Seven's Rio Olympic production costs erode gains in TV ad revenue

Arvind Hickman
By Arvind Hickman | 15 February 2017

The Rio Olympic Games and a solid programming slate helped Seven grow its audience share and metropolitan TV ad revenue, but escalating costs hurt the media company in the last six months of 2016.

Seven increased TV advertising revenue by 4.6% to $648.7 million which bucks an Australian advertising market decline of 0.4%.

Seven's TV revenue received a lift from program sales, which increased 16.7% to $50.2 million, helping total TV revenue climb 5.4% to $698.9 million YOY.

However, the nearly $30 million gain in ad revenue over the period was dwarfed by the cost of covering the Olympic Games and third-party productions, which increased costs by $86.5 million in its P&L statement.

Seven's EBITDA, a measure of profitability, was down 25.5% to $170.8 million on the first half of FY16, while television EBITDA was down 22.5% to $153.2 million. Imapairment charges of $83.3 million reduced the interim profit to $12.4 million - 91% less than the interim profit in first half of FY16.

Stripping out the Olympics broadcast, which reached 18 million Australians, Seven still won its 21st consecutive half of ratings with a 38.9% share of total people despite a stronger second half from rival Nine.

Seven West Media's digital revenues grew by 200% YOY, largely buoyed by streaming, but “softer trends” in the traditional static display ad market has affected yields as more inventory is traded programmatically.

Seven West Media's print assets had declines in advertising and circulation revenue. The West Australian Newspapers had a 10.7% revenue decline  $108.5 million. This included an 15.8% drop in advertising revenue and a 4.6% drop in circulation earnings.

In November, West Australian Newspapers bought out Perth's other major masthead The Sunday Times and Perth Now, giving the media company a near monopoly on newspapers in the west. The West has also launched a new website.

Pacific Magazines had an advertising drop of 22.5% to $57.8 million and a circulation drop of 13.8% to 25.4 million.

Unlike newspapers, Pacific Magazine's revenue relies much more on circulation figures – which models survives longer remains to be seen, but both are challenged.

Seven is looking at opportunities to integrates its print, TV and other assets as it seeks a business model to keep all formats thriving.

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