It was a confident Seven Network this
morning. On the day it matched previous promises on earnings and
produced no unwelcome surprises to investors, there were full page ads
in the SMH and Daily Tele boasting about how they’re now number one in news.

In
Sydney certainly, and nationally, but not in Brisbane or in Melbourne
where Nine still rules at 6pm. Seven said that in Sydney it was number
one at breakfast, 4.30pm News, 6pm News and in the 6.30pm current
affairs war between its Today Tonight and Nine’s A Current Affair.

What
it didn’t say – directly at least – was that Nine was second. But the
ad did have the Seven logo of a humanoid TV set kicking Nine’s Dotty
Nine logo to pieces. Now what will Nine boast about on Thursday when
its parent, PBL reports. That it’s Still The One overall but a faded
Number One?

Seven certainly has something to boast about at the
moment as it makes a comeback against Nine for the second time this
year. But judging from the final profit figures,
there’s a question or two to be answered in the year ahead that will
test the Network’s ability to turn ratings success into financial gold.

Seven’s
earnings after tax came in at $65 million, down 22% and in line with
the promises made at the annual meeting late last year and when the
interim results were released in February. TV revenues rose 10.2%
across the year and 11.9% in the second half, when the industry growth
rate slowed to 8.6%

That’s encouraging, especially after a poor
calendar year in 2004 during which Seven’s revenue grew at a lower rate
than the industry average and its share of advertising slipped. It’s
risen in the first half of 2005, outpacing the industry growth rate
quite sharply, reflecting the impact of programs like Desperate Housewives, Lost, Dancing with the Stars and the rebound in the news and current affairs hour from 6pm to 7pm Monday to Friday, especially in Sydney.

Costs
were up 5.6% over the year (excluding the Olympics), but the second
half saw a 10.3% growth in costs. Now that’s the big worry. Unlike Nine
where costs have outstripped revenue growth, Seven’s costs are still
under its growth in revenues. Seven management says this sharp rise was
due to “the network’s intensive program development and marketing” in a
competitive marketplace.

And Seven certainly is competitive:
Nine sources say they are being outspent heavily by Seven, especially
in the promotion of its News and Today Tonight. Investors have
accepted Seven’s explanations for this less than impressive
performance, the shares were up 3c in the first 15 minutes of trading
this morning to $8.11, which is close to an all time high.