Paramount gets serious about AFL; Mangled Monkeys; When it's good to be boring
Welcome to Unmade, written while you were sleeping on Wednesday morning.
Happy International Respect for Chickens Day. Sounds like the perfect reason for a trip to Nando’s.
There’s been a lot going on over the last 24 hours. Paramount released its quarterly numbers and in the investor call dropped a hint about its AFL ambitions. Pureprofile released a strong set of numbers. And it began to look increasingly likely that The Monkeys - one of the great Australian agency brands - will disappear despite protestations otherwise.
Unmade’s paying members received this email an hour before everyone else.
Paramount’s global CEO makes his AFL pitch
First then to Paramount, owner of Network Ten.
Last night, the company released its global financial results for the first quarter of 2022. Initially, the share markets didn’t much like it. In the first few minutes of trading, the stock price fell nearly ten per cent, taking it to the lowest point since the early months of the pandemic.
Perhaps the opening sentiment was driven by the company’s US TV results. They showed broadcast TV advertising revenue falling from US$2.8bn to $2.5bn for the quarter. However, this was mainly because the same period in 2021 was a bumper one for Paramount’s CBS as it aired the Superbowl that year. The Superbowl rotates between the four US networks of CBS, NBC, ABC and Fox. It’s due back on CBS again in 2024.
More likely, the initial downward stock price trend (which later recovered somewhat) was driven by investors’ ongoing resistance to Paramount’s heavy investment in subscription streaming. The markets don’t like how much is being spent on content by the likes of Netflix, Disney+ and Paramount Plus.
Paramount is unique among the big global media companies in owning all four of the screen pillars of broadcast television, film studios, subscription streaming and ad-supported streaming channels.
Overall, the company’s total revenues fell slightly, from $7.4bn to $7.3bn for the quarter. And costs grew faster, from $5.9bn to $6.6bn. That halved operating profits from $1.5bn to just under $800m.
That extra expense came in what the company describes as its direct-to-consumer segment, which consists of its paid streaming service Paramount Plus and its ad-based offering Pluto TV, which is yet to launch in Australia.
The investment in streaming is gaining momentum, as the company rolls out Paramount Plus and Pluto TV across the world. Advertising revenue in the segment grew by 59% to $347m. And subscription revenue increased by 95% to $742m.
Paramount Plus now has 40m global subscribers, while Pluto TV has 68m monthly active users, the company said yesterday.
However, costs in that streaming segment increased by 107% to $1.5bn. So the company’s streaming adventure made a loss of $456m for the quarter - a long way from profitability. The company is being sustained by its good old fashioned broadcast television division, which made a profit of $1.5bn, admittedly down from the $1.8bn profit of the same quarter a year ago.
Most interestingly for Australia, global CEO Bob Bakish signalled a willingness to continue to invest to win audiences - and that included sports rights.
The company is serious about taking AFL off Seven, and not put off by the likely $2.5bn, five year price tag. If it won all the rights, it would most likely split games across both Ten and Paramount Plus.
As The Australian reported earlier this week: “Ten’s joint Australian bosses, Beverley McGarvey and Jarrod Villani, jetted out along with AFL chief Gillon McLachlan to Paramount’s Avenue of the Americas headquarters in New York to introduce McLachlan to Paramount’s global boss Bob Bakish ahead of a lunch meeting at 12.30pm on Thursday.”
It sounds like the lunch went well. Bakish was asked about sport in the investor call. He didn’t mention AFL specifically, but it was obviously top of mind:
“We like sports as a component of our programming strategy across platforms.
“We have been selectively adding sports properties outside the US. We do this in a very disciplined way, looking at ROI. We very much like it as a component of our strategy. It’s performing very well in the broadcast market in both a viewership and an advertiser perspective and is clearly driving streaming as well.
“We like it. In terms of negotiations, all negotiations have their challenges.
“We were just with an international league last week talking to them about the power of Paramount in the context of our platforms, our production expertise, our monetisation capabilities and really showcasing the value of sports to us. It’s a compelling package we offer and I’m very happy playing that plan. It’s part of our strategy, clearly not our whole strategy.”
It’s worth unpacking that last paragraph a little more. For one thing, it says something about the negotiation dynamic. Although Paramount is the potential buyer, it almost felt like Bakish was the one doing the selling, talking about the “compelling package”.
The reference to production expertise is presumably meant to put minds at rest that AFL would be a higher level production than the company’s A-League soccer coverage which was criticised for streaming glitches.
The “showcasing” reference points towards the promises the company will be making about helping AFL get global coverage.
But more widely, his tone suggests lessons have been learned from how Ten allowed the cricket rights slip through its fingers four years ago, after Nine snatched tennis from Seven and was willing to relinquish cricket. Egos intervened.
As I wrote in my book Media Unmade:
The chess game was not over quite yet. Much as Nine enjoyed no longer being beholden to Cricket Australia, it was still willing to bid for the rights to the international game at the right price. And, of course, dropping out of the bidding might have allowed a rival to pick up the rights too cheaply.
In reality, it was a question of who was most desperate, Seven or Ten. Seven would feel the loss of tennis more keenly, but without Big Bash Ten would lack any top-tier sport. Three forms of cricket were up for grabs: Tests, one-day internationals, and Big Bash.
Ten paired up with Nine for the bidding. The plan would see Nine hang on to the Tests, while Ten would retain Big Bash and gain the one-day internationals. Seven bid alongside Foxtel.
For the bid from Nine and Ten, the plan was for Nine to contribute $50 million for the Tests, and Ten to initially offer a lowball $70 million for Big Bash and the one day internationals, making a total bid of $120 million per year. Nine was firm that it would go no higher on its contribution to the bid.
Cricket Australia’s chairman David Peever took an unusual approach to the negotiations, accusing Ten’s management in an email of being ‘bottom feeders in this market’. The email was soon leaked to The Sydney Morning Herald. Ten did indeed increase its share of the bid significantly, to $145 million per year, creating a total offer of $195 million per year. Ten boss Paul Anderson shook hands with Cricket Australia boss James Sutherland on what he understood to be an agreed deal.
Hours later, Seven and Foxtel came back over the top, with Seven putting in $82 million and Foxtel $115 million per year, making for a total bid of $197 million per year for the six years of the deal. Despite the fact that it would put some cricket behind the Foxtel paywall for the first time, Cricket Australia took the slightly higher bid. Some believe the decision was influenced by Peever’s anger at his email to Ten having leaked.
These negotiations - which will of course also be vigorously contested by incumbents Seven and Foxtel Group among others, will likely be conducted with a great deal more humility on both sides.
Monkeys in a tangle
A week on from the Accenture Interactive rebrand to Accenture Song, it’s starting to look like a case study in how not to do a rebrand. And also in how to repeat history.
Having made a hash of the rebrand of Three Drunk Monkeys to The Monkeys a decade ago, the management team seems to be doing it all over again.
Back in 2011, most of the trade press had got wind of the fact that Three Drunk Monkeys had decided to rebrand after winning alcohol company Diageo as a client. Yet even after the Sydney Morning Herald uncovered that the business name had been changed to The Monkeys, the company continued to claim there was no plan to rebrand. They also issued on the record denials to AdNews and to Mumbrella, where I was at the time.
It was a lie - within a few days of the denials, they rebranded, with a lame statement saying: ”After months of deliberation we agreed that it would be better for everybody if we had a shorter email address.”
Usually the rules of the PR game are that if the press gets hold of an inconvenient rumour before you’d prefer the news to be published, by all means refuse to comment, or dismiss it as speculation. But to offer an absolute untruth earns unnecessary antipathy and means that future denials hold little water.
Which brings us to last week’s rebrand of most of the company’s agencies around the world, with the exception - apparently - of The Monkeys and boss David Droga’s own US agency Droga5.
Strategically, that’s weak enough. As Mark Ritson put it in his Marketing Week column:
“David Droga is the CEO of Accenture Song. And while he was comfortable scything down the other brands in the group, he couldn’t quite bring himself to do it to his own baby. This is a bad move. Partly because it will create increased ill-will across the other sacrificed sister agencies. But also because Accenture Song was so close to creating a single, focused sub-brand. Now, with the survival of Droga5, the company is still juggling multiple brands. You’re either singular or you’re plural in the world of brand architecture. Accenture Song was so close but is now so far away from total focus.”
But now it seems that despite the denials, The Monkeys name is for the chop too. Campaign Asia talked to David Droga, who acknowledged that The Monkeys name will go:
Question: Some pretty iconic names will be retired: The Monkeys, Karmarama, Fjord, etc. Will there be a wake for them? Can these shops still keep some of their unique culture?
Droga: “The best way to honour these brands is to give their people, beliefs and cultures the best possible opportunities to be successful and relevant today and tomorrow. The past is lovely but the future is more pressing and in need.”
Yet locally, The Monkeys are still claiming their name will remain. Presumably because not all the clients have been told yet. Past behaviour is the best predictor of future behaviour. Don’t trust the denial.
The eventual announcement will presumably explain that this time they wanted a longer email address.
When it comes to business, there’s a lot to be said for being boring. It’s usually better than the alternative.
A decade ago, the company now known as Enero, and then known as Photon Group, was generally prefixed with the word "troubled”. Every ASX announcement was pounced on, to check whether it had gone into administration yet.
But somehow, then CEO Jeremy Philips, along with his successors Matthew Melhuish and Brent Scrimshaw, gradually turned it into a boring company. Each set of half years results would show the organisation plodding its way back towards normality. These days, it’s got a market capitalisation of $310m, which is about four times what it was two years ago.
Then there was the car crash that was Trimantium GrowthOps, floated as TGO. Since being removed from the ASX and taken private, it’s like it was all a bad dream, with marquee agency AJF Partnership back to boring old business as usual as one of Melbourne’s most competent creative shops (and with all the GrowthOps branding removed from its website).
Away from the ASX, take media agency Atomic 212. The 2017 industry awards cheating scandal involving founder Jason Dooris has disappeared from collective memories since his departure. Now the agency is once again better known for its client work.
And Pureprofile can also now proudly claim to be in the ranks of the boring but profitable. Three years ago, the data and research company well and truly deserved the “troubled” tag. Founder Paul Chan was ousted. The board was in turmoil. The company had massive debts. New CEO Nic Jones lasted just a few months.
And then, in 2020, CEO Martin Filz arrived. Since then the company’s market capitalisation has more than doubled, to $55m.
Yesterday, on an impressive set of results, the share price leapt up nearly 13%, even as most of the ASX was falling. Revenue for the nine months of the financial year to date is up by 43% to $30.8m. Profits are up $3m for the year to date.
It’s all very boring. Which is good.
The Unmade Index outdoes the All Ords
The Unmade Index of Australia’s companies out performed the wider ASX All Ords yesterday.
While the All Ords fell by 0.47% in response to the Reserve Bank’s increase in interest rates, The Unmade Index nudged upwards.
While Pureprofile outshone the rest of the sector, Domain, Ooh Media and HT&E had good days too. Nine’s share price is now the worst it’s been in more than three months.
Time to let you go about your Wednesday.
Before I do, don’t forget, Unmade’s first event, Marketing in a Cost of Living Crisis, takes place at Forrester’s in Surry Hills three weeks from now, on May 24 at 5pm. Cost of living is a topic in every major news outlet at the moment, particularly following yesterday’s interest rate rise.
I’ll be moderating a panel featuring Optus CMO Melissa Hopkins, GroupM CEO Aimee Buchanan, Macquarie University’s Professor Jana Bowden, a leader in marketing research, and one of my favourite strategists, Shapeshifter founder Al Crawford.
Tickets are on sale now for $69, or $10 for paying Unmade members. Click here to book.
I’ll be back with the Unmade podcast tomorrow, when I chat to PHD’s global chief marketing officer Chris Stephenson (another one of my favourite strategists).
And a heads-up that Saturday’s Best of the Week edition of Unmade may be late. I’m flying back to Australia, arriving on Saturday morning. I’m keen to cover off the quarterly News Corp financial numbers which may or may not arrive before I take off from Heathrow. If I’m not feeling too sleep deprived, I’ll dive onto wifi when QF2 arrives in Darwin and write something on the Sydney leg. Otherwise, I may send it on Sunday.
Have a great day.