Seven West Media, owner of the Seven Network in Australia, reported an underlying net profit of AU$137.5 million on revenues of AU$943 million for six months, down over 8% on the same period the previous year. Yet the group posted a half-year loss of nearly a billion Australian dollars, mainly representing a reduction in the goodwill value of its television business. So does this reflect a lack of confidence in broadcast television or is it simply an accounting device?
Seven is the leading commercial television network in Australia, by audience and share of advertising revenue. The group also has publishing interests in newspapers and magazines but television represents over 70% of its revenue.
The company reported one-off items of $1,148 million, including a $960 million impairment of television goodwill recognised as part of the takeover of Seven Media Group by West Australian Newspapers in 2011. That resulted in a total statutory loss of $993 million for the six-month period.
Naturally a large loss, albeit a largely intangible one, can be offset against future taxes to enhance net profits.
ITV, the leading commercial broadcaster in the United Kingdom, wrote off £1.5 billion in goodwill in 2008. It went on to make a remarkable recovery, at least in the eyes of investors.
Tim Worner, the chief executive of Seven West Media, said: “This does not diminish our belief in the future of free-to-air television or our ability to maintain leadership, revenue share and cost control in the business.”
He said it reflects the tough economic conditions affecting consumer confidence and advertising expenditure, adding: “we believe it is prudent that we adopt a more conservative approach to the valuation of our businesses.”
The group is increasingly focused on delivery to mobile devices, including its 50% stake in Yahoo7, he said. “Mobile for some is not just the second screen but increasingly ‘the’ screen.”
The company reported “demand for online video continues to grow rapidly with more than 62.8 million videos streamed over the past six months, up 28% on the previous first half”. It also reported over 1.5 million downloads for its PLUS7 catch-up television app, with a 36% year-on-year increase in programme streams.
Yet that looks more like a growth opportunity than significant adoption, even in a country with a population of slightly less than 23.5 million people.
In comparison, the BBC iPlayer reported 1.3 billion online requests for television programmes in the same period, in a country with a population of just over 64 million.
Seven enhanced its online video offering with the launch of its Hybrid TV initiative, combining broadcast and broadband services, based on the Freeview Australia HbbTV platform.
Seven also recently launched a new Presto service in collaboration with pay-television provider Foxtel.
“This new venture sees the leaders in subscription television and our acknowledged strengths in content creation and leadership in broadcast television work together to deliver a new and exciting service to Australians,” said the chief executive of Seven West Media. “Our expanding content library underlines Seven’s future as a content company delivering its programming to our growing audiences across a range of devices.”