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PORTFOLIO POINT: Ten may benefit from improved market conditions

PORTFOLIO POINT: Ten may benefit from improved market conditions

PORTFOLIO POINT: Ten may benefit from improved market conditions, but the TV network owner needs to make up a lot of lost equity ground for its shareholders.

If you read the financial press regularly (and there are good reasons not to), one topic that may have caught your attention is the difficulties faced by our main free-to-air commercial television networks.

Channel Nine, struggling under the weight of a private equity capital structure, has led the charge, but Seven and Ten have followed not far behind. The news for all three has focused on earnings disappointments, equity raisings, asset sales, and various other “restructuring” initiatives – none of them good for equity holders.


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Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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  1. Could not the game of cards analogy also apply to the two dominant supermarkets where each continually tries to snooker the other by taking customers off them? Come to think of it, it could possibly apply to the banks also, although that is a 4 handed game.
    I suppose if you went to America the pot would become much bigger but the the number of players in the game also increased.
    Regards Ian Bowditch

  2. christophe capel

    Good post Roger and great analogy re the “perpetual game of cards”.

    And to add to this, scary to hear that Channel 9 made a loss on the Olympics but did that anyways… to use it as a platform to advertise all their upcoming shows.

    Ten may benefit from improved market conditions? I think the free-to-air TV model is a remnant of the past where channels dictated a linear program at a set time on fixed device, your TV. It is structurally doomed.

    Nowadays, people want choice, on the go, whenever they want and on multiple devices (smart phones, tablets, consoles, etc.). Definitely not easy to deliver but the way to go. This will provide extra revenue for the networks and can be offered in many different ways (ongoing subscription, pay as you go, etc.) as well as creating more space to advertise on.

    I think TV channels have been slow to move online unlike what some newspapers have done successfully where digital offering now represents a significant part of their business. While I do see a lot of people in public transport using their mobile devices to read news articles (some specifically targeted to their preferences), I am yet to see many people streaming TV the same way…

    Will the channels’ salvation be through on demand internet streaming?

    The TV networks should check what Quickflix is doing in this space to get an idea. It is a great innovative company tackling online streaming and multiple devices offering brilliantly. With a 52% YoY growth vs what the TV networks are experiencing, might not be a bad idea…

  3. very good post Roger, particularly liked the card game analogy. Ten ran into problems as soon as they hit their 1 millionith Simpsons re-run (well it felt that it was that many) and the people who used to watch it got bored and moved elsewhere. Ten has had some good shows but they have never had a bunch of them at any one time.

    Owning a TV station has its benefits if you seek a voice to influence the nation but as you mention there is no true competitive advantage, well at least sustainable one. You have exclusive agreements with distributors from america for content but it is a very volatile business with as more misses than hits, you both have to put a certain element of Australian content on tv which is expensive etc. One potential plus is that if social networking advertising continues to produce questionable results for the firms advertising than maybe a return to tried and trusted formats like radio and TV will see them perform a bit better, but as always that is just speculation and we are not interested in that.

    As with a few (ok alot) other businesses, making a case not to invest is far easier than making a case to invest so i will leave them and simply turn them on when something interesting is on or if they have the least worst show on at the moment.

    A long term investment is very hard for TV companies as the content they show can change so rapidly (Just look at Tens latest dance show where the advertising on the buses lasted longer than the actual show)

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