Seven West Media strikes deal with Google, swings to net profit
Kerry Stokes’ Seven West Media will provide content to Google’s favoured News Showcase product, but is still backing the government’s media code.
Kerry Stokes’ Seven West Media has struck a deal with Google to provide news content to its News Showcase, as the federal government’s mandatory news media bargaining code looks set to become law.
Seven West said the agreement will be subject to executing a long-form agreement within the next 30 days.
Google has been pushing its News Showcase as an alternative to the federal government’s drive to make tech giants pay for content, via a mandatory media code which is backed by other major news organisations including News Corp, publisher of The Australian. Three weeks ago, Google threatened to withdraw its search engine from the Australian market if the code became law.
Google launched News Showcase in Australia on February 5, and at the time said it would initially appear across its Google News product, with plans to sign deals with more publishers and to eventually bring its Search product. The launch marked the first time that Google would pay publishers for their news content in Australia.
Late last year, Google said it would pay publishers more than $US1bn over the three years to licence content for News Showcase, which displays story panels, images and summaries of news content. It was initially launched in Germany and Brazil.
Mr Stokes, who is Seven West’s chairman and biggest shareholder, says its deal with Google is a “great outcome” for the two parties.
“Our new partnership recognises the value, credibility and trust of our leading news brands and entertainment content across Seven and West Australian Newspapers.”
Mr Stokes thanked Prime Minister Scott Morrison and ACCC chair Rod Sims, and singled out Treasurer Josh Frydenberg “who has been instrumental in the outcome of this groundbreaking agreement”.
“Their outstanding leadership on the implementation of the proposed news media bargaining code has resulted in us being able to conclude negotiations that result in fair payment and ensure our digital future,” he said.
Code will still pass
Seven West Media CEO James Warburton said he was confident Australia’s media bargaining code would be passed into law. Mr Warburton, who has been tasked to overhaul the television broadcaster and newspaper publisher’s fortunes, says Seven West’s Google deal is separate to the landmark code before parliament.
“The deal is not predicated on the legislation coming into effect or not coming into effect, the legislation is unequivocally coming into effect,” Mr Warburton said.
“And the deal has nothing to do with that and it‘s about negotiating the outcome that we wanted and getting an agreement with Google.
Mr Warburton said the group, which publishes The West Australian and The Sunday Times and 31 regional and community newspapers, had been “extremely supportive of the code all the way through and continue to be supportive of the code and there‘s nothing in this deal that suggests otherwise”.
“As far as I‘m aware, every single media company is negotiating with Google as we speak, some have signed deals, some haven’t. But at the end of the day, it comes down to I suppose commercial acumen and the ability of people to do deals.”
Mr Warburton was tight-lipped on the details of the Google deal or financial value, noting it was only signed on Monday morning. The announcement came just minutes after Seven West released its financial results with the group reporting a statutory net profit of $116.4m for the six months to December from a loss of $49.4m a year earlier.
“We wouldn‘t have announced it if it wasn’t substantive and significant,” he said, adding more details will be released after a so-called “long form agreement” is signed within the next 30 days.
Mr Warburton declined to comment on a report, which cites unidentified industry sources, that the deal is worth more than $30m annually. The Australian understands the figure is higher.
The Morrison government is set to push its legislation through the lower house on Monday. Debate on the bill could begin in the Senate as early as Tuesday, with the code expected to be enshrined in law by the end of the month.
Reiterating the government’s intention to legislate the mandatory news media bargaining code, Treasurer Josh Frydenberg said he had spoken to both Google chief Sundar Pichai and Facebook founder Mark Zuckerberg over the weekend, and welcomed the efforts of the big tech companies to reach deals with media companies.
“I spoke to him (Zuckerberg) just yesterday, and I have been speaking as recently as this morning as well as over the weekend with Sundar [Pichai], the head of Google,” he told the ABC on Monday.
“They are very focused on what’s happening here in Australia, but I sense they are also trying to reach deals, and that is welcome.
“Both the media proprietors and the digital giants I think recognise that we have something that is workable here in Australia, something that we can take forward, something that can ensure a stable media landscape, and something that will see journalism continued and journalists rewarded for creating original content,” he said.
The code is designed to ensure media companies are compensated for the use of their content on search engines and social media platforms, and seeks to address the market bargaining imbalance between the digital giants and news publishers.
On Friday, a Senate committee recommended the news media and digital platforms mandatory bargaining code be passed.
“This legislation is important, and it is our intention to pass it through parliament,” Mr Frydenberg said.
Google launched News Showcase in Australia on February 5, and at the time said it would initially appear across its Google News product, with plans to sign deals with more publishers and to eventually bring its Search product. The launch marked the first time that Google would pay publishers for their news content in Australia.
Seven swings back to profit
Seven West’s surprise deal was announced just minutes after it West delivered solid interim financial results on the back of major cost-cutting.
The TV broadcaster and newspaper publisher has returned to the black as Mr Warburton’s turnaround plans start to deliver results, and as the metropolitan free-to-air television advertising market bounces back strongly.
Seven West said the metro free-to-air-TV ad market rose 0.6 per cent in the first-half to December, with the second quarter recording a hefty 17 per cent jump.
Mr Warburton was very pleased with the results, given the difficult ad market during the coronavirus crisis.
“This has been a very big year for Seven, with several major milestones achieved as we continue to reposition the business,” he said.
“Our new content strategy is firing, with a significantly improved ratings share and a more attractive demographic profile.”
Mr Warburton said its TV network has seen a big jump in viewers with new shows such as Big Brother and Farmer Wants A Wife.
“Our new tent poles are delivering on average 75 per cent more audience than the old content strategy. This will translate to higher revenue share in the coming 12 months.”
Seven West posted a statutory net profit of $116.4m for the six months to December 26 from a net loss of $49.4m, although revenue fell 9.8 per cent to $644.2m.
Its interim underlying earnings rose 24 per cent to $165.7m from $133.1m a year ago.
Seven recorded significant items of $41.5m before tax, which primarily relate to the reversal of “onerous contracts”.
Excluding significant items, Seven‘s costs dropped 17.5 per cent to $493.7m as Mr Warburton cut costs across the group as well as temporary net cost savings related to COVID-19.
Seven’s net debt dropped 42 per cent to $329m in the first-half of the 2021 financial year.
The group said its $170m costing cutting plan is on track with a further $30m of cash savings identified.
No dividend was declared, in line with recent years.
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