CEO - Television Review

Network Ten (TEN) has delivered on its core objectives in 2008 and demonstrated the resilience of its business model, despite the most difficult external environment faced by the sector in almost a decade.

Among our achievements this year, TEN is:

• broadening its prime time audience profile through compelling content aimed primarily at 18-49 year-olds, while retaining dominance in 16-39s*
• confirming its lead in daytime, where TEN is again number one in all key demographics
• successfully extending television brands to online and hand-held devices
• effectively containing TV cost growth, which in financial year 2008 was within four per cent, exclusive of selling costs, within management targets
• the only commercial network to gain share of advertising revenue in the first half of the calendar year

Financial Results

 

In the first three quarters of our financial year, TEN reported 7 per cent revenue and 13 per cent profit growth on the same period of 2007, and for the full year delivered operating margins of 25.3 per cent.

Fourth quarter comparables were affected by the absence of Federal Government spending, the anticipated impact of the Beijing Olympics, and the abrupt deterioration of the broader economic environment in the final quarter which saw a contraction in the advertising market.

TEN's pledge to contain full year television cost increases to within 5 per cent would have been challenging even without the US writers' strike. Yet we achieved that goal while continuing to invest in digital media; developing additional domestic content such as So You Think You Can Dance Australia; broadcasting the Rugby World Cup and Indian Premier League cricket; and launching our new digital channel, TEN-HD.

Programming And Ratings Performance

TEN's prime time focus on 18-49 year-olds, a highly attractive audience to advertisers, has delivered a competitive 32.8 per cent commercial share in the ratings year to date. We have also won our eighth consecutive year in 16-39s.

For the second year in a row, TEN leads in every key demographic between 9am and 5pm, Monday to Friday. We boast the three most-watched regular programs: Bold and the Beautiful, Judge Judy and Outback 8.

Our flair for big-event television remains unrivalled. Dance Australia – 2008's most successful new entertainment format – has raised the standard for Australian franchises with exceptionally high audience appeal, production values and advertiser engagement. The finales of Dance Australia and The Biggest Loser Australia are the top two non-Olympics/sporting programs of the year in 18-49.

The return of Dance Australia and The Biggest Loser Australia will be among the reasons TEN will start the 2009 ratings year with confidence.

As we develop and integrate new programs, others have naturally run their course. It was the right time to farewell Big Brother after a rewarding, and sometimes challenging, eight years. We have for some time been working to ensure the hours Big Brother occupied will be filled with fresh and exciting content.

This renewal process is supported by our new Australian initiatives, along with TEN's deepening pipeline of US content. Our proven US shows, including NCIS, House and the Law & Order franchise, have been renewed for full, and in several cases longer, seasons in 2009.

TEN's studio partners, 20th Century Fox Television and CBS Paramount International Television, are also providing increased volume and quality of new series this year. We expect to see a number of new series for 2009, and TEN is maintaining the policy, now emulated by other networks, of broadcasting the most-anticipated of these new series very close to their US air dates.

TEN is in an especially strong content position, and we look forward to 2009 as a year free of atypical TV events, unlike 2008.

Next year, TEN's daytime line-up will be further strengthened by The Doctors, a spin-off from the highly successful CBS Paramount series, Dr Phil, which launched strongly in the US and will provide us 260 episodes a year.

In sport, Network Ten will broadcast more than 1,100 hours across both the main channel and TEN-HD this year, a three-fold increase on 2007. That includes approximately 400 hours exclusive to TEN-HD, including NASCAR, NFL and premium Australian and international golf tournaments.

TEN started the financial year with the Rugby World Cup, which delivered incremental ratings and a strong profit margin. We secured the emerging global Indian Premier League (IPL) cricket franchise, which exceeded TEN's revenue and audience predictions. IPL's global success bodes well for the next four years of TEN's contract.

Highlights of TEN's seventh year as a principal AFL broadcaster include the Hall of Fame 150th year celebratory match which averaged 1.3 million viewers, becoming one of the highest-rating non-finals matches in AFL history. In 2009, the AFL Grand Final returns to TEN.

Our flourishing motorsport portfolio includes coverage of every round of MotoGP and Formula 1 along with TEN's flagship motorsport program RPM, now in its twelfth year, and the introduction of NASCAR to TEN-HD.

TEN's expanding golf coverage included 2008's opening two majors, the US Masters and US Open. TEN also carried exclusively on TEN-HD the Australian PGA Championship and the Ryder Cup along with the prestigious World Golf Championships.

We are well progressed in planning for the 2010 Commonwealth Games. As with the Rugby World Cup and IPL, these rights present a tactical opportunity to acquire a major event that will be ratings and margin positive.

With more than 30 hours of news and public affairs each week, TEN News remains a strong performer in off-peak and fringe prime time. News at Five, with its unsurpassed local news coverage, continues to dominate its timeslot and, as our commercial rivals continue to reduce their output, TEN now boasts the only late night national news service.

We have bolstered our international news coverage through a content supply agreement with ITN in the UK, adding to our exclusive arrangement with CBS. TEN also re-opened a London bureau for the first time in nearly 20 years and is now the only Australian commercial network with a Europe-based correspondent.

TEN is also the only commercial broadcaster to have a dedicated environment reporting unit ensuring comprehensive coverage of the critical issue of climate change. With Telstra we established the TEN News Environment Awards that each month recognise individuals and community groups working to preserve our planet.

The quality of our children's productions was again acknowledged this year when the BBC invited TEN to co-produce a children's factual series. Outback 8 debuted in September, combining the talent and resources of both broadcasters in an entirely new format for younger viewers. Also in partnership with the BBC we brought the internationally acclaimed Animalia to air in November. Our long-running Totally Wild is now produced from state-of-the-art facilities at TEN's Adelaide studios as well as from the children's production unit headquarters in Brisbane. And, in its fifth year our children's news service, ttn, is seen in classrooms across Australia.

Sales Achievements

TEN Sales continues to bring the network's powerful 18-49 story to market. TEN's broader appeal to viewers 'young and young at heart' remains one of the network's points of difference and a reason for clients to confidently invest in TEN.

TEN Sales is focused on maximising revenue market share commensurate with our audience delivery in the most advertiser-relevant demographics while ensuring our big entertainment franchises and sports events are fully monetised.

TEN Sales is also preparing for the exciting opportunity of deeply engaging more clients in a multitude of ways with new, soon-to-launch digital channels.

Digital Media Progress

TEN Digital Media is delivering an increasingly important component of our viewers' media mix through extensive video and unique content for web and hand-held devices. TEN sites enjoyed 35 per cent unique visitor growth during the financial year, as measured by Nielsen NetRatings. More than 10 programs now offer full episode, catch-up TV, and the dramatic increase in video views – along with web-only content – complements TEN's strong broadcast ratings. Television in tandem with online unambiguously drives more value for sponsors, particularly in the key measures of brand recall and propensity to act on advertisers' messages.

Among the many new sites TEN Digital Media launched this year, So You Think You Can Dance Australia was particularly successful. The website attracted more than 90,000 unique visitors per week during the broadcast season, and in excess of 200,000 video streams in just 12 weeks. Around two-thirds of users said the website drove them to watch more of the broadcast program. The site provided outstanding broadcast integration, with major sponsor Optus enjoying very high brand recall from both those who watched the program on television and used the website regularly.

Now that the platform is fully deployed, the Digital Media team is focused on leveraging that infrastructure; additional content will deliver greater audiences, while new tools and services will encourage users to spend more time with our sites and return more often.

TEN's digital presence is different to the other TV networks: it is program-focused, as opposed to portal-driven. TEN Digital also works with 'best of breed' partners and is not tied to a single technology provider.

Operational Achievements

2008 has been a watershed year in TEN's full transition to a digital architecture that supports both our current broadcast requirements and our multi-channelling strategy. This development enables two distinct transmission streams in each of our five markets – one standard definition (SD) signal and one high definition (HD) – local insertion of commercials, program promotions and community service announcements, plus 'clean' feeds to our regional affiliate. Progress is well advanced towards our third stream (SD) in line with Government legislation allowing TEN a further multi-channel in 2009.

We are in the final stages of deploying a content management system, enabling seamless and efficient file-based ingest and transfer of content across the network. As a result, TEN is able to present content in any form across our broadcast and digital media platforms, with videotape rapidly becoming obsolete. We have achieved this in the scalable, flexible and financially prudent manner for which TEN is known.

Multi-channel Future

Our digitised architecture allows TEN to fully explore all options to 'mine' our spectrum and effectively deploy our content to new channels. TEN has diligently explored numerous market and programming options to identify the most relevant, appealing and promising business model for future digital channels.

Multi-channelling offers free-to-air networks scope to more aggressively compete for viewers by offering diversified content on new channels. Next year, Australians will have nine commercial and potentially six Government-supported free television services.

In the lead up, Australia's free-to-air broadcasters have created Freeview to help Australians make the transition to digital TV and to educate, inform and excite the vast majority of people who wish to enjoy more compelling broadcast channels than ever before, for free.

By the end of 2007, 42 per cent of Australians were watching digital free-to-air television, and we know that figure has increased since then.

The greatest growth in take-up is coming from HD-capable sets, sales of which are currently increasing by approximately 80 per cent annually.

Free television is as strong and relevant as ever, and the Freeview platform will encourage people to spend even more time with us. TEN continues to take a leadership role within the industry to advocate our medium and demonstrate our confidence in its vibrant, promising future.

We are working with our broadcast, manufacturing and retail colleagues towards meeting the Government's target date to convert all Australians to digital TV viewing by December 2013.

Environment And Sustainability Initiatives

Among TEN's proudest achievements this year is the development and deployment of our environment strategy, 'Making Your Mark'. We took this step because of our responsibility to viewers, clients, suppliers, shareholders and employees to be both a successful and sustainable business.

We wanted to ensure our own house was in order before we went to market, and our staff enthusiastically embraced that mission. In the 12 months prior to announcing Making Your Mark, we made a number of changes to positively impact our carbon footprint and future emissions. These ranged from simple things – such as removing personal waste bins to encourage recycling – to installing energy efficient lighting and optimising air-conditioning systems to reduce demand.

We estimate our actions in the 2008 financial year will reduce TEN's electricity consumption from air-conditioning, lighting and equipment by 2.4 percent (5.13 percent on an annualised basis) and reduce emissions from waste by 7.48 percent, or 29.33 per cent on an annualised basis.

Ten Holdings' board has endorsed a corporate environment policy and, in a first among commercial free-to-air broadcasters, TEN has published an environment management plan. TEN is also the first national media company to join the Federal Government's Greenhouse Challenge Plus Program; is the first Australian commercial free-to-air broadcaster to commit to a greenhouse
gas emissions reduction goal (30 per cent on 2006/07 levels by 2020, to be reviewed in 2010); and we are participating in the Carbon Disclosure Project, the leading global index on corporate carbon profiles.

But practicing what we preach is only half the equation. We know that as a media entity, we can positively influence others. Across our schedule, TEN is increasing environmental content in our existing programs because they reach more people than a single, dedicated environmental program would. Our Making Your Mark long weekend in June reached almost 6 million people. We have also joined the 'Together' campaign to promote small actions Australians can take that together will make a big difference.

While the environment consistently ranks as the social issue our employees believe is most important, TEN's community engagement goes much further. We have actively developed a balanced portfolio of not-for-profit (NFP) causes, and regularly seek staff input to ensure our support program is aligned with employee values. TEN donates airtime, our talent and other resources to help NFPs advance their aims. National partners include CARE Australia, Camp Quality, the Australian Conservation Foundation and Cure Cancer. TEN also supports a variety of local NFPs in each of our capital city markets. TEN works proactively with these groups for, on average, two years to continually refresh our portfolio and ensure TEN's contribution is shared.

People

TEN is proud to be a dynamic workplace, full of talented people who are passionate about the business of broadcasting and digital media. To ensure that remains the case, we've further strengthened our 'Achieve' performance management framework with intensive Achieve workshops for managers, delivered in partnership with the National Institute for Dramatic Arts (NIDA), to enhance coaching skills and improve the quality of feedback we offer employees.

This year we also introduced a reward and recognition program in response to employee feedback. 'Shout!' gives employees the opportunity to acknowledge and celebrate the efforts of colleagues who contribute to TEN's success. To date we've received more than 2,500 nominations for a Shout! award, 120 employees have received a monthly Shout! prize, and one employee has been awarded an overseas holiday. Shout! underscores TEN's acknowledgement that all our achievements stem from the efforts and determination of our employees.
I offer all our staff and shareholders my thanks for your continued support for and confidence in TEN. We look forward to delivering even further in 2009.

Grant Blackley / Chief Executive Officer - Television

*All ratings data supplied by OzTAM. Survey weeks 7-41, 2008 excluding Easter and Olympics. Metro commercial prime time (1800-2230, Sun-Sat) / daytime (0900-1700, Mon-Fri) share.