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News Analysis 31 Aug 2020 - 3 min read

Hugh Marks on a 'no ads' 9Now subscription service, combined streaming and BVOD content deals and why consumers ‘aren’t silly enough’ to fall for Google’s current campaign

By Josh McDonnell - Senior Writer

Nine CEO Hugh Marks says it’s unlikely streaming service Stan will take on ads in some form - for now - but he doesn’t rule out an ad-free 9Now model in the future, as the network continues to make large-scale content deals that move across advertising and subscription platforms.

What you need to know:
  • Nine’s results for FY20 included a $575m loss for the 2020 financial year. The loss was due to a $665m write-down of goodwill for Domain and its TV broadcast assets.
  • Excluding the write down, profit was $155.9 million.
  • Nine’s streaming service Stan saw 54% growth in revenue to $242.1 million in the 12 months to 30 June, recorded its first positive earnings and ended the year with 2.2 million users.
  • Nine CEO Hugh Marks says Stan is one of the group’s most successful “high margin” businesses.
  • Despite the influx of various paid and subscription streaming models in Australia, it is still “very unlikely” Stan will start carrying ads.
  • Marks didn’t rule out the possibility of a paid model as a consideration for Nine’s broadcast video on demand (BVOD) business 9Now.
  • The company adopted a “preferred partner” strategy for large content deals and is increasingly using content across its entire video offering.
  • Marks says the recent NBCUniversal deal, which has seen content shared across Nine and Stan, is the new strategy.
  • The business will also look to take a similar approach to local content production, with Stan Original titles eventually being shown on Nine and 9Now.
  • The Nine CEO also dismissed Google’s current “scare campaign”, claiming consumers “aren’t silly enough” to be tricked by the digital giant.

 

Content clarity

Nine CEO Hugh Marks has praised the performance of the company’s subscription streaming service Stan, labelling it one of the “best examples” of a non-traditional, high-margin division of a modern media business.

Stan’s revenue jumped 54% to $242.1 million in the 12 months to 30 June and it moved into the black for the first time, recording earnings before interest, tax, depreciation and amortisation of $31 million. It finished the financial year with 2.2 million users, up from 1.7m a year earlier.

Despite the strong results, questions still hang over the future of streaming services in Australia, given the rapid expansion of new offerings from international content giants.

Disney+ has signed more than 2 million subscribers in Australia according to Roy Morgan Research since it launched in November, a move that ended Disney’s content deal with Nine and Stan.

In August 2019, AVOD service Tubi made its soft launch into Australia, with plans to significantly ramp up its content library and ad sales operations.

ViacomCBS has flagged a new streaming service following the merger of the two late last year. The product will replace CBS All Access, known as 10 All Access in Australia.

Disney+, Tubi and the new ViacomCBS product join an already crowded market that is home to market leader Netflix, Amazon’s Prime, Foxtel’s Kayo, Binge and Now, Hayu and dedicated horror platform Shudder.

Marks told Mi3 that despite the arrival of different paid and subscription streaming models in Australia, it is still “very unlikely” Stan will start carrying ads.

“Putting advertising on Stan doesn’t make sense and it can easily become a move that confuses our consumer and overall customer proposition,” Marks says.

“That's not to say that's going to be the case forever, but there are others in the market who we’ll leave to take that approach.”

Marks says a more likely development is for Nine to remove ads from its BVOD service, 9Now, for consumers who want to pay to subscribe to it. Such a move would give consumers the option of opting out of ads on 9Now, while giving marketers the ability to still reach some of the platform’s users.

“It’s something to consider, especially given the double digital revenue we are generating from our subscription business,” Marks says.

“However, it’s not something extremely high on our agenda when we are achieving similar results through an ad-funded VOD [Video On Demand] model.

“Our view is we're better off in the market with the 9Now service as it is and ensuring that we're able to offer those targeted solutions to advertisers alongside linear buys.”

Marks says one of the benefits of the growth of Stan is that Nine takes now a “complete video” approach to content deals, viewing its free-to-air channels, 9Now and Stan as three platforms with one over-arching content strategy.

That strategy has helped Nine position itself as a “preferred partner” for major content production houses, as demonstrated in its recent deal with NBCUniversal.

Originally a free-to-air and BVOD deal covering content from the NBC, Bravo and E! networks for Nine and 9Now, the deal was recently expanded to include Stan and to pull in content from Sky Studios and NBCUniversal International Studios content. The deal includes shows from NBC’s recently launch AVOD and subscription service Peacock.

NBC is yet to announce if it will launch Peacock in Australia, with many industry pundits expecting it to follow HBO’s lead with its streaming platform HBO Max and maintain exclusive local content deals.

The move by Stan continues to highlight the competitive nature of international rights deals.

Stan’s loss of Disney and Marvel content was originally considered to be a killer blow to the service, however, continued deals with Showtime and Universal have helped maintain its customer appeal.

Despite this, the entry of yet another player with the library depth of a combined Viacom and CBS could cast further doubt on international rights deals.

The yet to be named ViacomCBS service, launching early next year, will end Stan’s ongoing access to new Showtime series, while existing shows such as Billions and Homeland will remain on the platform.

Marks says Nine’s breadth of video platforms will continue to strengthen its appeal as a major content partner.

“It's a pretty compelling proposition when we can come to the market with content acquisition money from different business units and combine them into one screen strategy,” Marks says.

Earlier this year, Guy Bisson of Ampere Research discussed the need for a greater AVOD evolution in Australia at the Future of TV Advertising forum.

He argued that the major television networks would be best suited to adopting a "Hulu-like" model over the next three years or lose footing to the likes of Netflix and other burgeoning streaming giants.

Hulu is an American subscription video on demand service fully controlled and majority-owned by Disney, which serves as a TV aggregation platform covering most of America's major networks.

No fools here

When asked about the ACCC's digital platforms inquiry and Google's aggressive public information campaign to alert Australian users that their "free services" were "at risk", Marks was dismissive of the tech giant's "obvious tricks". 

This month Google launched a national campaign across its diverse consumer facing platforms, ‘warning’ Australians that their data was at risk.

Google, in an open letter from its local boss Mel Silva, said new government regulation would force digital platforms to hand over user data to “big news” businesses.

Many responded to the open letter as a “cynical ploy” and “fearmongering”.

Marks told Mi3 he wasn’t concerned over Google’s move to go to consumers directly, which has gone into more detail since its first open letter. He says Australian consumers “aren’t silly enough" to fall for “Google’s obvious tricks”.

“By no stretch of imagination do I think Australian consumers are going to believe what Google is pushing out at the moment,” Mark says.

“Journalism and quality news have always been valued in this market and will continue to do so, which is why Google will remain the lesser service when it comes to this matter.

“Australian’s value transparency and honesty, so I would encourage those digital players to recognise this and embrace the code process so we can all move forward.”

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Josh McDonnell

Senior Writer

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