Yahoo US deal may see Seven West Media exit joint venture

A sale of Yahoo’s news and media properties to the owner of the Daily Mail could affect the local joint venture.

Yahoo CEO Marissa Mayer (Picture: AP/Lionel Cironneau)

A sale of Yahoo’s news and media properties to the owner of the Daily Mail could have implications for the US internet portal’s local joint venture with Seven West Media.

It is understood that some Seven executives believe the decision by Yahoo’s US headquarters to spin off its core internet business presents a golden opportunity to exit the JV by buying out the other partner.

Such a move has been speculated as Seven initiates a series of moves to claw back advertising sales for key properties, such as the Australian Open app 7 Tennis and magazines published by Pacific Magazines, including Women’s Health and InStyle. Sales representation for these assets was previously held by Yahoo7.

The Australian market is unlike any other Yahoo operates in because Seven is entitled to 50 per cent of Yahoo7’s profits. The commercial network is also entitled to royalty payments from products such as internet-based TV catch- up service Plus7, which enables users to watch programs ranging from reality hits My Kitchen Rules and Seven Year Switch to US comedy The Big Bang Theory and period drama Downton Abbey.

While industry rumours have suggested Seven had been preparing a contingency plan since last year to exit the joint venture, executives privately insist they remain committed to the business, which had annual revenues of $99.6 million in the year ended June 2015.

Seven executives believe a combination of global and local partnerships are becoming ever-more critical to counter the monumental scale of Google, YouTube and Facebook as more advertising spend shifts from local players to global giants.

Investment bank Morgan Stanley has estimated that this small pool of international players will collectively extract $4 billion to $5bn worth of advertising revenue this year. That is 35 to 40 per cent of the total pool of ad revenues in Australia.

For audience and advertisers, the most sought after content offered by Yahoo7 are premium video assets produced by Seven.

At Seven’s half-year result, the company’s MAVENs strategy — mobile, video, native and social ad formats — delivered strong growth, offsetting some of the softer trends in traditional display advertising. Seven’s share of net profit after tax amounted to $5.7m for the half.

A bid by Daily Mail & General Trust for Yahoo’s news, sport and finance sites would provide the British company with new content and open the door to Yahoo’s advertising sales expertise and key relationships.

Locally, the company’s Daily Mail Australia website recently exited a joint venture with Nine Network. After a strong start two years ago, growth has flattened out, and the website recently dropped out of Australia’s top five most popular news and entertainment websites.

DMGT confirmed that it was in talks with a number of unnamed partners to form a joint bid, funded with private equity cash.

“Discussions are at a very early stage and there is no certainty that any transaction will take place,” the company said.

Yahoo has also held meetings with Verizon, IAC/InterActiveCorp and CBS.