What you need to know:

• Landing the largest national share for the TV ratings year, Warburton said it still matters – because the money tends to follow that metric.
• Seven is late going into negotiations with buyers for 2023 due to OzTam’s misreporting of numbers in Sydney for 94 days, with some show ratings down 20 per cent as a result, per Warburton.
• While some buyers have indicated they may hold back a record amount of spend in the hope of picking up better short-notice deals in a soft market, Warburton thinks that will likely backfire. “It very, very rarely works.”
• He said Seven has the balance sheet strength for acquisition – but is in no rush. “The market’s not going anywhere.”
• A streaming deal remains on the table. Potentially an AVOD deal with a multinational too. Warburton rejects conjecture that Foxtel had a hand in crimping its Peacock deal with NBCU.
• AFL premium – lower than some may think – is worth paying because it now includes digital rights, some 2 billion minutes of BVOD per season.

Numbers game

Seven CEO James Warburton has poured cold water on suggestions free-to-air TV networks will take a beating on rates next year after ad buying groups indicated they may hold back record amounts of upfront spend, betting on headwinds to force networks to drop prices. Seven is instead targeting modest rate gains of "probably" circa 1-3 per cent after winning bragging rights on total audiences for 2022. But that depends on getting customised bundles and "converged selling" right.

Warburton also scotched rumours that rival Foxtel – which like Seven also struck a content deal with NBCUniversal – had crimped Seven’s proposed streaming play with NBCU-owned Peacock. He suggested the broadcaster’s new channel, Bravo – which will house “the entire NBCU BVOD library” from 15 January following a reported $45m annual rights agreement – will fuel “significant” growth, while underpinning any further relationships with the American multinational.

Negotiations are ongoing and Warburton said Seven may also do a deal with a global partner for ad-funded streaming. “It’s all on the table. The promotional power of Seven is what will drive these things … that is where we make sense for what is now an extremely congested market.”

M&A ahead?

Warburton claimed Seven has the balance sheet for further M&A. Radio network HT&E has been mooted as a potential target while broadcasters may be tempted to relook at out of home, with QMS the most obvious buy. But he said the firm is in no hurry to force deals.

“The best thing we can do is continue to focus on the core. We have gone from a business that was troubled … to I think an incredibly strong position. So that [core] is our focus.” Should acquisition options arise, “there is no rush,” said Warburton. “It’s not like the market is going away.”

He pointed to the $130m deal for regional affiliate Prime, which took three attempts and five years before finally completing in January, as an example of the virtues of patience.

“It’s proved to be an absolute masterstroke in terms of the dominance of Seven as a national platform, the growth of Seven Plus in the regional markets … It turned out to be an incredibly cheap transaction for us, which has added significant upside to the business,” said Warburton, who dismissed competitor claims that Prime is delivering a lower power ratio than when owned independently: “They will do a 44 share in FY 23,” he claimed.

“So there's no rush [for M&A], the market is not going anywhere, and some of the other players don't necessarily have the options we have.”

While some suggest a deal for a major radio network could prove a stretch for shareholders, Warburton rules nothing out.

“We've restored the balance sheet to a point where we now have a number of options. If they make sense, we're open for business and we'll explore it.”

Size matters

While Nine and paramount-owned Ten have questioned the value of being the most watched network, suggesting TV is sold on demographics rather than the largest overall national audience, Warburton insisted being the biggest still matters. Why?

“Because if you look at the trend of revenue, you need to be number one in total people to be number one in revenue … That is the way the crown has always been handed out.”

Citing KPMG numbers of a 39.1 per cent total television share for FY22, Warburton said KPMG’s numbers suggest Seven has a 40.2 share for Q1 FY23, July to September. Meanwhile BVOD minutes climbed 16 per cent to 10.6bn year on year – and Warburton said revenue was in lock-step.

The network claimed new BVOD channel Bravo, aimed primarily at women under 50, would drive further audience and revenue, with Chief Content Officer Angus Ross forecasting 1.5 sharepoint gains over 2023.

Hence Warburton’s confidence that next year will be “business as usual” for Seven’s top line, despite some suggesting pain for linear TV across the piste.

Negs brinkmanship

Now deep in rate negotiations for next year, he said the network had been “holding off” closing some deals with buyers due to a problem with OzTam’s numbers midyear, which led to under-reporting for three months in Sydney, the largest metro market. “Some of them were under reported by 20 per cent,” said Warburton. “So we're later than we'd like to be on negotiations because of that data reprocessing issue,” with the correct data only circulating to buyers at the start of last week.

That means it “is too early to tell [whether fears of a first quarter crunch will materialise],” per Warburton. “The market is still relatively short, so we will finish off the year in the next couple of weeks.” Prior to Christmas, “we will need to have locked in a pretty fair proportion of the book”.

He said advertisers trying to upweight short-term spot markets by pulling back on upfront commitments – Omnicom Media Group chief Peter Horgan suggested the group may take that approach – could lose out.

“It’s all relative in terms of what your base is. But if you want to play the market, then you risk access – and that’s an interesting game,” said Warburton.

“None of that particularly worries us if that's the direction people take. Sometimes it works, sometimes it doesn't. I would have thought making commitments and locking down a ceiling always allows you to play the market if the market is short or weaker. If you try and float the market, it has very, very rarely worked,” said Warburton.

“So we'll see a lot of screaming when people can't get what they want. The more valuable parts of your inventory are becoming more and more valuable in terms of building reach, and they're the pieces of inventory that get sold first.”

BVOD marketplace

Plans to build a cross-network BVOD marketplace using the OzTam IDs as a common identifier to enable targeting and capped frequency buys across Seven, Nine and Ten via a programmatic BVOD marketplace remain live, per Warburton, following reports that it had been scuppered due to nervousness on the part of Ten parent Paramount. That led to months-long legal questions that now appear to be resolved.

“It’s still there. It’s just complex,” said Warburton, with OzTam already under huge pressure to hit the go-live date for VOZ in early February. “We’re now talking about measuring streaming, with things like Netflix [ad tier] coming, so there is an enormous amount of work going on, probably the most we have ever seen, going on behind the scenes at OzTam,” he added.

“The BVOD marketplace is just … complicated. It's taking more time than anyone probably envisaged, but I think there's strong appetite for it to exist.”

If Warburton were a betting man, would he back the BVOD marketplace to be in market next year?

“From a Seven perspective, we’re all in,” he said. “You’d have to ask the others.”

AFL payoff?

Rivals suggest Seven will have to recoup upwards of $50m additional annual cost after meeting the AFL’s hiked price for the next round of rights. Warburton indicated that figure is way off, with sources close to the business suggesting $20m annual additional expenditure is closer to the mark.

Warburton said any hike will ultimately pay off in terms of sellable audiences – because the rights include digital distribution.

“You have to remember, we built 7plus with essentially the only sporting rights being the Olympics and Supercars. Now we'll be in a position where we also have the AFL on 7plus and it's about 2 billion minutes a season. That’s a pretty substantial upweight.”