Nine cops 38 per cent profit hit as ad revenue slips

Jacob Shteyman |

Profits at Nine Entertainment have dived 38 per cent amid falling advertising revenue but the media group hopes legislation can help it take a share in a potential artificial intelligence windfall.

The company on Thursday reported full-year net profit after tax of $195 million, down from a record $315 million the year prior.

Group revenue was flat at $2.7 billion while earnings before interest, tax, depreciation and amortisation dropped 16 per cent to $591.2 million.

Nine chairman Peter Costello said the company solidified its position at the forefront of Australian media even as headwinds buffet the sector.

“Whilst we faced tougher economic conditions which have impacted the broader industry, Nine has risen to the challenge, continuing to drive audience and revenue share, and investing in the future of the business while focusing on the efficiency of our cost base,” the former federal treasurer said.

Broadcast EBITDA, including free-to-air television and radio, fell 20 per cent as metro advertising revenue declined 11 per cent. Television costs grew seven per cent, with significant investment in content such as Ashes Test cricket and dating show My Mum, Your Dad helping grow market share to a historically high 41.8 per cent. 

Subscription streaming service Stan continued to be a standout for Nine. Earnings lifted 30 per cent, with active subscribers up to 2.6 million.

Publishing, which includes newspapers The Sydney Morning Herald, The Age and Australian Financial Review and digital news platforms, copped an eight per cent drop in earnings, reflecting a decline in advertising revenue.

Digital grew its subscription revenue, boosted by price rises implemented in May, and now accounts for more than 60 per cent of publishing revenue.

Earnings at real estate listings platform Domain declined 15 per cent to $103.3 million amid a sluggish property market but an uptick in the first six weeks of trading in the new financial year points to a potential recovery.

Its been a disappointing year for media companies, with Nine competitors Seven West and News Corp also recently announcing big profit drops as ad revenue falls across the board.

Chief executive Mike Sneesby echoed his News Corp counterpart Robert Thomson in flagging artificial intelligence as a major opportunity for the industry.

Nine already uses AI in user segmentation, engagement optimisation, personalised content recommendations and process automation but Mr Sneesby flagged it could also be used to produce content.

However, he warned of potential challenges, the most immediate being companies using Nine content to train AI platforms, and called for government to step in to protect the local media landscape.

“This is not unlike the reliance social media platforms have on Nine’s content, which resulted in mutually beneficial commercial agreements supported by the news media bargaining code,” he said.

Mr Sneesby said Nine will continue to invest in new content and reduce costs to safeguard against the ongoing deterioration in market conditions.

The company is going all-in on the Paris Olympics, with two 24-hour free-to-air channels and comprehensive streaming coverage, and has recently gone to market for advertising rights.

E&P Capital market analyst Entcho Raykovski said earnings were slightly below consensus expectations but within Nine’s guidance of $590-$600 million.

Nine will deliver a fully franked final dividend of 5c per share, down from 7c last year.

Shares in the group had dipped 0.3 per cent to $2.02 by late morning.