to pick up, is less bullish now.
Announcing its 2023 financial year results this week, it said only that January and February’s ad revenues were “pacing ahead of last year” – but those months last year had been negative on the year before and “pacing ahead” might well not mean real growth.
NZME holds out some hope, with business confidence improving and consumer confidence slower to grow but showing signs of kicking in this year.
There is a caution raised in the company’s outlook messaging to the market. “However sentiment among market commentators remains one of uncertainty and there is no clear consensus on the outlook.”
Advertising income was the company’s Achilles heel last year, with total ad revenue down $15m as companies kept their wallets closed and the housing market staggered back into life.
NZME’s radio division and One Roof real estate arm held up relatively well, but its publishing division found it hard, with even the strategic hope of digital ad revenue down $5m. Despite growth in digital subscribers, the loss of around 4000 newspaper subscribers and a 7 percent fall in newspaper sales in shops left a further hole in finances.
The company is promising a continued focus on cutting costs, after reducing them by 3 percent or $9m in 2023. Many commercial media firms reliant on advertising spends are doing the same, with TVNZ, for example, on a declared five-year cost-out drive.
Tantalisingly, NZME continues to signal to suitors and potential targets that it could still be in the market for some form of industry consolidation. “We will continue to review any potential opportunities that may present in a consolidating market and will be disciplined in reviewing any opportunities that may emerge.” – TM
Stuff top spot up for grabs
Stuff’s long reign as the country’s biggest news website could be about to falter as a result of its drastic and troubled new site design and app.
Stuff was still well ahead of nzherald.co.nz in January, with 2,339,000 monthly unique readers, a margin of almost 400,000 as the Herald sat just under the two million mark.
But that result masked the major change to Stuff’s design and functionality from about two-thirds of the way through January and repeated suggestions from within Stuff that readership fell sharply after the changes.
Two competitors, including the Herald (in Friday’s media column by Shayne Currie), have now noted Stuff’s daily readership numbers recorded by Nielsen to be significantly down through this month.
Nielsen’s next monthly report comparing the sites’ numbers is due on March 15.
The main Stuff site has adopted a more populist, racy tone since the business placed much of its “serious” journalism behind three regional paywalls last year. Stuff’s digital operations are now run by a former NewstalkZB radio producer Nadia Tolich.
While revamped website designs always have an element of the shock-of-the-new for readers for a while, the ongoing performance issues with Stuff (initially it could not provide archived stories, and it can be painfully slow on mobile and desktop to bring up selected stories) plus a clutter of moving parts, could have provoked a reader reaction. At the moment it increasingly resembles a collection of ‘stuff’ and much good journalism is probably getting missed.
Early on, Stuff journalists had privately spoken of observing daily or weekly drops of up to 20 percent in readership.
The January Nielsen figures were:
Stuff – 2,339,000
nzherald – 1,951,000
newshub – 1,110,000
rnz – 1,019,000
1News – 721,000
ODT – 403,000
-TM
