Investment implications
The great switcheroo from audiences that watch linear TV versus those who prefer subscription viewing continues to hurt traditional commercial television revenue. Nine Entertainment’s TV audiences remain strong, but the shift of advertising away from linear TV has not yet finished.
The only good news from Nine’s trading update was the implication that if Nine is doing it tough on TV advertising, then given its audience leadership, its competitors must be doing worse. In the case of the Ten Network, we still see a real possibility its new owners may hand back the broadcast licence, shuffling what is left of linear commercial TV advertising into two networks.
Growth in subscription services
The growth in Nine’s subscription businesses, including TV, is performing well. Stan subscriber growth has held up post-Olympics and Nine expects the financial year 2025 to show average revenue per user growth despite higher costs.
Challenges in total TV market
The underlying total TV remains challenging, in Nine’s words. The second quarter of 2025 is reverting to the decline rate in the financial year 2024 (about -10% on the previous corresponding period) with no tangible signs of improvement. With total TV down by that much, we believe linear TV is down by more, perhaps -13% – a degradation from the -7% seen in the first quarter of 2025 which was boosted by the Olympics.
In aggregate, we estimate that the first half of 2025 linear TV market revenue will be about -27% compared to the first half of 2022.
Cost management and operational adjustments
We expect Nine may have more work to do on its cost base given the extensive decline in advertising TV revenue. A key element of this will be the cost of content for subscription service businesses.