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Seven's James Warburton on cracking the SVOD market, his text to Matt Preston, reducing ad loads and why it matters to marketers

By Paul McIntyre - Executive Editor

4 November 2019 5min read

James Warburton & Kurt Burnette

Seven chief revenue officer Kurt Burnette and CEO James Warburton: Look out for some surprises

By Paul McIntyre - Executive Editor

4 November 2019 5min read

James Warburton opens up on his fast and furious overhaul of Seven's programming slate, why he texted Matt Preston on his first day in the job, his intent for cracking a subscription video on demand service, the odds for real collaboration between TV broadcasters, the catch-up job required on Seven's tech and systems and the future of ad loads for marketing effectiveness. Yes, there's plenty here.

"Twelve streaming services are not going to survive. Where are they going to launch? If you go to News, they are going to promote Foxtel. Nine is going to promote Stan. Ten will promote the CBS product. If you think about it, we are pretty clean - and we are talking to all of them."

- James Warburton

 

 

If you want James Warburton in full flight, listen to the Mi3 Audio Edition here. It's unfiltered. You can read the abridged text version below but the podcast conversation is loaded. Click here for a sonic burst on Seven and its future.   
 
 
Streaming wars: Seven prepares to enter fray

Within the next few months, a dozen streaming players will be lining up to do battle for Australian audiences. “Twelve is too many. They are not going to survive and a few are going to get bruised knees,” says Warburton.

But the new entrants present an SVOD opportunity for Seven. And Warburton’s keen. He’s open to running both subscription and ad-funded services in tandem. For the would-be usurpers looking for partnership or promotion, Warburton suggests, Seven is the only game in town - and he's talking to all of them.

“We’re pretty clean when you think about it. If you go to News, they are going to promote Foxtel. If you go to Nine they are going to promote Stan. Ten will promote the CBS product. So where are you actually going to launch? Where does Disney launch and what happens? How much will they spend, where? They care about Australia and our rural numbers. What about the telcos that don’t have a strategy beyond telecommunications? We are talking to whole range of people to, basically, build something.”

Warburton repeats that could be a promotional alliance, dangling a carrot of “$50 or $60m of promotional activity” to any potential partner, or full-blooded joint venture. Either way, Seven is “very keen to have a more robust SVOD strategy”.

At the moment, that involves "turning over a lot of rocks". Where it lands will play out “in the medium term”.

In his world, that translates to “about six months.”

"Drama is now effectively a streaming product [with sponsored, one-minute ad breaks]. That is probably the model for us with drama going forward, to be frank. And the market will now lean forward, understand that and pay a premium for it."

- James Warburton

Marketers: Embrace lower ad loads (or else)

Warburton says Seven is happy to run ad-supported and subscription products in parallel: “Absolutely, you would look to maximise your earning stream from both services.”

That’s good news for marketers, given the narrowing of options posed by a dozen ad-free models. It should also spur some soul searching: If audiences are choosing to turn away from ads, it might be time to take responsibility and try something different.

Warburton says Seven has grasped the nettle, with ad loads set to reduce within competitive categories.

Drama, he says, “is effectively a streaming product now”, with Westpac sponsoring a one-minute ad break within Secret Bridesmaids’ Business, for the first time on Seven last month.

“The viewing experience was great. I think that is probably the model for us with drama going forward, to be frank,” says Warburton, “and the market will now lean forward and understand that and pay a premium for it“.

That is something certain market actors have tried before, without success. Now, however, the landscape is different.

“So yes, there is some ability to look at ad loads,” says Warburton. “Maybe the world has changed a little bit and we need to innovate and drive that as an industry.”

"This is about transforming the company and that is what I enjoy. I don’t enjoy business as usual. If they had said, "just go and do this James and run it", that’s never been me. It’s a huge opportunity. We’ve done a lot in ten weeks – and we’ll keep going."

- James Warburton

Deals brewing

Warburton predicts the incoming streaming wars play into a major consolidation round across media, “that is starting to happen now.” 

Though big traditional media groups are currently active, Warburton says the consolidators will not necessarily be the current incumbents.

“If [private equity house] Quadrant announces the purchase of [OOH firm] QMS, I don’t think it’s an outdoor play. I think it will be a much bigger play in market and so I think there will be consolidation across the board.”

Warburton “would not be surprised to see another two or three” private equity firms entering a bidding war for QMS, or other media entities. “I think that notion of value sits pretty well with private equity.”

Seven, however, is keen to shape the new world order.

“I have said to our chairman and our board, it is not just about improving ratings and revenue. It’s actually about transforming the company, being a hunter and being very hungry for M&A opportunities,” says Warburton. “We see ourselves building a bigger media group over time.”

With Seven’s debt weighing heavily, Warburton is under no illusions that he must fund acquisitions himself. There will be no major injection from the parent company or major shareholders. That approach is evidenced by the sale of Pacific Magazines to Bauer and Redwave Media radio assets to Southern Cross Austereo, alongside the all-scrip deal for Prime.

“We have to balance the books and we are getting there,” says Warburton. “We’d like to get our debt under two times [earnings], so we will continue to chip away.”

Warburton says his remit was made clear by Ryan Stokes before agreeing to take on the role.

“This is about transforming the company and that is what I enjoy. I don’t enjoy business as usual. If they had said, “just go and do this James and run it”, that’s never been me. It’s a huge opportunity. We’ve done a lot in ten weeks – and we’ll keep going.”

“We’re already making stuff for Matt Preston in India – he’s huge in India - and that will be a good, profitable experience for both of us in the backend. We get the share of the shows he does and everything else.”

- James Warburton

New strategy, same fundamentals

Tasked with turning Seven around, it's fair to say Warburton has come out swinging in those first ten weeks.

As well as the M&A deals, he's reshaped the strategy internally. Underperforming shows have been punted, new slates chalked up and external production houses re-engaged as Seven attempts to reclaim the primetime dominance for years taken for granted. 

Warburton’s first big play was to sign MasterChef duo Matt Preston and Gary Mehigan, old friends from a previous life. He texted them on day one, but insists it’s more of a sure bet than a Hail Mary.

“I did Gary and Matt’s last deal when I was at Ten, so I know the guys well, there’s a huge amount of trust.” Moreover, even as they see out gardening leave, Seven’s reaping the benefits.

“We’re already making stuff for Matt in India – he’s huge in India - and that will be a good, profitable experience for both of us in the backend,” says Warburton. “We get the share of the shows he does and everything else.”

He says Seven still provides a big international pull. “A lot of people are wanting to come to Seven because we are making shows for Facebook, for Netflix, for Amazon and for other networks around the globe – and I think that is the model that’s really changing. So yes, I texted them the day I was appointed and said, “Want you on board” and then we moved very, very quickly.”

That said, Warburton acknowledges the need to focus on quality over quantity.

“We had too many programme failures, we tried to do a whole range of things ourselves,” says Warburton.

To rebuild, and become less “inward focused … you have to go outside and find the right formats and deal with some of Australia’s best production companies,” he suggests.

“That is not to say we have not had success. A lot of our dramas will continue to be made by Seven Studios. But for now, we have to have a schedule that we can develop and some formats that we can stick with.”

Those formats “and big shows that people know”, should help buttress the Olympic Games, which Warburton says is already pulling in brands.

“We’ve effectively got eleven companies already on the Olympics, probably the earliest that has ever been.”

While the current market is “patchy” - Warburton thinks a “low single-digit decline for the fiscal year” is on the cards across the board - he rejects the suggestion that the future of TV is managed decline.

He thinks the TV industry needs to properly articulate both how it is changing, citing VOZ as a “game changer … but nobody is talking it up”, and the underlying fundamentals of the medium, regardless of how it is badged.

“Ultimately, your strength is still in terms of who and what you reach. That has been the case for years, it will continue to be the case. I think you find the big media companies continue to re-invent themselves.”

"Media agencies do an incredible job. The sophistication of what they do keeps expanding but the remuneration stays the same. But if you’re doing a big play for a brand, then you need to be working with the product manager or the marketing director."

- James Warburton

Direct to marketers

If media agencies are failing to talk up TV, Warburton is not shy. The Prime merger, boosting reach outside of metro areas, gives Seven “a real shot to go and talk to marketers”, says Warburton.

Media agencies may be doing “an incredible job [given] the sophistication of what they do and what they deal with keeps on expanding yet their remuneration stays the same”. But he’s unapologetic about dealing direct with big spending clients.

“I do talk to marketers, because you have to understand what their issues are and what they need when they go to market. If you back yourself and the medium to deliver, you create great enduring relationships with them going forward.”

Moreover, he says about “ninety five per cent” of the media buying side via agencies is “transactional, based on the fortunes of ratings, revenue rate and those sorts of things.” Such procurement-driven approaches via agencies, he suggests, don’t suit the big deals.

“If you’re doing a big play for a brand, then you need to be working with the product manager or the marketing director, or whomever,” says Warburton. “You need to be fully integrated in terms of your production and those types of things and I think that is where the point of difference is.”

Asked how Seven’s direct/agency revenue mix might look in three years’ time, Warburton suggests the balance is unlikely to change “over dramatically”.

But he says marketers are taking “a lot more ownership of the media deals,” and if anything, it is the marketers calling the media owners.

“That’s good, because when you are making a $15-$20m commitment to a network, you want to know the CEO and you want to understand you have the support.”

Warburton hopes more marketers will return the favour by talking about how their investments are delivering growth, which in turn will help drive home the value of marketing within the c-suite.

“It’s good to see that there are some senior marketers that are prepared to go on camera and actually talk up campaigns. We had Campbell Arnott’s CMO David McNeil and Coles CMO Lisa Ronson talking about the multiplier effect at the upfronts,” says Warburton.

“I do not think we as a mass media do that enough. But I think that is where you get noticed. At the end of the day, that is where the CEO’s attention lies. The big focus needs to be top line growth.”

"Every single agency CEO I talked to wants something different [from a TV trading platform]. The industry is supposed to be together on it but there seems to be two schools of thought. So my point is, what does the MFA want?"

- James Warburton

Programmatic TV: Now or never

From a systems perspective, Seven has to “catch up really quickly,” Warburton acknowledges.  From a data perspective, it has also been “in a catch up mode”, though he touts “some good surprises” coming from work led by chief revenue officer, Kurt Burnette, around Red Fusion, data sets and user IDs. “With what Kurt is starting to roll out now, I think we can catch up relatively quickly,” Warburton suggests.

But he thinks there is a need for a consensus approach to data.

“Everyone talks about data. But there’s no uniform or blanket [approach]. I think we would all be better as an industry to work out what clients truly need and put it together… [to provide] one solution versus having a solution from each player all the way through.”

That sounds suspiciously similar to Anthony Fitzgerald’s view. The former MCN CEO has essentially said broadcast TV is doomed unless the networks can stop fighting each other and focus collectively on wresting back the initiative from the technology giants.

Fitzgerald (“awesome, a great competitor who has been really good for the TV industry”) is right in some ways, says Warburton. “But this notion of doom is one that I refuse to accept. ‘It’s doomed’ is bullshit.”

A uniform approach by networks, however, requires media agencies to align on what they are asking for.

“Every single agency CEO I talked to wants something different. The industry is supposed to be together on it but there seems to be two schools of thought. Nine wants to go with their system, but I don’t think everyone totally agrees with that. So my point is, what does the MFA [the Media Federation of Australia] want?”

But that’s the same blame game that has let the tech giants tuck into TV ad dollars. Yet the platform behemoths have succeeded by forcing their approach on the market. Does Seven, along with the other networks, have appetite to fire up the steamroller?

Nine appears to be taking the initiative, pushing its Galaxy trading platform as a cross-market solution.

Warburton says that, “if everyone agrees, then that is what we will do.”

And if they don’t, the market will continue to go around in circles?

“I think so.”

 

Let’s go. What do you think?

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