Nine chairman Peter Costello warns of content cut if tech giants don’t pay up

Nine chair Peter Costello warns the company’s $1bn investment in content can’t be maintained unless Google and Facebook start paying to use it.

Nine chairman Peter Costello. Picture: Josie Hayden

Nine Entertainment chairman Peter Costello has warned that it will cut its $1bn investment in content if the media group isn’t compensated for its use by technology giants Facebook and Google.

In the company’s 2020 annual report, Mr Costello said the US-based digital platforms had “enormous market power”, but weren’t subject to the content rules that apply to free-to-air broadcasters in the Australian market.

“They make very little Australian content and contribute very little to Australian employment. Nonetheless, they are able to use the premium content we produce to attract audiences in the Australian market,” Mr Costello said.

Mr Costello said Nine has consistently invested in premium content, noting that as much as $1bn was spent across its business, which includes a commercial TV network, streaming service Stan and metropolitan newspapers, in the 2020 financial year.

“The large global companies use this content to generate revenue, but they do not pay for it at a rate that fairly shares the cost of making it or fairly shares the value they get from it.

“We cannot be expected to bear all the cost when it is being monetised by others. If we are not adequately compensated we will, regrettably, reduce our investment in this content,” he said.

“Simply, it will become uncommercial to make all the premium content we now make”.

Mr Costello doesn’t expect a cut in Nine’s content budget would worry Facebook or Google as it wouldn’t affect their global businesses in “any significant way”, but it would affect Australian creators, consumers, and culture.

Mr Costello’s comments come as the competition regulator, along with government departments work on a final news media bargaining code. Legislation is expected to be put before federal parliament next month.

Mr Costello has previously said that revenue from the digital platforms could be worth $600m annually, while News Corp Australasia executive chairman Michael Miller has said real estimates could be as high as $1bn. News Corp is the publisher of The Australian.

Chief executive Hugh Marks said while Nine’s content investment has been “relatively stable over the past five years, the nature of that investment has changed significantly”.

“We have focused on platforms we can monetise, and that are growing and on the content that works across those platforms. We also need to control more rights to our content, to ensure we can determine and capitalise on all forms of distribution,” he said in the annual report.

Nine’s annual report revealed that Mr Marks was paid $2.3m in the 2020 financial year, down about 28 per cent from $3.2m last year. Of that, $1.5m was his salary and fees, up nearly 11 per cent from last year, according to statutory remuneration figures. He didn’t receive a cash bonus, unlike last year when he took home $647,220.

The company, born out of a $4bn merger with Fairfax Media nearly two years ago, last month swung into the red, hit by costs totalling $665m related to its TV, investment in online real estate group Domain and its digital operations.

Nine’s advertising revenue fell following the coronavirus crisis as brands slashed spending, with the company booking a net loss of $590m for the year to June. That compared with a net profit of $221.2m a year earlier.