ANALYSIS - Nine’s switch to WIN to bring in more cash

Chris Pash
By Chris Pash | 22 March 2021
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Nine Entertainment could end up better off by $5 million to $15 million by switching its regional affiliate deal to WIN from SCA, according to calculations by market analysts.

The new regional television affiliation agreement was announced earlier this month. SCA is now in talks with Ten. 

Under Nine's minimum seven-year deal, WIN will broadcast Nine’s metropolitan free-to-air television content from channels 9, 9Go, 9Gem and 9Life into markets including Tasmania, regional Western Australia, Victoria, Queensland and Southern NSW.

In the six months to December, Nine reported affiliate revenue of $29.675 million, down from $31.337 million in the same six months the year before. 

WIN will pay Nine 50% ad revenue, the same as SCA. But WIN, with greater reach, is expected to deliver more to Nine.

“This deal allows NEC to cover more regions than the SXL (SCA) agreement, which doesn't cover Tasmania and WA,” write analysts at investment bank Jefferies.

Nine also will not have to provide local regional news, resulting in cost savings.

Jefferies expects the WIN deal to bring in $15 million a year more than the SCA agreement.

And analysts at Morgan Stanley estimate the WIN deal could add $5 million to $10 million to Nine earnings.

“We believe the change makes sense,” write the analysts at Morgan Stanley in a note to clients.

“We expect WIN will be able to achieve higher audience delivery in regional markets,and thus pay NEC a higher dollar affiliate fee and also see efficiencies and some cost savings.”

Market analysts see Nine, with strong half year results, as a key beneficiary of a strengthening advertising market.

And the TV ad recovery from the pandemic is well underway, according to market analysts.

Morgan Stanley: "We believe the outlook continues to be positive in 2021 ... and expect this will underpin further positive NEC (Nine) earnings revisions."

Nine shares have recently been trading at or near $3, a multi year high, making the media player an almost $5 billion company.

Nine recorded just a 2% dip to $1.163 billion in revenue in the six months to December despite the pandemic.

The media group also maintained its divdends to shareholders at an interim 5 cents a share. Net profit of $178 million was 69% better than the same six months the year before.

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