The Ten network confirmed on Wednesday that it was the most profitable TV network in the country, thus raising the question, why not a fourth Television Network?

The Federal Government and its Communications Minister, Senator Helen Coonan (does she watch commercial TV?) have ruled out a fourth commercial network, but based on the profit figures from Nine and Ten, and to a lesser extent from Seven, Prime and Southern Cross Broadcasting, there are sufficient profits available to justify a fourth commercial network.

Based on the various earnings before tax, interest depreciation and amortisation, the TV networks this year will earn well around $900 million, and probably a bit more.

And with revenue of around $3.2 billion or more that’s a gross margin of more than 26%, a figure dragged down by the underperformance of Seven (a gross margin of around 23% and SBC, a similar figure for its TV businesses).

But industry leaders Nine and Ten both have gross margins well over 30 per cent.

Ten has moved ahead of both Nine and Seven in the sheer profitability of its businesses, with tight controls on costs and a much surer programming touch in the past year.

Its gross margins again rose to exceed those of Nine and ended more than 10 percentage points ahead of Seven.

Ten also moved past Seven in its share of TV ad revenue to 30.3% and also moved past Seven in audience share.

Ten is first in its target demographic, the 16 to 39, second in the wider 15 to 54 and second in total people, having moved past Seven. Ten is confident that that will continue in the coming months.

The Canadian-controlled company (what foreign ownership restrictions?) revealed pre-tax earnings from Television of more than $272.1 million, just $8 million short of the earnings before interest and tax and depreciation earned by the industry leader, the Nine Network ($280.1 million).

Ten had TV revenue of $756.1 million, $106 million lower than Nine, which had revenues of $862.8 million. Seven’s revenues in TV totalled $815.9 million.

Ten’s gross margin was 35%, up from 32% a year earlier and again much better than the 36% earned by Nine (which was higher than the previous year’s 28.5%).

Ten, and Nine have both cleared away from the third commercial network, Seven, which reported earnings before interest tax and depreciation of $187.8 million on revenue of $815.9 million, and a gross margin of 23%.

Ten, like all other major media operators, are now starting to be importuned by fee hungry investment bankers looking for a turn. Apart from the Telstra bonanza that could flow if the Senate is cool on the idea, changing all the media laws looms as the big pot of gold for the media groups.

Hence the guarded comments from Ten’s executive chairman, Nick Falloon about what might happen.

But having painted herself and the government into a corner, La Coonan could convince the Prime Rodent to do a backflip (what another one?) and say to the media groups and the Senate, say yes to the media law changes and we will also allow more competition in the various sectors.

If its been okay for the commercial radio market to be invaded in recent years by the likes of DMG from Britain and Clear Channel from the US, why would any player object to freeing up the rules AND allowing greater competition.

After all that’s the real problem here. Too little competition (especially in newspapers and magazines).

Commercial television is competitive, but there’s more than enough money available for a new low cost entrant that would tack on at the bottom of the market.

The cost of auctioning the spectrum (like in commercial radio) might deter a lot of punters, but it would probably ensure a well-heeled, skilled operator appeared.

Either that, or privatise SBS!

Reader feedback:

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I think Terry Television has missed the point. The regulation of TV is supposed to prevent monopoly but has been captured by the monopolists.

The government’s refusal to allow a fourth commercial channel is a case in point. Of course competition wouldn’t put the likes of Packer out of business. In a similar vein is the decision of the government to use digital TV for high definition. As the digital signal is compressed, standard definition would free up the spectrum for more channels (as proposed by the Productivity Commission). High definition doesn’t allow this and is unknown in Europe and rare in the USA. Then there’s the way pay TV was delayed for a decade or so. Anything to cosset the poor little rich guys who run our media.