Seven’s bargain and SMI: Getting by
The share market liked the Prime takeover deal, and September's Standard Media Index numbers were better than I expected
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Welcome to Unmade - kicked off on Tuesday morning in a coffee shop in Sydney’s Surry Hills, as I adjusted to working on a laptop screen after the luxury of double desk monitors; and completed on a train towards the Central Coast, on an iPad. Yikes. Combine that with having left my reading glasses in the hotel, and there being no one available for proofreading this morning, and I apologise for the crimes against literacy that follow.
Yesterday I maintained my perfect 18 month streak of Jetstar cancellations, arriving at Launceston Airport to discover that my flight to Sydney had been axed. Luckily I was able to scramble onto the last Qantas flight out. So I had one more trip via a deserted Melbourne Airport. When I arrived, the board was showing just two departures and two arrivals.
It was a packed A330 flight out of Melbourne though, with that most unfamiliar of things - international transit announcements for the passengers flying on to LA. I’ve flown a lot during the pandemic, but this was the first one that mostly felt like the way it used to.
Meanwhile, late night luggage claim at Sydney had some Love Actually scenes playing out as Melburnians arrived to be reunited with close ones. It was rather a nice way to end a gruelling day.
Seven picks up a bargain
Before I get to yesterday’s Standard Media Index data, I’ve an additional observation on yesterday’s deal for Seven West Media to buy Prime Media.
Seven’s shareholders are effectively getting Prime for nothing.
The market liked the deal so much that the SWM share price rose by 14.3 per cent, to a market capitalisation of $812m. That was growth of $106m.
That’s almost as much as the $132m that Seven will be paying. Add in the fact that SWM is already a 15 per cent shareholder (so effectively gets $20m back that way) in Prime AND the fact that the value of Seven’s stake in Prime rose by $9.3m on the back of Prime’s own 74.5 per cent share price rise yesterday, and that adds up to $135m.
Of course, the share price might fall back as the market contemplates the sector’s long term prospects, but right now it looks like CEO James Warburton has pulled off a smart deal.
Two swallows, no summer
For another month, the lights on Standard Media Index’s dashboard mostly flashed green yesterday.
National advertising spend by the media agencies in September was up 15.5 per cent year on year.
However, the same time last year, SMI reported a fall for the market of 24.3 per cent for September 2020. So we still haven’t returned to 2019 levels. Last month’s Olympic-driven jump was indeed a one off.
Not that we could have expected anything different. With Sydney and Melbourne both in lockdown in September, the market was nowhere near normalised.
The SMI data also suggests a multi-speed recovery, depending on the medium.
TV was up 17.1 per cent (after a fall of 19.5 per cent last year).
Radio was up 12.8 per cent (after a 27.3 per cent fall).
And magazines’ jump of 19.6 per cent does not look so impressive against the backdrop of a 56.2 per cent fall the year before.
Similarly, newspapers seem to have found their new, lower, level for advertising. This September’s fall of just 0.5 per cent looks less impressive when stacked against September 2020’s fall of 46.3 per cent. Thank goodness for subscriber revenue.
As for outdoor advertising, September’s 3.8 per cent rise, sits against a 62 per cent fall the year before.
The advertising recovery is going to be a slog.
Corrections and clarifications: SCA’s revenue hit
In yesterday’s newsletter, one of the ramifications of the Seven-Prime deal that I flagged was the downside for Southern Cross Media’s ambitions of a decent price for its regional TV stations.
I also referenced yesterday’s Sydney Morning Herald article on the hit the company’s revenues has taken since losing its Nine affiliation and switching to Ten.
Afterwards, SCA issued a statement to the ASX:
“The article includes some analysis of Standard Media Index (SMI) data in relation to regional television national revenues for the September 2021 quarter and suggests SCA has suffered a loss of earnings following its affiliation switch from Nine Network programming to Network 10 programming on 1 July 2021 because revenues for the September quarter are back about $17 million year on year. Within this $17 million, the article attributes over two thirds of that decline ($11.5 million) to revenue losses by SCA in northern NSW. In fact, SCA has not owned a television licence in northern NSW since 2017.”
In turn, the SMH published its own clarification:
While Southern Cross does not have a licence in NSW, it was the sales representative for Nine. SMI attributes the amount earned in that period to Southern Cross. Excluding $11.5 million from Northern NSW, Southern Cross lost $5.5 million in the first three months of the new financial year.
Letters: Will the Cat try to buy SCA’s TV stations?
Still with yesterday’s email, I speculated on what the Seven-Prime deal might mean for regional news bulletins.
And I flagged the loss of competitive tension for SCA with Seven no longer a potential buyer of its TV stations. Perhaps Ten’s owner ViacomCBS is the logical acquirer. MC points out that thanks to the sale of his Prime stake, Australian Community Media proprietor Antony Catalano might also be a contender.
MC writes:
Given Seven's long history of good quality regional news bulletins at Seven Queensland, there's no particular reason to think that they will downgrade Prime's current news output, which is focused on NSW and to a lesser extent WA. They might even improve their Victorian service. Also, regarding likely bidders for SCA’s regional television business, surely ACM is now in that category. The synergies their existing operations could have had with Prime can be had in a very similar form with SCTV.
That’s a good point, MC. I wonder whether ViacomCBS is contemplating making a quick offer to SCA now, before Catalano gets his hands on the money from the Prime deal which won’t even be voted on by shareholders until next month.
Time to get on with the day. I’ve a couple of cats to help settle in at their new home, who may be a tad reproachful after an interstate flight.
I also need to finish reading Lisa Wilkinson’s book - and to write a review of it - before the embargo lifts tomorrow.
As ever, I welcome your thoughts at letters@unmade.media, or via the comment button.
And if you enjoy Unmade, please do share it with a colleague. Most social media platforms have their own newsletter platforms, and they seem to be deprioritising links to newsletters like this one on the Substack platform. The fact that Unmade is still growing is entirely down to word of mouth, so thank you.
Have a great day.
Toodlepip…
Tim Burrowes
Proprietor - Unmade
Thanks for the SMI data Tim and that you didn't fall into the trap of saying that a 15.5% YOY increase in Sep 2021 after a 24.3% YOY fall in Sep 2020 means that the market is only down by 8.8% on Sep 2019, when it is in fact still down by 12.6% on Sep 2019.