Fairfax ABC

Fairfax Media and Southern Cross Austereo emerge as the two winners in the reporting season for Australia’s media groups. The season was dominated by more than $2 billion of losses and write-downs in asset values as revenues continued to weaken, taking profit margins with them. Nine Entertainment emerged with an honourable mention, while Telstra, which remains a bit-player, wants out of Foxtel to allow its rapidly growing TV and mobile media businesses room to grow unhindered.

Judging from the write-downs and outlook statements, the next year won’t see the pressures changing. Seven and Nine are forecasting a small dip in earnings and another strong share of a declining ad market, and Fairfax will be dominated by the spin-off plans for Domain. Southern Cross expects a small rise in earnings, News Corp and Telstra will be busy thrashing out the terms of their Foxtel device, and the future of Ten remains up in the air with the media law changes still stuck in the Senate. It is likely the Foxtel restructure will see a series of write-downs and impairments by both Telstra and News.

Fairfax reported a net profit of $83 million and no write-downs for the 2016-17 year, while Southern Cross this morning reported net profits of $108.5 million (up 40% as its radio,  rather than its regional TV business, did well) and no write-downs. Chief executive Grant Blackley said Southern Cross had reduced debt, sold off its northern NSW TV business to WIN and received broadcast licence fee relief from the government, and would expand into the out-of-home advertising market.

Nine Entertainment reported a loss of nearly $330 million in one-off charges (most were announced earlier in the year), the largest being a write-down on its television broadcast licences ($260 million) and provision to exit its Warner Bros contract. Nine reported a $203.4 million loss for the 12 months to June 30, compared with a $33.2 million profit in the year prior. Excluding one-offs, Nine reported a profit of $123.6 million, compared with $120.3 million in the prior year. Revenue fell 3% to $1.24 billion.

Seven West Media last week reported a small rise in TV revenue and earnings, but that was overshadowed by $988 million in write-downs of the value of the TV licences, magazines, goodwill and onerous contracts and sports rights, producing a loss of $744 million.

The ACCC has this morning approved a bid by Lachlan Murdoch and Bruce Gordon for Ten Network, which lost $232 million in the six months to February 28 after a $214 million write-down in the value of its TV business. Ten collapsed in mid-June as Murdoch and Gordon threatened to sue the directors (including the CEO of Foxtel).

We will get the 2016-17 results from Prime Media tomorrow (it’s an associate of Seven), while we still do not know how Gordon’s WIN travelled in the year to June.

News Corp wrote-down the value of its Australian newspapers’ long life assets by US$310 million and the value of its 50% stake in Foxtel by another US$227 million for a total write down of US$537 million or close to A$700 million. Foxtel saw its net income plunge to A$79.6 million in the year of June, from $244 million a year earlier, thanks to a 100,000 drop in subscribers and a A$3 drop in the annual revenue per subscriber, as well as losses of A$144 million on the failed investment (13.8%) in Ten and the Presto streaming joint venture.

That failed because the Stan streaming venture jointly owned by Nine and Fairfax seems to be a viable model up against Netflix. Nine said on Thursday that Stan had nearly 800,000 subscribers, up 50% on a year ago. “We’re first and foremost a content company … the future media world will be dominated by video and we’re at the forefront,” CEO Hugh Marks said.

In terms of future moves, Telstra’s move to force News Corp to restructure their jointly-owned Foxtel pay TV business is a sign the telco is on the way out of the sector because its own media business is booming.

Amid all the publicity over the dividend cut last week, and the decision to drop its stake in Foxtel to 35% from 50%, was the news that Telstra’s media revenue increased by 8.2% to $935 million “due to the strong performance of Foxtel from Telstra and Telstra TV”. Foxtel from Telstra grew 8.1% to $777 million with 57,000 subscriber additions over the past year, while there are now 827,000 Telstra TV devices in the market, continuing its strong growth. That is up from 300,000 at June 30 last year and just over 600,000 at December 31. Telstra is now Foxtel’s most important customer.

Foxtel also had 1.3 million Sports Live Pass users (including 1.2 million users who receive the service as part of their mobile subscription) across AFL, NRL and Netball, delivering unique and exclusive content for its mobile customers. These are both areas where Telstra is grabbing Foxtel subscribers, especially in mobile sports passes.

NOTE: This story has been updated to include more detail about Nine’s results.