Nine’s profits crash by 40pc as advertising revenue dries up

Nine Entertainment’s net profit has crashed by 40 per cent in the six months to December 31 thanks largely to a slump in advertising revenue.

Nine will hope for a significant financial return on its investment in broadcasting the Paris Olympic Games this year.

Nine Entertainment’s net profit has crashed by 40 per cent in the six months to December 31, with the extended slump in advertising revenue continuing to weigh heavily on the media company’s bottom line.

Earnings before interest, tax, depreciation and amortisation (EBITDA) also fell sharply, down 15 per cent from $370.5m to $316.1m. However, Nine’s broadcast video on demand (BVOD) platform continues to grow, with revenue up by 19 per cent to $88.6m.

Nine chief executive Mike Sneesby acknowledged that while it was “hard to tell” when the advertising market would bounce back, he believed “it was close to the bottom of the cycle”.

“With consensus that 3Q will again be tough, (and) we expect 4Q to be tough in terms of trading, we feel like we are close to the bottom and we should be thinking about what the uptick starts to look like,” he told The Australian.

But Mr Sneesby ruled out cutting rates for the network’s advertising clients.

‘‘Cutting rates in the short term to meet short-term objectives ends up costing you in the long term when demand comes back,” he said. The prolonged slump in ad revenue is particularly worrying for Nine as its coverage of the Paris Olympics – which will be enormously expensive to produce – is just five months away.

Last year, Nine paid $305m for the rights to cover the summer and Winter Olympic Games, starting with Paris in 2024, through to Brisbane in 2032.

Traditionally, the Olympics are a loss-making enterprise for the host network.

For example, the most recent Summer Games in Tokyo (held in 2021 due to a Covid postponement) was a ratings bonanza for Seven, and yet it still led to a $50m loss for the Kerry Stokes-­controlled company.

Nine non-executive chairman Peter Costello and chief executive Mike Sneesby.

Asked on Thursday about the prospects for a profit arising from Nine’s Paris coverage, given the difficult economic conditions, Mr Sneesby said the network was better placed than Seven to capitalise on the Olympics due to its digital assets and its spread of platforms. “We are confident about commercialising the Games,” Mr Sneesby said.

Costs rose by 12 per cent across Nine’s broadcast division, and Mr Sneesby said there would be further cost-cutting before the end of this financial year. “We’re not about to go and cut a range of heads in the business but I would say that trading continues to be difficult in Q3 and Q4 and as we’ve committed to the market, we’ll continue to have cost-out initiatives. I think where we start to turn to from here is … about the way we structure our business, the way we share content across the company, things that will take longer but will give us efficiencies over the longer term. That becomes a greater focus than short-term cost reductions,” he said.

Earlier this month, Nine cut 22 roles from its marketing arm, ‘‘Powered by Nine’’.

Nine’s first-half broadcast revenue fell by 9 per cent to $654.6m while revenue for its streaming service 9Now increased by 6 per cent to $93.8m.

Nine Radio’s revenue fell by 3 per cent to $52.5m and the company’s digital and publishing arm, which includes The Sydney Morning Herald, The Age and The Australian Financial Review, saw a decline in revenue by 4 per cent to $288.7m.

But 9 per cent growth in digital subscriptions and licensing revenue “more than offset the decline in print subscription revenue”, Mr Sneesby said. Digital now accounts for about 61 per cent of Nine’s publishing revenue.

Nine’s paid streaming platform, Stan, recorded double-digital revenue growth, climbing by 11 per cent to $228.4m.

Mr Sneesby said Nine had “kicked off engagement” with artificial intelligence giants over payment for use of news content.

“All of the important journalism that comes out of our business will be one of the biggest drivers of AI engines,” he said.

“We (Australian media companies) all agree as a media business that if our content, our journalism and our IPs are being utilised by a third party, then there needs to be a commercial structure in place around that. In that sense, we are all very aligned in terms of how we approach it.”

Nine’s shares closed 8.7 per cent lower at $1.68 on Thursday.

Entcho Raykovski, a media analyst with E&P Financial Group, said Nine’s first half EBITDA was ahead of consensus estimates. “This is a good result, but the outlook for TV into 2H24 is more difficult than expected,” he said. Nine will pay an interim dividend of 4c a share.