Ten just reported a $232.2M loss for the first half of the 2016-17 financial year. That’s a big problem for a company which as of today has market cap of $126.76M. A $250M loan from the Commonwealth Bank is enough to staunch the bleeding for now, but it also means that shareholders are going to get nothing in the face of what seems like an inevitable collapse. It is the good will of the Commonwealth Bank that keeps the company in business, but CBA has a lot of people it must answer to, not least of which is APRA who will be looking at the possibility of such a large default becoming a threat to the system.
That’s the bad news. The good news is that all the machines still work and a well-trained group of technicians, managers, producers, and administrators exist to manage them. Ten’s advertising revenue was actually up 2.1% year on year, but costs were up 7.4%. Ten’s real troubles begin with the $100M a year it spends on American content.
Buying American television for cheap and broadcasting it to Australian audiences is what made Ten a success story in the first place. I remember growing up with a guaranteed half hour of The Simpsons on every weekday, up to 2 hours on some nights. It was a good plan while sending video around the world involved a VHS tape and a P.O Box. The incredible growth of telecommunications technology has destroyed this model utterly, past tense, that well is dry.
Interestingly enough Ten’s American suppliers are doing quite well, because they understood the shifting landscape they were on and got ahead of it. The future is digital, broadcast is a dinosaur, Ten’s broadcasting license has gone from being a government granted monopoly, to being the anchor around its neck.
The internet is both the doom of Network Ten and its savior. By moving the entire network onto the internet and shutting down its broadcast service completely it frees itself from the constraints of the 24 hour broadcast schedule. No more prime time, no more early morning, pure content on demand at the schedule the viewer sets for themselves.
Netflix has already broken this market of course, but Netflix doesn’t have what Network Ten has, the capacity to generate a constant supply of local content at high quality and low cost. Its assets are its staff and equipment. No longer is it about maximizing revenue per minute of air time, but it is about producing any and all content where the revenue accrued from advertisers is greater than the cost of making the minute.
Youtubers are absolutely smashing Ten in profitability, the highest rated Australian youtuber according to socialblade.com is CKN toys, with a mere 248 videos they have accrued over two million subscribers with over two billion video views. Socialblade.com estimates their yearly revenue at somewhere between $500K and $9.5M. That’s just one channel with low overheads. Network Ten is lucky to be getting $50K out of youtube with nearly 30,000 videos and much higher overheads.
On any given weekend there must be thousands of A grade sporting events across Australia, for the cost of a camera crew for the duration and an hour’s post production there’s a few hours of content that will earn for years. Sure it might only be seen by a few thousand people, but it’s essentially free to distribute indefinitely whenever those few thousand people might care to watch it.
It certainly doesn’t end at sporting events. Comedy, politics, educational programming, children’s programming, even high quality drama has it’s model completely changed from “what is the best show for 7:30pm on Thursday” to “How many shows can we create that enough people will watch to at least cover costs.” And Network Ten has almost everything in place to do exactly that.
What they are missing is the software to make it worthwhile. It needs to return the social element that once made broadcast television the staple of break room conversation. Users guiding users to the content they care about. Every town and suburb in Australia could be producing its own 24hour news channel made up of bits and pieces of independently produced content.
Advertiser funded and delivered via broadband with no computer literacy required Network Ten will have eliminated it biggest costs – licensing American content that Australians are getting from alternative sources and paying for a broadcasting license that long ago ceased to be valuable. They could take that money and pay for a set top box installed on every Australian television set within three years.
“It’s like Netflix, but free, and you don’t need a computer.” CBS and Fox would be paying for access; the tables would truly be turned.