Tuesday, November 19, 2019
Home / Interviews / Nine’s Hugh Marks

Nine’s Hugh Marks

Not long after the Australian government axed cross-media ownership laws in late 2017, Peter Costello, the chairman of Nine, placed a phone call to Nick Falloon at the historic newspaper publishing group Fairfax Media. The two businesses had collaborated in the past, teaming to launch the SVOD service Stan. Costello proposed a deeper alliance, one that would create Australia’s largest locally owned media company. Announced in late July 2018, the A$4 billion ($2.7 billion) merger was a done deal by the end of the year. Hugh Marks, who had served as CEO of Nine since 2015, was tapped to lead the newly combined company. The new Nine is already seeing the benefits, reporting improved fiscal 2019 revenues of A$1.8 billion ($1.2 billion), with a net profit after tax that was up 19 percent to A$187 million ($127 million).

The company’s operations span television, video on demand, print, digital, radio and real-estate classified ads. Its assets include the Nine Network, which has been driving ratings with its mix of news and current affairs, including the flagship 60 Minutes; coverage of marquee sporting events; format-based entertainment shows like Love Island Australia, Married at First Sight and LEGO Masters; and domestic and imported drama series. Nine’s channel portfolio also includes 9Go!, targeted at viewers 16 to 39; 9Gem, for women 35-plus; and the lifestyle and reality channel 9Life. Content from all of those channels is made available on the AVOD streaming service 9Now. The SVOD platform Stan caters to its discerning customer base—which stands at about 1.7 million subscribers—with high-end originals like Bloom and a broad array of imports. The publishing division, meanwhile, is home to the Sydney Morning Herald, The Age and the Australian Financial Review, while the digital portfolio includes 9Honey and CarAdvice, among others.

Across its bouquet of ad-supported platforms, Nine is offering brand partners 360-degree campaigns, with an emphasis on delivering high-end, impactful ad formats backed by data and insights. Indeed, as Marks tells World Screen, one of the key benefits of the merger has been the integration of data from across Nine’s portfolio of touchpoints. Marks has worked across the broadcast, production and distribution sides of the business—he previously served as director of Nine Films & Television and as CEO of Southern Star Group. Now, he is tapping into his two decades of experience in the media industry to make sure that Nine continues to reimagine how Australians access entertainment, news and information. He tells World Screen about his priorities for the group in the years ahead.

WS: What was the rationale behind the Fairfax Media and Nine merger?
MARKS: For us as a business, we need to recognize that media is changing, television is changing, how people define television is changing. Netflix is television to me. We need to take advantage of the assets we have—broad reach, audience scale, the ability to market. But we also need to continue to drive the business to have a greater proportion of its earnings exposed to where audiences are, with higher growth, as opposed to where audiences are slowly fragmenting. [Before the merger] 85 percent of our earnings were from broadcast and 15 percent from digital. By next year 50 percent of our earnings will be from broadcast. That’s not because broadcast will decline in earnings, but because we’ll have these other growth assets: long-form video, subscription video, digital subscriptions for publishing and classified sites. That mix looks a lot better, and that enables us to have the confidence to continue to invest in whatever new [businesses] we’ll add to that mix.

WS: Do Australian shows continue to drive your broadcast television ratings? What role do acquisitions play for Nine?
MARKS: What’s changed in the way we look at our business is, we’re a content business. We have all these platforms, broadcast and digital video, but we’re essentially a content business. If I go back to my old days at Southern Star, how a distributor worked was, you created some IP, and you sold it to a broadcaster, but the money was in the distribution of other rights. In those days it was international and windowing, and now digital video is another extension of that. That was the business model. As a broadcaster, you made money by building a schedule where you basically moved audiences early in the evening through to later in the evening. You might spend more money earlier in the evening, but you might make it later in the evening through a low-priced acquisition. That’s how you made money. That part of the business is getting tougher. We do still get audience flow from one show to the next, but audiences are a lot more mobile. While they might love Married at First Sight, that doesn’t necessarily mean you’re going to retain 70 percent of that audience through whatever follows. You spend A$500,000 an hour here and A$5,000 an hour here. It’s a change in mentality, right? With local content, we can own the rights. As a broadcaster 20 years ago, I could only make money out of linear television. On a show like Married at First Sight, you make money out of linear television, but then it has a huge audience on-demand; it translates into a digital publishing environment and drives audiences there, and we can also put it up on social and make some incremental revenue there. So the revenue you can get from a local program, by virtue of controlling the rights, is much greater in today’s environment than it was ten years ago. It’s just changing your business model to reflect where audiences are. Overseas acquisitions still work for us; there’s still an audience for them, and the price of those rights in Australia has decreased over the years. We’ve also been able to decrease the volume we have to acquire, which is where we were really getting hit in the past. So you spend less [on acquisitions] and spend more on local, and everything you spend on local means you have that revenue opportunity that broadcasters didn’t have ten years ago.

WS: What about sports rights acquisitions?
MARKS: We’ve been very focused, in all of our sports deals, on ensuring that we have multiple window rights. In the Rugby League, we have the digital rights to the games that we hold. With tennis, we have all rights—free, pay, digital video, even social media for a certain period of time. So it’s the same theory: local content, audiences want to engage. There’s a higher percentage of your audience on free-to-air linear, but there are still incremental audiences watching on streaming, catch-up, clips, whatever it may be. If we can monetize that, then again it’s the same experience as other local content. News is the same. It’s harder to do, but if we can find a way to negotiate an outcome with platforms like Facebook and even Google, where we embrace the platform in return for a fair revenue proposition, then we can make more money out of news content. So don’t limit your thinking to your linear broadcaster. You have to change your thinking to [be focused on] the distribution of content.

WS: What’s working for Stan, especially against stiff competition from the global streaming giants?
MARKS: It has a differentiated content offering. If audiences are starting to love the on-demand nature of the viewing experience, and you can offer them a sufficiently good value proposition in terms of the content they can access, then you can build a service. We have the ability to market through our assets. That’s a huge advantage. And again, using the relationships we’ve had with international content supply partners for many years, we’re just repackaging what we used to buy for free to air on SVOD, marketed well with a clear proposition and never discounted. It’s a good value proposition. And it’s been successful. Stan went into profitability in March. So, from this point on, we will see that business continue to grow. We have a lot of long-term content relationships; we have some short-term ones. There is a lot of content available on the market.

WS: The Hollywood studios are all preparing their own direct-to-consumer services. As a broadcast and digital platform operator, are you concerned about how much content will be available for you to acquire?
MARKS: We’ve built an asset in Stan that is a good point of access to the Australian market for companies like Disney. Disney in and of itself is great family entertainment. Hulu in the States is the general-entertainment proposition. If you take that to the Australian marketplace, there’s a great family audience there that will be very interested in Disney and Disney+, but actually the scale of the market is challenged—there are only 24 million people. How do you turn that into not just a family proposition but a broader entertainment proposition, so you can access a wider audience as part of the service? If you just access the family, you only get so far. We’ll discuss with all of those players what their best options are in the Australian marketplace. And because we have a good broadcast business, a good AVOD business and a good SVOD business, we’re in a position to be able to do that.

WS: How has the advertising market been?
MARKS: The free-to-air market has been soft in the last 12 months. There are a range of factors behind that. The housing decline dented consumer confidence—that hits a lot of consumer businesses that are generally big advertisers on free to air. Through the success of our programming, we have been able to acquire share through this period. The market is changing, and the share dynamics are changing. That might be a long-term shift. We’ve been able to hold our revenue position by growing share. The rest of the economy is going OK. There’s no great recessionary environment. There is a lot of cyclical stuff in the market at the moment. How much is structural? There is always going to be a structural impact through audience fragmentation. That just means your cost per thousand to the advertiser is going up. We’ve changed our model so we’re pitching much more of a return on investment model than a CPM sales model. We don’t do this with every advertiser, and we don’t do this in every situation, but we’re able to go to market and say, here’s how we can build a marketing platform for you across all of our assets. And hopefully, we can get a greater share of wallet as a result. There are plenty of examples post-merger where that is absolutely happening.

WS: What ad formats do you see working well for your advertising partners? Is the 30-second spot still viable?
MARKS: The 30-second spots still work, and in digital video, they are brilliant. We’ve seen some great executions this year. That’s one of the things we’re pushing as well. We’ve had to up our game creatively to attract audiences, and marketing is the same—up your game on the creative, and make sure you get it right, because that’s a very important part of the dynamic. We’ve seen more interest in integration and brands in context in the programs we create. So you’re buying spots, you’re buying integration, you’re buying some other content. That association with our content has really grown over the last few years. And we’ve focused a lot on that.

WS: On the programming side, what have been some of the key ratings drivers?
MARKS: News and current affairs is always very important; it’s the backbone of our schedule and often still the number one show on any given night. That’s probably a third [of our content budget]. Sports is still incredibly important for free-to-air television. Again, probably a third of our expenditure, maybe it’s a bit less. That enables you to have those big advertiser relationships and consistent delivery of audiences. And then there’s entertainment. The model is changing a bit, depending on the nature of the show. Reality television is very much a here-and-now advertiser proposition. Scripted has had more of a challenge in the Australian marketplace, part creatively and part platform-wise. But if I look at scripted going forward, and I look at our results, probably a third of the audience is now on-demand. That audience will be there for five, six, seven years, so you have to change the way you think about how you fund different sorts of programming to reflect that different revenue model. The audience still wants local scripted programming. We just have to change the way we think about the sorts of shows we commission, recognizing that audiences consume them differently, so how do you finance that? We’ve got some good models coming up. We have a remake, Halifax: Retribution, with a much bigger budget; it will be over A$2 million an hour, which is big for an Australian production. Again, we’re able to attract money from the international market now because there are more buyers internationally. Every little bit is changing, but the mix probably won’t change: news, sports and entertainment.

WS: Where do local companies fit into a landscape that is increasingly dominated by the FAANGs and the global majors?
MARKS: There is still a role for the aggregator. We have guaranteed revenue streams from multiple platforms—how do we take advantage of that to build long-term relationships with big suppliers? We can say, Don’t worry about Australia—here’s a big check. It’s a long-term check, because you can see that we’re changing our business so it is sustainable. How else do we build on that partnership? What else can we provide to you as part of that partnership? We made the decision long ago with our digital assets that you had to sign in to watch anything on Nine’s sites—that means we have a growing user database. And now, with the Fairfax merger, we have a database through Domain, through Stan, through Nine. We’re going through a big data unification project. The way distribution has changed means that as a small player, you can access a niche audience. We have to be able to show suppliers that we’re a better route to market than you necessarily trying to do that yourself.

WS: Are you happy with the audience measurement systems in use in Australia?
MARKS: There’s a new ratings system being released by OzTAM, Virtual Australia (VOZ), that will combine linear viewing with digital viewing of television shows. You’ll be able to receive one audience number. That will be revolutionary in how we deal with advertisers.

WS: How is your own data integration process going? And how will you be using that data?
MARKS: To be able to say, We used to sell you people 25 to 54, and now we’re going to sell you auto intenders—that’s a pretty powerful shift in your advertising relationship. We’ll have a lot of places where we have digital audiences and can identify that targeting outcome. And with the VOZ panel, we’ll be able to know, for all of our shows, a demographic. If Married at First Sight is watched a lot on-demand, the composition of that [digital] audience is relatively reflective of what your linear audience is. So we’ll be able to sell Married at First Sight as high-performing with home renovators or auto intenders, fast-moving-consumer-goods intenders, whatever it may be. As an advertiser, you get a better, more efficient outcome.

WS: What are your other major priorities in the year ahead?
MARKS: The other thing we have to do is dispose of some non-core assets. We are in the process of doing that. And we’re focusing on who our strategic partners will be. We’re naïve to think we can do it by ourselves in this changing market. Those are two big priorities.











About Mansha Daswani

Mansha Daswani is the editor and associate publisher of World Screen. She can be reached on [email protected]

ALSO READ

NATPE Adds Five New Execs to Board

In advance of its flagship conference and marketplace, NATPE has elected five new members to its board of directors, including Louise Pedersen, CEO of all3media international.