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News Plus 15 Feb 2021 - 3 min read

Google news: Warburton says Seven sharper dealmaker than rivals, eyes $60m SVOD partnership

By Josh McDonnell - Senior Writer

Seven's James Warburton: “The code is going into legislation and it's a pretty simple model: you negotiate or arbitrate. Everyone has an option to do what we did, or to not do what we did. It is up to them."

With a reported $30m Google deal in the bag, Seven CEO aims to leave rivals tied up in negotiation or arbitration. Next up James Warburton's aiming to strike a $60m contra in bid to carve out a stake in Australia's subscription video market. The ASX likes the numbers.

What you need to know:
  • CEO James Warburton suggests Google news deal due to sharper negotiating and commercial acumen.
  • Aims to do deal with Facebook next.
  • Also working on SVOD partnership.
  • Audiences gains from lockdowns remain.
  • Media agency booking cycles returning to six-to-eight-weeks, giving greater visibility.
  • Some programming improvement required.
  • Share price hits 20-month high on strong interim results.
Money talks

After striking a deal with Google worth a reported $30m a year, Seven West CEO James Warburton has suggested the media company may have sharper negotiation skills than rivals Nine and News Corp.

But he softened that barb by admitting there is less bad blood between Seven and the search giant.

There is also less at stake, with Seven’s news revenues primarily derived from The West Australian and 7News.com.au. Either way, Warburton aims to move on with rebuilding Seven’s balance sheet.

Warburton spoke to Mi3 as Seven West’s half-yearly results powered its share price to a 20-month high. Debt and costs are down, revenue is recovering and Warburton appears to be delivering. 

Striking a deal with Google, and potentially Facebook, he hopes, will nudge top and bottom lines further in the right direction.

Moving on

Seven’s deal with Google puts pressure on rivals while giving government and Google a face-saving path away from brinkmanship. The reported $30m annual deal, however, was speculative and incorrect according to some close to the two dealmakers.

As other major publishers either try to hold firm or enter last-ditch talks with Google, Warburton said Seven is powering forward.

Refusing to divulge details, he said the deal would enable a “material” new revenue stream and enable Seven to concentrate bandwidth on other growth areas.

“The code is going into legislation and it's a pretty simple model: you negotiate or arbitrate. Everyone has an option to do what we did, or to not do what we did. It is up to them,” said Warburton.

He shrugged off suggestion that Seven had become a platform price-taker.

“Every single media company has been negotiating with all parties for a period of time. It comes down to commercial acumen and ability to negotiate,” said Warburton.

Equally, he added: “There's less animosity between ourselves and Google. We've been good partners on a range of things for a long period of time and we were able to get a deal done that we both like,” he said.

“It’s good to be getting fairly remunerated, and now we have got an advantage of being first to market [amongst our peers].”

Warburton confirmed similar discussions between Seven and Facebook, though these are “less advanced”.

Last year, Seven was part of Facebook's $10m content funding program, via the Watch platform, though results were underwhelming.

Viewers, buyers return

Warburton is bullish that Seven can maintain audiences across the network, aided by a large spike in viewership prompted by lockdowns and Covid restrictions. 

"Big Brother, Farmer Wants a Wife and SAS all performed well last year with buyers ready to reinvest in 2021, proving advertisers are also confident in the return of TV audiences," he says. 

He said there is a clear return by media agencies to the usual investment and trading cycle. Last year, additions and changes to a TV plan could be made within hours of shows going to air.

According to Warburton, the cycle of six-to-eight weeks has made a comeback: "It's encouraging to see that stability, with people booking those larger integrations and sports inventory earlier."

Holes to fill

Despite strong audience spikes in some of its key tent-poles, Seven admits there is still work to be done on the programming slate.

Newcomer Holey Moley, while up double digits on former franchise My Kitchen Rules, still has some kinks to iron out.

"We may have overstretched Holey Moley and will look to strip it back going forward, but that's part of the lessons you learn on any new production. It probably only needs to be a once a week event, still with a shorter run than other shows. It'll be back, but with those changes," said Warburton. 

SVOD: $60m partnership push

Warburton says the company remains intent on finding a way into the SVOD market in 2021.

Despite a cluttered marketplace with Nine, Network 10, Foxtel, Netflix, Disney and Amazon all vying for market share, Seven is confident it can make headway by taking a "partnership approach".

"We could bring a $60m marketing budget to those already in the market and we are having some of those discussions now," he said

"It was difficult last year with Covid and everything else we had to deal with, but it is certainly a focus for this year. We can’t say exactly when we might get a deal done, but we are keen to get moving on it as quickly as possible."

Key financials

Headline numbers from Seven West Media's half yearly financials:

  • Net profit after tax of $116.4 million on group revenue of $644.2 million.
  • Underlying net profit after tax was $86.6 million, up 26.5% on the same six months the year prior.
  • Q3 revenue forecast 7-10% ahead on the same period last year, dependent on bookings.
  • Operating expenses declined 18% to $480 million.
  • Net debt reduced 42% to $329 million.
  • Metropolitan free-to-air TV advertising market increased 0.6% during the year with a strong recovery in the December quarter (up 17%).

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