news articles 31 march 2005

[Inside Australian Idol]

Network Ten turns on the profits
By Colin Kruger
March 31, 2005

Australia's No. 3 television broadcaster, Ten Network, has unveiled a 23 per cent increase in interim earnings to $53.5 million and says it is on track to become Australia's most profitable TV network this financial year despite losing viewers to Seven Network.

Ten reported an 18 per cent lift in group revenues to $492.5 million for the half-year ending February 28. The overall result was slightly ahead of market expectations.

"As usual, we clearly outstripped our commercial rivals in margins and now, for the first time, we achieved the highest interim television earnings of all the networks," said Ten's executive chairman, Nick Falloon.

More importantly, the company said it was well placed to defend its hold on the key 16 to 39-year-old demographic without the programming cost blowout being experienced at Seven and Publishing & Broadcasting's Channel Nine.

The two rival networks reported rising costs in their respective interim results as they fight for the top spot on the ratings ladder.

Ten's shares have declined 19 per cent since last December, in the wake of Seven's surprise ratings wins as shows like Lost and Desperate Housewives have drawn viewers from its rivals.

Ten conceded that it had lost viewers in the early part of this year as its own new programs like The X Factor fizzled, but said that was about to change as it brought out the big guns.

"Many of our biggest and best shows are still to come, including Australian Idol and Big Brother, while the AFL has just kicked off," said John McAlpine, who heads Ten's TV operations.

Mr McAlpine said Ten had come from second spot in the 16 to 39-year-old demographic this time last year to claim the No. 1 position by year's end, and itexpected that it would do the same this year.

Ten was the only network to increase its viewing audience for the 2004 calendar year and grabbed 31.5 per cent of the TV advertising spend. Based on new advertising deals and expectations Ten will retain its dominance among 16 to 39-year-olds, "Ten is set to retain its high revenue share", Mr McAlpine said.

ABN Amro Asset Management's Neil Boyd-Clark said Seven's main impact so far had been on Nine, and he expected Ten to do well as long as it stayed dominant in the 16 to 39-year-old demographic.

"The big issues they face is what Seven's doing in terms of its ratings performance," Mr Boyd-Clark said.

Analysts were also impressed with Ten's cost containment. Shaw Stockbroking's Greg Fraser described its 44.7 per cent profit margins as "astonishing" for a free-to-air network.

A performance turnaround at Ten's outdoor advertising business, Eye Corp, contributed strongly to earnings, though on a much smaller base than the TV business. Eye Corp reported a 48 per cent increase in revenues to $58.7 million, while earnings before interest, tax, depreciation and amortisation more than doubled to $14.4 million.

Ten shares closed 3c lower at $3.59 yesterday.


www.smh.com.au/news/Business/Network-Ten-turns-on-the-profits/2005/03/30/1111862463291.html

[Inside Australian Idol]

Ten factors out song and dance
Mandi Zonneveldt
31mar05

NETWORK Ten's love affair with talent quests appears to be over, with TV head John McAlpine yesterday signalling the death of X Factor.

Mr McAlpine said it was unlikely X Factor would return for a second season.

"We're clearly unhappy with X Factor's ratings. It's a bit hard to hide that," he said. "I'd struggle to say right now that we'd renew it."

And while the network is still hoping for a high-rating third season of Australian Idol, Mr McAlpine said it would be alone in its genre.

"I think we've peaked in terms of adding to the supply pool," he said. "Australian Idol we want to protect. It will do a good job at the back end of the year, but it might be on its own in the future, I think."

Mr McAlpine's comments came as Ten claimed the title of most profitable commercial television network for the first time.

The network reported a 23 per cent increase in net profit for the six months to February 2005 to $53.5 million.

Revenue from television lifted 15 per cent to $433.7 million and earnings before interest, tax, depreciation and amortisation for the TV division climbed 29 per cent to $194 million.

And chief executive Nick Falloon predicted another record year ahead.

"Given our financial results to date and the likely continuation of solid advertising demand, we are confident Ten will deliver a record performance in the coming financial year," he said.

"Despite the intense competition between the networks, we believe the depth of our program schedule . . . will ensure another victory in the key 16-39 demographic."

As well as Australian Idol 3, Ten's 2005 line-up includes another rendition of reality show Big Brother and international hits The 4400, Law and Order: Trial By Jury and Kirstie Alley's Fat Actress.

Mr McAlpine also hinted at the inclusion of celebrity-driven reality shows, with the format proving successful for other networks.

"We've got a couple coming up at the back end of the year that we haven't made any announcement about," he said.

But the ratings rivalry has already proven fierce, with the Seven Network overtaking PBL's Nine for the first time.

Mr McAlpine yesterday admitted Ten had suffered a slight drop in audience share this year, but said the network was satisfied with its programs to date.

"This is a marathon. You've got another 36 weeks to go," he said. "We are judged on our performance on an annual basis, not on six weeks."

But Mr Falloon said the network was leading in the 16 to 39-year-old demographic for the first time in five years, and its focus on that market had not changed.

"Would rather be up, of course we would, but it's not significant in the scheme of where we are," he said.

"With the schedule we've got for the back end of the year we're very confident in being able to continue to build on what we're doing.

"On the other side of the fence, our two competitors will be, as they are, building their costs fighting each other to be number one."

Ten's outdoor advertising division Eye Corp also performed strongly in the six months to February. Its revenue increased about 50 per cent to $58.1 million, while EBITDA climbed to $14.4 million.

Shares in Ten finished down 3c at $3.59.


www.heraldsun.news.com.au/common/story_page/0,5478,12706326%255E2902,00.html

[Inside Australian Idol]

Hyped to the max but Ten's star recruit lacks the X factor
Sally Jackson
March 31, 2005

CHANNEL Ten's musical talent show The X Factor has flopped so hard it has turned the network off launching any new programs in the genre.

Ten chief executive John McAlpine said yesterday he believed that category of television had now peaked "in terms of adding to the supply pool" of programs.

"We're clearly unhappy with The X Factor ratings, it's difficult to hide that," he said, adding that the series was unlikely to be renewed for next year. He said he also didn't know if Ten would again schedule American Idol, another music quest show that is failing to thrill viewers.

Nevertheless, he predicted that series three of Australian Idol, which is scheduled to air in the second half of this year, would do well. "Our expectations are the same as last year" in terms of audience numbers, he said.

Series two of Idol last year averaged 2 million viewers on Sunday nights and 1.7 million on Mondays, and the Final Verdict show was the most watched program of the year, with 3.3 million viewers.

Ten reportedly paid more than $25 million for the rights to The X Factor, believing that if it didn't, rivals Nine or Seven would nab the format and use it to blunt this year's Idol.

"It was a competitive environment. Everyone wanted the show, we wanted it, plus we wanted it [as] a defensive move," McAlpine said. Now, however, "it's a bit hard to defend it".

The series started promisingly in early February with 1.45 million viewers but within a week its audience had plunged by a quarter to 1.085 million. Within a month it had halved to 705,000.

Yesterday Ten announced an interim net profit of almost $53.5 million for the six months to February 28, up 23 per cent on the same period last year, with the television business contributing revenue of $433.8 million, up 15 per cent.

Ten's programming costs rose by 5.1 per cent, or about $10 million, half-on-half. That did not include the cost of The X Factor, which will show up in the second half of this year.

"We will continue to invest strategically in programming, it's what makes the world go round, it's our business," McAlpine said.

One genre he said Ten was looking at launching was that of celebrity-based entertainment programs. Seven's Dancing With the Stars is the nation's No.1 local program and Nine has also had a hit this year with its Celebrity Overhaul.

"We don't know how long it's going to last, these things are cyclical, but we have got a couple [of programs in the genre] coming up at the back end of the year that we haven't made any announcement about," McAlpine said. "I think there's room for a bit more – but again, how long does it go and when do you put your foot in?"

Overall, he said it had been an "interesting" start to the ratings year. After years as the No.2 commercial network, Seven has stormed the No.1 spot this year and is averaging a 29.2 per cent 6pm-midnight audience share to Nine's 28.4 per cent and Ten's 21.4 per cent.

However, McAlpine said Ten's share of 16 to 39-year-old viewers between 6pm and 10.30pm, its core demographic, was only down 1.2 per cent.

"We believe we will retain our lead in 16-to-39s" for the year, he said, although he conceded Seven's resurgence means "it will be tough" for the network to keep its No.2 spot in the 25 to 54-year-old demographic.

"We're very satisfied with our progress to date," he said. "Agencies and clients are not concerned with the small drop in ratings we have had ... We have depth in programming to get us through the rest of the year. We will finish very strongly."

As to whether he thinks Seven or Nine will win the year in the "all people" demographic: "Don't care," he said. "It won't affect us either way."



www.theaustralian.news.com.au/common/story_page/0,5744,12704557%255E7582,00.html

[Inside Australian Idol]

Ten tops in TV profit
By Jane Schulze
March 31, 2005

THE Ten Network has grabbed the mantle of Australia's most profitable TV network from Channel 9 after posting a strong interim result that it believes gives it enough firepower to win the title for the full year.

In the six months to February28, Ten's television operating income grew 29 per cent to $194 million, putting it well beyond Nine's $171.4 million and Seven's $104 million.

"Without doubt we will be the most profitable network for the first time this year," Ten's TV chief John McAlpine said yesterday.

But the impressive TV performance was outclassed on a percentage basis by Ten's newly performing outdoor advertising group, Eye Corp, which more than doubled operating income to $14.4 million.

That helped group earnings before interest, tax, depreciation and amortisation grow 32 per cent beyond the same time last year to $207.8 million. Group revenue increased 18 per cent to $492.5million and group net profit jumped 23 per cent to $53.5 million.

McAlpine said Ten had strong programs still in reserve, with series such as Blind Justice, Australian Idol and The 4400, ensuring it would continue to win its preferred 16 to 39-year-old demographic this year.

But the strong start to the ratings year by Seven makes him less confident about retaining the No.2 spot in the 25 to 54-year-old demographic.

"It will be tough and we might be a couple of points down on last year but we will still be very efficient in the market," he says.

Ten's share of the 16 to 39-year-old audience has fallen 1.2 per cent this year but Mr McAlpine believes it will match the 30 per cent share of revenue achieved in January to June last year.

"We are on track to do the same this year because the negotiations for our renewals were very solid," he said. "The problem Channel9 has got is they are the most expensive on a cost-per-thousand basis so they will feel the pain [from lower ratings] before we do."

Mr McAlpine, who agrees that the TV advertising market is growing at 4 to 6 per cent, said Ten has achieved its revenue targets for March and April and that advances for May were "very good".

But he noted that while Seven is doing well in the ratings, its profitability is well below Ten's.

"Seven are having a bit of a run with the ratings but they have a bit of work to do here with [earnings] margins of only 17.6 per cent," he said, noting that Ten's margin was 43 per cent.

Ten's result excluded the costs for expensive but low-rating programs such as The X Factor and the local version of Queer Eye for the Straight Guy, which will fall in the second half.

The increasingly competitive ratings war has seen all TV networks forecast higher programming costs, and Ten agrees with market consensus for a 6 to 8per cent increase in its annual program costs. Excluding those items, it says, operational expenses were flat in the half.

Ten chairman Nick Falloon said Ten agreed to bid jointly for the AFL rights with the Seven Network as "we thought it was our best option to secure an ongoing relationship with the AFL". Ten shares finished 3c down at $3.59.


finance.news.com.au/story/0,10166,12704912-462,00.html

[Inside Australian Idol]

Cowell's 'X Factor' axed down under
Thursday, March 31 2005, 01:17 BST -- by Neil Wilkes


The Australian version of The X Factor will not be returning for a second season, it emerged today.

The show, which was bought by the Ten network at a cost of $25 million (£10 million), has failed to perform strongly in the ratings despite a high torrent of publicity. The first season is currently averaging around 700,000 viewers a week, whereas Australian Idol, which also airs on Ten, enjoyed a 2 million average in 2004.

"We're clearly unhappy with X Factor's ratings. It's a bit hard to hide that," said John McAlpine, Ten CEO. "I'd struggle to say right now that we'd renew it."

He added: "I think we've peaked in terms of adding to the supply pool. Australian Idol we want to protect. It will do a good job [later this] year, but it might be on its own in the future, I think."


www.digitalspy.co.uk/article/ds20315.html

[Inside Australian Idol]

Faith in numbers
By HEATH ASTON
March 31, 2005

NETWORK Ten will let ratings runt The X Factor die a natural death while still pinning its hopes on its parent show, Australian Idol, to reverse a poor start to 2005.


Keeping positive...Ten's executive chairman Nick Falloon.

The $25 million X Factor and the disastrous Australian version of Queer Eye for the Straight Guy, axed after just three weeks, have disappointed executive chairman Nick Falloon (above).

But he confidently predicted yesterday that Idol 3, along with Big Brother and AFL coverage would make Ten the most profitable TV network and ensure it holds on to the No. 1 in the crucial 16-39 demographic in 2005.

After a bad start, Mr Falloon appears intent on making the most of third spot among the commercial networks.

"Would we rather be up? Of course we would . . . with the schedule that we've got for the back end of the year we're very confident in us being able to continue to build on what we're doing," Mr Falloon said.

"On the other side of the fence our two competitors [Channels 9 and 7] will be, as they are, building their costs fighting each other to be No. 1."

With six weeks until the end of The X Factor's season, it seems the show, and other idol clones, have been assigned to the TV history book.

"We're clearly unhappy with X Factor's ratings, it's a bit hard to hide that . . . it's difficult for me to see now that you would introduce another show of that genre," Mr Falloon said.

Ten yesterday unveiled a 23 per cent lift in first-half net profit to $53.45 million, hailed by analysts as proof that Falloon and chief executive John McAlpine's low cost-focused management was the best in the TV business.

TV revenue rose 15 per cent to $433.8m while costs rose by a thin 6 per cent to $239.8m in the first half.

And Mr Falloon predicted a record full-year profit.

"This will be the first year in television where we are the most profitable of the networks, in a real sense not just the margin sense," he said.

He added that he expected to continue to capture 30 per cent of all advertising revenue in the commercial TV market.

Ten's sideline business, outdoor advertising outfit Eye Corp, also impressed, up 48 per cent to $58.7m.

Shaw Stockbroking media analyst Greg Fraser said Ten was "easily the best-managed" TV network.

"[This result] shows the strength of the business, that they've got far better cost control and they are not having to spend huge amounts of money on news and current affairs," Mr Fraser said. "And they've increased the number and prices of the sponsorship of the key shows."

He said sponsorship of Idol 3 would pay in large part for the production and cost of the rights, making advertising and market share "cream on the top".

Shareholders received their first fully franked payment of 15.5c a share for 2004/05 in January, with the second dividend detailed in June and paid in July. Ten shares slipped 3c to $3.59.


dailytelegraph.news.com.au/story.jsp?sectionid=1265&storyid=2889471