Seven West Media warns of revenue declines, advertising woes

Seven West Media says TV remains ‘difficult to predict’ but it expects more revenue declines in a soft ad market.

Seven West Media CEO James Warburton, left, with chairman Kerry Stokes. Picture Nikki Short

Seven West Media has flagged a further decline in revenue for its metropolitan television business caused by soft advertising market conditions, while urging the government to take action against digital platforms.

Seven chief executive James Warburton told the company’s annual meeting the market remained “short and difficult to predict”, with the business now forecasting the television market to be down “mid single digits” for the next financial year.

It comes a day after rival Nine Entertainment also warned its first half earnings would be hit by the weak advertising market and an advertiser boycott of Alan Jones’ radio program that had affected the radio business.

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“FY19 was a challenging financial year from an advertising markets perspective, driven by political uncertainty, the impact of the royal commission on financial services advertising spend and generally subdued economic conditions,” Mr Warburton told shareholders.

“We grew to a 39 per cent revenue share in the first quarter of FY20, but in a down market.

“The market remains short and difficult to predict but we can expect further softness in the second quarter. We are now forecasting the metropolitan television market to be down mid single digits for the financial year.”

Seven expects full year 2020 underlying EBIT to be at the lower end of $190 million to $200 million, with the exclusion of merger with Prime, and sales of the Pacific and Redwave businesses.

Chairman Kerry Stokes said the way to fix the continual tough advertising market conditions was to ensure tech giants like Google and Facebook were regulated.

“The fix is to find a way of stopping the big platforms taking all the money. At the end of the day, they are like a vacuum cleaner. They come to Australia, they vacuum up all the money and go away again, and we get what’s left,” Mr Stokes said.

“Getting an opportunity to control some of the revenue in Australia would be great, I just don’t know how we do that.”

Mr Stokes urged the federal government to adopt all recommendations of the Australian Competition and Consumer Commission’s report into the market power of digital platforms, which would subject Facebook and Google to the same rules as broadcasters, including content quotas, advertising classifications and privacy laws.

However, he said he was not confident the government would take action. Mr Stokes made reference to a part of the Australia-US free trade agreement which says the government “cannot interfere with American company creativity”.

“We urge the federal government to adopt all these recommendations, otherwise the digital platforms’ disruption in the broadcast media industry will accelerate, to the detriment of consumers, advertisers and thousands of Australian workers,” Mr Stokes said.

“We are not seeking special favours from the government but a chance to continue delivering first class local content and news to Australians in both city and regional areas.

“All these studios, they fall under a special section of the trade agreement and our government can’t do any special tax on it. We get stuck with it, America doesn’t worry about us.”

But Mr Warburton said it was important for leaders of media businesses to talk the industry up despite current market conditions.

“Here we are yet again as public companies and public CEOs giving guidance, talking about the ad market. I’m hugely confident going in with an expanded offering,” he said.

“We have to get up and fight really hard and actually talk to clients at a very senior level.”

Mr Warburton said he would continue to “transform” the business into the new year, but would not comment directly on plans to buy more assets. But Mr Stokes said he had no plans in the future to sell Seven West Media.

“We are keen on giving James a chance to grow the business, we’ve always wanted to grow not sell it. We would have sold a long time ago if we wanted to sell,” he said.