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BOTW: Somewhere over Slaughterhouse Pinnacle; PR fails; Sorrell in decline; Is Seven getting ready for M&A?; Enter The Cat
Welcome to Best of the Week, kicked off in London on Thursday, edited on board JL44 to Tokyo on Friday, and wrapped up on JL51 to Sydney this morning, somewhere over Slaughterhouse Pinnacle. My body clock is in shreds and my body odour is best not contemplated.
I’ll be in town for a few days, ahead of Compass, which kicks off in Sydney on Tuesday night. Do come along.
Today’s questions: Which PR blunder is worse: A telco that can’t communicate; an event organiser that puts its guests in hospital; or a retailer stumbling into Middle Eastern terrorism?; After Foxtel and Disney updates, is the picture any clearer on streaming battles? What’s Seven up to? Does The Cat’s proposal for SCA make any sense? And is Martin Sorrell running out of time? Big week.
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Set your Compass
Compass curator Cat McGinn writes:
As Peter Block wrote, “One’s vision is not a road map but a compass.” And how better to navigate the turbulent times in which we find ourselves than with the guidance of a panel of industry leaders?
We’re delighted to be able to announce our Melbourne panel for Compass, our end-of-year industry mixer, which takes place on the evening of Tuesday November 21. It’s a great opportunity to chat with your peers, along with a panel of media and marketing leaders helping you navigate the turbulent times with a look back at the year that was 2023, and offering their projections for what lies ahead in 2024.
The panellists for Melbourne are Jason Tonelli, CEO of Zenith Australia and chair of the Audited Media Association of Australia. Back in June when we spoke to Tonelli he revealed that Zenith’s research capabilities indicated the Australian public was leaning towards a "no" vote in the referendum.
He’ll be joined by Melody Townsend, General Manager - Retail Marketing, Bank of Queensland Group, who has been championing the use of AI and market mix modelling to drive efficiencies. Also on the panel is Dentsu’s chief investment officer Ben Shepherd; Thinkerbell’s Head Thinker - Creative Media, Hannah Nickels; and adman and broadcaster Russel Howcroft, co-host of 3AW Breakfast.
And, as we’ve previously announced, our Sydney edition of Compass, which takes place this coming Tuesday November 14 is equally illustrious:
Clive Dickens, VP, TV, Content & Product Development, Optus
Henry Innis, Co-Founder & CEO, Mutinex
Lauren Joyce, Chief Strategy & Connections Officer - ARN
Leah Jackson - Head of Digital Marketing, AU Portfolio - Goodman Fielder
Simone Gupta, Co-Founder, Supermassive
Tickets for both Melbourne and Sydney are available here.
Unmade’s paying members get a complimentary ticket to our Compass events. Drop us a note if you need your voucher code.
We’ve also made the reluctant call to postpone Compass Brisbane for now. Time got away from us. More on that soon.
Fails of the week: The Optus meltdown; blind apes and a ham mess
Tim Burrowes writes:
There were some prize winning PR disasters this week. Let’s cross to the podium for the ceremony, in reverse order.
3. The K-mart “Ham-mas” tie in
In third place for PR nightmare of the week came Kmart. A few months back when it went into production, who’d have thought that a $4 festive Christmas ham bag would have made headlines.
Obviously a spot of Googling might have averted the problem, but the notoriety of Hamas was in fairness far less than now. From a PR perspective, Kmart has handled the situation as well as it could, withdrawing the bags from sale as soon as the offence began to ripple outwards
As a result, it became a one-day story.
2. Another Optus nightmare
Next comes a new public relations disaster for Optus, after its broadband and wireless services went down, and stayed down, for most of Wednesday. It’s already far more than a one-day story.
Little more than a year since the company’s reputation-shredding data hack, Optus’s new technology disaster saw a full day of headlines around the inability of customers to even make emergency calls, and debilitated businesses unable to take payments.
For much of the day, it looked as though the lessons of last time had not been learned. It was two hours before the company even acknowledged the issue and four before it issued a substantial statement.
How Unmade covered the 2022 Optus debacle:
In the meantime, communications minister Michelle Rowland was filling the information vacuum, holding her own press conference and doing media interviews throughout the day.
Fortunately for Optus, most of its network finally came to back to life before the key evening TV news bulletins went to air.
While the failure to lead the story during the day is genuinely odd, given how battle hardened the telco is after the hack, Optus did make one sensible communications call.
While the media wanted a press conference, Optus chose instead to make boss Kelly Bayer Rosmarin available for short one-on-ones with the key broadcasters and newspapers, including the ABC, Nine, Seven and the AFR.
While she came across as a little robotic in interviews as she stuck to her approved lines, it was a far better outcome than the alternative - a press conference which would likely have turned into a circus, no doubt accompanied by footage of Bayer Rosmarin walking away when it ended with questions still being shouted at her.
However, the failure to explain what she understood so far of the technical details was reminiscent of the company’s evasiveness at the time of the data hack. In a spectacularly bad piece of timing, the company found out yesterday that the report it commissioned into the hack from Deloitte is likely to go public after a judge ruled it wasn’t protected by legal privilege.
On its own, this week’s communications response from Optus would have gone down as a B minus. In the context of last year’s events, it’s starting to look like the telco still doesn’t have a decent crisis playbook. My guess is that this one will cost Bayer Rosmarin her job.
1. Bored Ape Yacht Club x Jack Morton
Still, in the case of Optus, at least nobody suffered bodily harm.
Which leaves top place on the podium to NFT outfit Bored Ape Yacht Club, and its event producer Jack Morton Worldwide.
They decided to liven up the NFT event by using ultraviolet blacklight to illuminate fluorescent paint. For visitors who got too close or looked too long, the impact was similar to staring into the sun without realising it.
Haven’t people who were fooled into spending thousands of dollars on JPEGs already suffered enough?
The disaster will be an all time case study in risk management in the event industry.
Is Sorrell still to blame for WPP’s ageing agency systems?
Thursday saw the release of the quarterly numbers from Sir Martin Sorrell’s S4 Capital, owner of Media Monks.
The most positive thing that can be said about the market’s reaction was that it wasn’t as bad as other recent updates. S4C shares initially lost 25% before recovering about half of that. But that still leaves the company worth less than a tenth of its peak, and no longer a billion dollar organisation.
Sorrell, who was ousted from WPP five years ago, had promised that S4 Capital would be different to the other holding companies - it would focus on big tech clients, and it would mainly ignore legacy agency work to focus on big tech solutions.
With technology clients undergoing their own correction, and marketing spend down more widely, that’s two drags on the S4 Capital model.
Thursday’s update showed a company losing steam. S4Cs net revenue for the quarter was down 15.4% to £211m globally (and down 10.5% in Asia Pacific).
The organisation has cut about a tenth of its staff in the last year, with more cuts under way.
Sorrell is still adland’s weather man. So his update: “The challenging trading conditions we saw in the first half have intensified in Q3.” is something that should worry anyone working in agencyland.
That includes his old colleagues at WPP who issued their own profit warning a fortnight ago. The current global boss Mark Read is still blaming Sorrell for the outdated technology being used to run many of its agencies, citing “30 years of inactivity”. Ouch.
Meanwhile, at the big end of town
Seven West Media and Nine both held their annual general meetings on Thursday. Their performances for the FY23 financial year were already on the record, but they added more detail on how this financial year has started for television (badly).
What will Seven do with its war chest?
Splitting the last financial year into two halves, Seven’s CEO James Warburton told shareholders the total TV advertising market had declined by 4.5% from July to December 2022, and that had worsened to a 12% fall from January to the end of June. For the most recent quarter of July to the end of September, the TV market was down another 8%.
He also announced $25m in “cost initiatives” for the rest of this financial year. In its annual report the company had said its costs this financial year would be $1.26-$1.27bn. Now the target is $1.23-$1.24bn.
Other than the outlook, there was another update from Seven. The company has extended its debt facility again, this time out to four years. Based on current rates, it will be paying 6.75%, or a bit under $20m a year, on covering the interest on its debt.
One intriguing thing about Seven’s new debt facility is that although it has come down from $600m to $525m, that’s well above the company’s current net debt of $249m.
If Seven doesn’t resume paying dividends (which is becoming contentious for shareholders), that leaves a modest deal-making war chest of perhaps $250m.
A logical acquisition target is Southern Cross Austereo’s Tasmanian TV operation. If the takeover bid for SCA currently being conducted by ARN Media and private equity company Anchorage Capital Partners succeeds, the TV assets would end up with ACP, including the Tasmanian operation.
Since Seven’s acquisition of regional operator Prime, Tasmania is the biggest market where Seven doesn’t sell its own product. Unusually, Southern Cross TV sells both Seven and Ten in Tasmania. It also reps Seven, Nine and Ten in the smaller markets of Broken Hill and Spencer Gulf.
With its own AFL team finally on the horizon, Tasmania is already a passionate AFL state. As an owner of the Tassie Southern Cross TV operation, Seven would be better placed to make the most of its AFL rights in Tassie too. ACP would be a seller at the right price.
The Seven brand is by some distance the market leader in Tasmania where the NRL-focused Nine doesn’t put up much of a fight. Despite announcing a dedicated 6pm bulletin more than a year ago, Nine still pipes in its 6pm Melbourne bulletin.
The Cat enters the chat
Not that the ARN takeover of SCA is even close to a done deal.
Antony Catalano, proprietor of Australian Community Media, has entered the fray. Yes, ACM, ACP and ARN are doing battle for SCA. That’s a lot of three letter acronyms.
Catalano has made a non-binding offer to fold his regional newspaper empire into SCA in exchange for being issued new shares in the company.
The rationale would be the combined strength and efficiencies of two regional players.
However, sceptics would ask why SCA’s shareholders would want to be encumbered with legacy newspaper assets. Or to see their shareholding diluted to achieve it.
Catalano has made something of a habit of trying to gatecrash M&A action.
Back in 2018, late in the process of the Nine-Fairfax merger, he launched a half baked bit to buy 20% of Fairfax Media, but was quickly rebuffed.
And in 2019 he grabbed a stake in Prime to prevent the merger with Seven. Eventually Seven had to buy it instead.
His proposal might be slightly more attractive to the SCA board as a defense against a full takeover. But the fact that the SCA share price sank yesterday suggests the market doesn’t give a lot of weight to Catalano’s idea.
Ad supported streaming gets more competitive
Nine told much the same story as Seven this week, with CEO Mike Sneesby pointing to an 8% fall in revenue to the total national TV advertising market across the whole financial year. But within that, Nine’s revenue decline was a more modest 2%.
For the current quarter, Nine said it saw “no discernible improvement” in the TV market. Seven claimed it saw “a slight moderation in the market decline”.
The market treated both companies differently on the day. Nine’s share price went up a fraction, but Seven lost more than 5% and is once again trading at its lowest point since the pandemic.
The difference in market reaction is partly explained by Nine having a wider story to tell, with its publishing operation, streaming service Stan and forthcoming Olympics rights. One data point absent from Nine’s update was the actual number of paying subscribers to Stan. “Positive subscriber momentum with growth in paying and sport subscribers” was as far as it went.
Meanwhile, Seven’s main growth story is around growing its 7plus audience, particularly when it gets streaming rights to AFL at the end of next year.
The hope from the local TV companies is that ad-supported streaming will fill the gap left by the decline of the broadcast market. The problem is that this has already become a much more competitive field than the three-network dynamic of broadcast. The global players are all pushing into AVOD too.
Next year, Amazon Prime Video will switch to ad-supported as its default subscriber tier in Australia. Instantly, Amazon will become a huge local TV player.
Netflix is yet to get its sales act together locally, but it will.
This week Disney said it will be folding Hulu - which is currently US-focused - into its streaming offering. Once Disney completes its buyout of Comcast’s third of Hulu next year, the final barrier for Hulu to become an international brand will vanish.
Foxtel flat while News Corp’s news profits shrink
Which brings us on to Foxtel, whose biggest shareholder News Corp released its quarterly numbers yesterday. With its push away from OzTAM (something will have gone wrong with it’s plan to build an alternate measurement system if Foxtel Media extends again after this year’s contract runs out), Foxtel’s ad-supported tier is going to become even more important.
There was no new info on how TV ad sales are going, but updates on subscriptions. With the Binge pipeline affected by the Hollywood strikes and the end of AFL and NRL seasons meaning Kayo was flat, the overall number of Foxtel streaming subcribers was down slightly.
Revenue and profit were both down for the quarter for Foxtel compared to the same quarter a year ago. The numbers are reported in US dollars and the reported revenue fall was because of currency fluctuation. But the fall in profits was because of rising sports costs.
With a new $1.2bn loan facility (yikes!), Foxtel will now start repaying its shareholder loans which will be helpful cashfow for News Corp.
That’s perhaps a necessity. The update revealed that News Corp’s news division is up against it. Profit for the quarter was just $14m. Although it doesn’t break out the details between its Australian, US and UK news operations, the company did reveal that Australian advertising revenue had fallen by $10m.
There were a couple of other small hints in the update from CEO Robert Thomson.
You don’t write “Our quest is to maximize value for all investors, so we are assiduously reviewing our structure” unless you’re planning to change the company structure. Another crack at the Fox Corp - News Corp merger? A spin off of REA Group? A deal involving Foxtel? We’ll see.
And: “We are actively working to make the most of our premium content for AI and are engaged in advanced discussions that we expect to bring significant revenue to the company,” sounds like something of substance might be on the horizon. Sounds like the company expects to get similar deals to the payments made by the platforms under the shadow of the News Media Bargaining Code, bit this time from the AI players.
Campaign of the Week: “There’s No Good Reason”
In each edition of BOTW, our friends at Little Black Book Online highlight their most interesting advertising campaign of the week.
LBB’s ANZ reporter Casey Martin writes:
Innocean has created a critical campaign for White Ribbon titled “There’s No Good Reason”, challenging men not to downplay the regularity of violence against women. These articles represent only 1% of what White Ribbon claims are 48,000 that have been published on the subject in 2023 alone. It's confronting, emotional and it's the start of a conversation that will continue to grow.
Unmade Index heads back down
Seja Al Zaidi writes:
After more than a week of positive performance, the Unmade Index dipped by 0.56% yesterday to land at 591.2 points.
Southern Cross Austereo had the sharpest fall - down 2.63% - while ARN Media and IVE Group followed with respective 2.33% and 2.03% drops.
Ooh Media fell 0.74%, and Nine 0.26%.
Domain rose 2.29%, and Pureprofile 3.70%.
In case you missed it…
On Tuesday, we looked into the growing cost of sports rights:
On Thursday, we offered our definitive guide to Upfronts season, with the verdict from media agency investment officers, along with an exclusive interview with SBS boss James Taylor:
Time to leave you to your Saturday.
If you haven’t grabbed a ticket yet, please do check out the program for Compass, which kicks off in Sydney on Tuesday night and then hits Melbourne on November 21. Compass is our laid back discussion of the year that was, and the year to come.
And Abe Udy and I will be back on Monday with Start the Week.
Have a great weekend.
Publisher - Unmade