Australia’s Network Ten could be broken up and sold off for the benefit of its bank and three billionaire shareholders by the end of the year if a transformation project fails to improve its fortunes.
Ten is also relying on Australian Communications Minister Mitch Fifield to deliver a significant cut to broadcast licence fees, which are currently charged at 3.4 per cent of annual revenue.
The free-to-air broadcaster is pinning its future on securing a new A$250 million (NZ$271 million) loan.
Ten’s chief executive Paul Anderson said a substantial cut, which could save Ten around $23 million a year, would go a long way to improving its financial situation.
“We would like to see fees cut to less than 1 per cent,” he said.
“It is not case of ‘how much [of a cut] do we need to survive’, it is what is fair given the regime that we operate under and the competitors that operate in this environment with us.”
Ten revealed on Thursday its half-year revenue increased by $7 million, or 2.1 per cent, to $341 million compared to the same period last financial year. It did this as total capital city advertising declined 5.6 per cent.
But at the same time Ten’s costs increased by $20 million to $344 million, leading to a $2.4 million loss. These losses widened after it wrote down the value of its television licence by $214.5 million, leading to a total half-year loss of $232 million.
But attention turned to concerns about Ten turning an existing $200 million facility with Commonwealth Bank that is due on December 23 into a new $250 million loan. The current loan is backed by three shareholders: Lachlan Murdoch, who was chairman when the loan was created in 2013, James Packer and Bruce Gordon.
If Ten cannot secure new funding, it is likely receivers will be appointed to sell off assets to be split up between CBA and the guarantors.
Shares closed 19 per cent lower at 36 cents, giving Ten a market value of $133 million.
A spokeswoman for Fifield said he was aware of financial pressures on TV networks and “is examining further [licence fee] relief in the budget context”.
The chair of Australia’s government communication backbench committee, Dean Smith, used Ten’s financial position to pressure the opposition Labor Party to pass the government’s media ownership reforms.
“The news from Ten will demonstrate that the issues are very real and they are immediate,” Smith said.
“When media organisations have talked about the need for reform and the threats to their on-going viability – some have mistakenly assumed that these were empty threats and they’re not.”
Opposition communications spokeswoman Michelle Rowland said Labor supports licence fee cuts and some of the proposed media reforms.
“While we wait for this inept government to undertake comprehensive reform of Australia’s media laws, we wish the Ten Network well with their program of transformation to improve revenue and achieve cost-savings,” she told Fairfax Media.
Murdoch and Gordon cannot assume a controlling stake in the network due to existing media ownership restrictions.
But Anderson said the billionaires taking ownership was “highly theoretical” and his “firm priority” is to refinance with the transformation plan and licence fee cut in place.
“It is normal we would be [refinancing] at this stage. It would be preferable that it be done before half-year results so that [debt] didn’t go current,” he said.
Ten has brought in consultants, including McKinsey, to help identify where it can save money.
Among the cost increases was a 7.4 per cent production lift due to “investment in new prime-time domestic content”.
“In terms of the [production] cost increase for the first half, the vast majority of that is [reality show] Survivor,” Anderson said.
“We haven’t talked about job cuts [with staff] … what we have said is that we clearly need to reduce costs across the network.
Ten has internal targets that need to be approved by the board to reduce costs, improve sales and make more money from its digital channels. Ten already rents out its two digital channels to infomercials from TVSN and SpreeTV.
Anderson suggested advertisers could be charged according to “eyeballs” rather than time slots through dynamic advertising sales.
– Sydney Morning Herald