High wire media finances, controversial award winners and CMO successions

Seven and Nine have updated the market on how their years are unfolding; the Kennedy Awards made some odd calls; and a CMO50 winner has moved on already

Welcome to Unmade, written in the UK on Thursday afternoon my time, early on Friday morning yours. Still no glimpses of the sun at my end.

I remain in the jetlag-and-adjusting-to-the-bad-coffee phase. I’m sure last night’s 1.30am alarm call for Nine boss Mike Sneesby’s press conference didn’t help the body clock adjustment. But I’ll come to that conference call later.

Earlier in my career, when I edited a British magazine about the media industry, we hired an Australian journalist. She became known in the office as “Uncle Albert”, after the Only Fools and Horses sitcom character who would constantly hark back to “During the war…”

In our colleague’s case, her catch phrase was “In Australia…” before finding some new way to explain how her home country was superior.

Perhaps I’ve been away from the UK for too long, as I fear I too have become Uncle Albert. I’ve spent the last few days genuinely perplexed about why so many local cafes have gone to the trouble of buying sophisticated coffee machines without then bothering to learn how to use them properly.

It’s probably lucky very few people in the UK are signed up to this email as I suspect that won’t be my last complaint.

Anyway, happy Fancy Rat & Mouse day.

CMO successions

Before we get to the main topic, a couple of other thoughts.

You may recall yesterday’s post - inspired by the CMO50 list - about the speed with which chief marketing officers move on.

Unmade - by Tim Burrowes
The CMO roundabout spins faster
Welcome to a jetlagged edition of Unmade, written in drizzly British suburbia on Wednesday evening, my time, and Thursday morning yours. It turns out I may not have picked the ideal time of year to pop back. I’m yet to glimpse the sun since my arrival on Tuesday. Or to taste a decent cup of coffee, come to that. Still, the baked goods are top notch. And …
Read more

The full post was for paying subscribers only, but I’ve now opened it up to everyone via the link above, as I think the data deserves a wider audience. It’s worth noting that we’ve already had our first exit from somebody who made the 2021 list.

Congrats to The Iconic’s CMO Alexander Meyer, third in the CMO50, who is leaving The Iconic for a role with a retail startup in Canada.

Best dressed and most controversial?

Last night saw the ceremony at Royal Randwick for the 2021 Kennedy Awards, which aim to celebrate the best in journalism in New South Wales.

Named in memory of crime reporter Les Kennedy, the awards are still inside their first decade. It’s taken a while for the program to find its feet since beginning in 2012. From its first year, the ceremony was loooooong, with speeches from all the winners, and mini speeches from those making the announcements.

As a juror on a few occasions, I got to peep behind the curtain. Particularly in its early years, the event’s organisers deserved to be appreciated for their good intentions rather than than their organisational skills.

At one ceremony, the moment that I discovered I was announcing a winner and due to say a few words about the category, was when I was sitting in the audience and heard my name called by the MC.

Most notoriously, the 2015 event saw The Guardian’s Mike Bowers announced as winner in the photographic category and presented with a trophy on the night, only for him to be stripped of the award a few days later, with the organisers saying they had sent the wrong name to the engravers when the category jurors began to raise questions.

Last night, plenty of awards went to people who well deserved them. News.com.au’s Samantha Maiden - who led reporting on the Brittany Higgins rape scandal - will have needed an UberXL to take all of her trophies home at the end of the evening.

And it’s always reassuring that all is well in the world when Eddie Obeid’s chief tormenter Kate McClymont of the Sydney Morning Herald makes it onto an awards stage.

However, I fear that the Kennedys will once again be talked about for the wrong reasons.

Bizarrely, they presented trophies for best dressed “lady” and “gent”. They went to Nine’s Laura Tunstall and to Ten’s Martin White.

While some of the glamour of awards comes from the efforts nominees make to scrub up, giving out actual trophies for it - indistinguishable from the journalism trophies - does rather devalue the main point of the night.

Mind you - that’s not the biggest talking point. Sky News presenter Peta Credlin - Tony Abbott’s former chief of staff - won the award for long form current affairs reporting.

Credlin’s insightful insider expertise gives her political analysis real credibility on Sky News. But her selection for an award for reporting, rather than commentary, says a lot about the jury’s definition of journalism.

Most notably last year, Credlin was a regular participant at Victorian premier Dan Andrew’s press conferences. Her performance went beyond the traditional, devil’s advocate role of journalists whose job it is to ask hard questions and hold authority to account. Instead, much of it was partisan.

In a year where social media hostility grew to journalists across the board who asked legitimately tough questions, journalism was undermined by those who went further and advocated for or against a team.

The Kennedy Awards’ recognition for Credlin’s reporting blurs the definitions of journalism ever further.

A sunnier TV outlook?

This week, Australia’s biggest two TV players - Seven West Media and Nine - held their annual general meetings, and offered a few clues about how they see the coming months.

We’re less than half way through the financial year but Seven took the opportunity to issue guidance for how the company will finish up for FY22, which runs until the end of June. But Nine said the outlook was too uncertain to do so.

Both company’s CEOs are currently in the good books of ASX investors.

Under James Warburton, Seven West Media’s share price is trading at its highest in almost three years. And Nine is close to regaining the all time high it reached in March, just before Mike Sneesby was announced to take over from Hugh Marks as CEO.

Both Warburton and Sneesby are presiding over share prices higher than the day each of them took charge.

Seven currently has a market capitalisation of just under $1bn, while Nine has moved back above $5bn again.

And yet neither CEO is on completely solid ground with investors. Warburton’s most dangerous area is around the company’s debt level; Sneesby worried the market earlier in the year when he clumsily flagged that costs for streaming service Stan would rise, and its profits would fall in the short term.

Seven finished the last financial year with a net debt of $240m. That has reduced enough from the $564m it peaked at in FY19 to take some of the pressure off.

Indeed, Nine’s net debt of $250m at the end of the financial year was actually slightly higher than Seven’s.

Yet Seven knows it has to continue to convince the market that the company is serious about managing its debt level. The word “debt” appeared 18 times in the address to shareholders of Warburton and chairman Kerry Stokes. By contrast, Sneesby and chairman Peter Costello did not utter the word even once during their addresses.

Proportional to Seven’s EBITDA profit in the last financial year of $254m, that meant they got the ratio down to a reasonable 0.95. A year before, thanks to the Covid recession reducing the company’s EBITDA profit, the debt ratio had blown out to three times that.

The banks generally get nervous about whether debt can be repaid when the ratio is above 1.0.

Nine had a bigger EBITDA of $565m, meaning its own debt ratio was a healthier 0.44.

For Seven, the thing I was looking out for most was missing. Yes there was guidance on a profit number. The $260m EBITDA profit the company says analysts have been predicting for the financial year is a tad on the low side. It says it will be seven to ten per cent higher than that, which would take profits from $278m to $286m.

But although the presentation repeatedly mentioned that reduction of debt levels to $240m at the end of the financial year just gone (in five different areas of the update), there was no signal of where they expect the debt number to go next.

My guess is that this is because they know it is about to blow out again.

The company recently agreed a new debt facility which gives it an overdraft of up to $600m. And it’s going to need a big chunk of that to fund its $132m purchase of regional affiliate Prime Media. So I’d be surprised if the next time we see the company reveal a net level, it doesn’t begin with a 3, or maybe even a 4. That would certainly take its debt to EBITDA ratio back to above 1.0 again.

And that’s before the company even contemplates restarting dividends for its investors who haven’t seen any since 2018. This week Stokes committed to reviewing the dividend policy next year.

Warburton is on a high wire. The share price has grown because the market recognises that the Prime takeover is a sensible one at a fair price. Yet his bigger problem is that in the main, SWM is still an old school TV network, with some publishing assets out West.

By contrast Nine owns a substantial publishing arm along with its ownership of subscription streaming platform Stan, the TV network, and a series of talk radio stations too.

That means Seven faces far more of an imperative to do a transformational deal. I’m sure the likes of HT&E, owner of Australian Radio Network, and outdoor firms QMS and Ooh Media are rarely far from their thoughts.

For the deal to be done on favourable terms for SWM shareholders requires the share price to remain healthy. In turn that relies on the market not turning against the company when the debt level goes up again. That leaves a small window.

Meanwhile, what Costello and Sneesby needed to do yesterday was to sell in the message that the growing costs of Stan, including the UEFA football rights, was in the service of long term growth.

Most of Nine’s transformation - certainly in ownership terms - seems to have already been done.

During yesterday’s press briefing from Sneesby and Costello, that was the question I focused on.

Hugh Marks had prioritised a four point, big picture strategy during his tenure: The Fairfax merger; Nurturing Stan and a wider streaming future; taking on the digital platforms; and the switch from cricket to tennis. I asked whether Sneesby has now established a similar agenda.

Although his answer wasn’t wrong , it could have come from the boss of most big traditional media companies - to grapple with the fact that the digital disruption is still not over, and is indeed accelerating. That means more video streaming, more subscription (for both publishing and video), and the evolution of radio into a wider audio streaming world. There’s a lot to deal with there.

It’s going to be a fascinating few months.

Please do let me know what you think as always at letters@unmade.media or via the ugly brown comment button.

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And thank you for bearing with me in a somewhat transitional week as I got my head into being in a different timezone. I’m starting to see the pluses of being able to write in almost real time about overnight events such as the Kennedy Awards, and indeed goings-on in the northern hemisphere.

My weekend bonus for you tomorrow morning will be the third chapter of the audio edition of my book, Media Unmade. Tomorrow we get into the travails of News Corp at the start of the previous decade.

Have a great day.


Tim Burrowes

Proprietor - Unmade