Channel Ten says its industry is "under severe duress" and it may report annual losses of $30 million for this financial year if the government does not cut licence fees urgently.
Ten issued a profit warning on Thursday, saying it expects to see a half-year loss "of up to $5 million" due to the weak advertising market and increased content and other costs. Its half-year does not end until February 28 and includes the successful Big Bash Cricket season.
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"This industry is obviously under severe duress and yet commercial free-to-air television broadcasters continue to be penalised by the world's most expensive broadcast licence fees," chief executive Paul Anderson told the market.
Ten's shares were down 3 per cent to 87¢ during trading.
A spokeswoman for Communications Minister Mitch Fifield said the government understands broadcasters are under pressure as a result of technological change and global competition.
"The government cut broadcast licence fees in the last budget and is examining whether further relief can be offered, in the context of the many demands on the budget," she told Fairfax Media.
Late on Thursday afternoon industry peak body Free TV Australia said chief executive Brett Savill has quit after just four months in the role.
"I have formed the view that the role is not the right fit for me and I believe it is the right thing to do to step aside now so that FreeTV can pursue its agenda under a new leader," Mr Savill said.
Free TV Australia chairman Harold Mitchell said he was disappointed the appointment had not worked out.
Meanwhile, metro television ad bookings fell 4.7 per cent in January compared to last year, according to Standard Media Index.
Media buying agencies say advertisers want to pay for the size of the audience reached, so networks can still charge high prices for ads on blockbuster shows. But this means advertising prices fluctuate wildly.
What we know from each of the networks making statements to the market is that the [advertising] market is short and terribly tight.
Managing director at Fusion Strategy, Steve Allen
And prices in general have dropped as television competes against online advertising. A 30-second ad during prime time cost about $60,000 five years ago, but has now dropped to roughly $50,000 this year.
A day before Ten's profit warning Seven West Media revealed a 90 per cent drop in first-half earnings, and 30 per cent decline in underlying profit. Analysts are now expecting its full-year pre-tax earnings to be down 22 per cent, 2 percentage points more than the company predicts. Seven's shares dropped 6 per cent to 73¢, but inched back to 75¢ on Thursday.
Nine Entertainment Company is due to report its half-year results on February 23.
Deutsche Bank analyst Entcho Raykovski said Seven's revenues of $906 million were about $21 million less than he expected. He believes the decision to halve the interim dividend – from 4¢ to 2¢ – was made to preserve the balance sheet. Mr Raykovski has a "sell" rating on Seven with a target price of 70¢.
Seven talked up its share of the advertising market, saying it had managed to increase ad sales.
UBS analyst Eric Choi is sceptical Seven will see a better advertising market.
"[Seven] noted that guidance was based on "current visibility", we are however more cautious on the outlook," Mr Choi wrote in a note to clients. He said advertising during Easter was weak in previous years and May and June in 2016 were strong because of the long federal election lead-up.
"We therefore forecast a -4 per cent decline in FY17 TV ad market revenues, implying a -3.4 per cent decline in second half of 2016-17."
Managing director at Fusion Strategy, Steve Allen, said Free TV Australia used to publish July to December advertising revenue data on January 28. The January to June 2016 data showed national revenue was down 4.3 per cent to $1.7 billion. (Ten years ago networks collected the equivalent of $2 billion in the first half). Mr Allen suspects when the July to December numbers are finally released it it will show another 4 or 5 per cent decline in revenue.
"What we know from each of the networks making statements to the market is that the [advertising] market is short and terribly tight," Mr Allen told Fairfax Media.
As revenues decline, networks will have to keep cutting costs, but have managed to do that without cutting program quality too badly, he added.
Commercial network advertising revenue data should be released within weeks by Think TV, a new industry body launched to encourage advertisers back to television.
The new data is likely to include advertising revenue from Foxtel and Multi Channel Network as well as the three commercial networks.
"In the first half of 2016 ThinkTV will release further tranches of the Ebiquity payback study and world-first research by globally renowned independent academics at Media Intelligence Co, some of which will address the multiple measures on which TV advertising is unbeatably effective," ThinkTV's chief executive Kim Portrate said.
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