Southern Cross Austereo and Nine are about to switch on their regional television deal that will see SCA broadcast Nine's content into regional Queensland, Southern NSW and Victoria from 1 July following the affiliation deal signed back in April.
The deal will see SCA pay Nine 50% of the advertisng revenue it makes, which is significantly higher than the 30-5% it was paying Ten under the previous terms, which has caused some to question if it can attract enough advertisers to make it sustainable.
Blackley tells AdNews SCA is set to increase its ad revenue by 100% as a result of the deal, although he would not reveal a dollar figure. Rate cards have been renegotiated and regional advertisers will end up paying higher rates under the new Nine deal, but Blackley believes the Nine signal and content is of significantly greater quality to justify a “commensurately” higher rate. He also adds that new advertisers have come on board since the deal was struck.
He claims that year-on-year, ad revenue for July is already 80% higher under the new terms, and had it remained in discussions with Ten it would have ended up paying a higher fee anyway.
“The way we see it, we have secured a superior audience and superior opportunity to grow revenue. A 90-100% revenue increase is just good economics – it funds itself,” he says.
SCA sells ads across 135 sub-TV markets and says its structure makes it more accessible for regional advertisers to buy spots, particularly for Nine's GEM and GO stations, that appear in local markets than the previous arrangement under WIN where it operated national sales structure.
“That’s where you get the economic benefit in regional markets … more regional advertisers will be attracted because it’s more efficient and has less wastage,” he says.
The deal marks a shift of providers after nearly 30 years and will see the SCA brand disappear from TV for the first time – something Blackley claims was SCA’s idea because it’s “more efficient and positive for the business”. It doesn’t suggest any further merger down the track that would see Nine take over SCA’s regional TV business, he says.
Part of the breakdown of WIN and Nine’s affiliation deal was the launch of 9Now streaming nationally in to regions. WIN’s position was that it was broadcasting content into its geographical region, which was in breach of the affiliate partner agreement in place, and negatively impacted its ability attract advertising revenue. The court, however, ruled in nine’s favour.
Streaming is a reality of the broadcast world, and Blackley concedes that it could impact the regional business. But, there is a clause written in to the SCA Nine contract regarding it. While Blackley would not reveal the threshold that triggers it, there is a mechanism built into the contracts so that if streaming does materially impact SCA’s regional business the two sides would evaluate the economics of it.
“I can’t talk about the commercialities but we have a view that is expressed in our contracts. It’s fair to say, if it makes a material impact, we have a mechanism to discuss it from that point. If we see substantial impact, it allows us to have a conversation. This is new to this affiliation deal. It’s complicated but we’re looking at it with our eyes open, and we can modernise our contracts.”
While the election temporarily shelved media reform discussions, it is expected to be back on the table following the 2 July vote but Blackley does not believe there will be the rush of M&A activity that had been speculated. There has been much speculation that the affiliation deal is paving the way for a merger between the two after Nine bought a 9.9% stake in SCA in March, but Blackley batted that away, as SCA has done on numerous occasions.
WIN and Ten’s partnership also begins on 1 July.
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