Well, we know about the poor ratings, and this week we got an acknowledgement that the banks won’t lend it money, without guarantees by big shareholders.
So if you look at Ten’s situation another way, most Australians currently buying a home at the moment are considered a better credit risk by the banks than Ten.
You can borrow as much as you like to buy a house, so long as you have a job, earn enough and have a slab of equity in the deal – and no guarantee is needed. A house is considered better security than Ten’s assets ($785 million of which are intangibles, the value of the broadcasting licences).
Ten can’t match that, except with Bruce Gordon, James Packer and Lachlan Murdoch providing personal guarantees to the CBA for the $200 million loan (in exchange no doubt for a nice fee for each of the three).
Shareholders will vote on the loan at the AGM on December 18 and will no doubt have something to say about that. They will also be able to ruminate on the tragedy that is Ten at the moment, and possibly for the future.
It will be a long, long way back for Ten from where it now finds itself – battling to keep the small amount of revenue it now has and losing money.
It is a black hole and the weak point in Free To Air TV in this country and the network most likely to go broke and disappear.
Shareholders and others are owed an explanation from the chairman, Lachlan Murdoch (and an 8.9% shareholder) but he has gone missing. He is due at the 21st Century Fox AGM in Los Angeles Friday night, Sydney time. The next time he’s in public after the 21st Century Fox AGM should be the News Corp AGM, whenever and wherever that’s held. Then it will be the Ten AGM on December 18.
Murdoch has been chairman and the kingmaker at Ten since 2011, forcing the removal of former CEO, Grant Blackley and chairman, Nick Falloon, poaching and appointing former Seven executive, James Warburton, then sacking him, and then finding a News Corp executive in Hamish McLennan (a former adman) to do the job. Thanks to Murdoch (and the rest of the board) Ten has swung from trying to regain its crown as King of The Kids in the 16 to 39s, going up market into 18 to 49s and now edging into the ‘younger at heart’ parts of the huge 25 to 54 demographic, where 80% of the near $4 billion a year is spend in TV advertising.
So far Mr McLennan has been marginally better than Mr Warburton, but the improvement needs a microscope to determine the rise. For all the talk of a rise in audience in recent months, Ten is struggling. Given how weak Ten’s performance was in the last five months of 2012, the current period had to see an improvement. But it’s not much – Ten’s audience is up 6% in the core period of prime time – 6 to 10.30 pm. That won’t bring back the advertisers who have either deserted the network, or reduced their spending.
TEN FY 2013 Full Year Results Presentation
Since Lachlan Murdoch joined the board by buying half James Murdoch’s shareholding (and since Mr Murdoch and Gina Rinehart became shareholders), the network’s performance has worsened. Since the 2010-11 financial year when TV ad revenues peaked at $851 million), Ten has lost more than a quarter of that – $251 million, to a total of $630 million in the 2012-13 financial year. Grabbing $630 million of TV revenue a year is not enough to survive, let alone grow.
Earnings before interest, tax, depreciation and amortisation has fallen from $154 million to around $46 million, at best. But the actual performance is a lot worse because the last two years include reduced federal licence fees and the affiliation fees received from Southern Cross TV. Exclude those payments and the licence fee reductions and Ten’s five metro TV stations operated at a whacking great loss.
Ten raised more than half a billion dollars in 2012 and early this year through two capital raisings and the sale of its outdoor ad business, Eye Corp. That was to reduce debt, which happened, but it has risen and more is needed via the CBA loan, which won’t start until very late this year once shareholders approve it. A year ago Ten said its $230 million capital raising would reduce debt, which it did to a net $1.2 million at the end of February. But by the end of August that had blown out to $28 million, which sums up Ten’s problems. Ten has cash on hand in the bank, but that has to be used to keep going over the rest of this year and into 2014 and through the summer and The Big Bash broadcast.
Ten’s problem is that TV viewers do not trust the network to produce and broadcast programs they want to watch. They do start watching some series – US hits Homeland, Elementary for example had good first series, but this year for series 2, viewers have deserted Ten.
