What you need to know:

• Nine has 7.5 million active and inactive users on its books for Stan. CEO Mike Sneesby says it will use its base of inactive customers to out-compete rivals with lower customer cost-per-acquisition outlays. “If it gets tough for a while, it's going to be great for Stan versus the rest of the market,” Sneesby told Mi3.
• After the media company’s FY22 results last week – Nine’s revenues rose 15 per cent to $2.7bn, net profit up 35 per cent to $373.5m – Sneesby said the group was continuing to decouple itself from the advertising market, which is the “biggest variable” for its future performance.
• Nine Chief Sales Officer Michael Stephenson said Nine's people-based marketing initiative, announced first with Adobe two years ago and now covering identity alliances with Salesforce, LiveRamp and Karlsgate, had delivered a "slower start than I would have hoped" but suggested the next 12 months would see better market take-up.
• Nine was also set to overhaul its market approach to advertising attention metrics, looking to deliver more frequent data than a point-in-time benchmark on attention levels to its ads across different screens and formats.        
• 9Now was a key focus for investment to improve the user experience and ensure audience growth to offset linear viewing declines. A reskinned 9Now, further investment in the publishing division and new ad products are expected to be unveiled at Nine's upfronts presentation next month. 

Nine will leverage 7.5 million current and former Stan subscribers to give it a boost against rivals in the streaming wars, reducing acquisition costs as users cut spending and their repertoire of subscription services, said CEO Mike Sneesby.

In an increasingly crowded market and ahead of economic headwinds, Sneesby, a former CEO of Stan, is confident Nine has an edge on newcomers.

“Everyone rolls up and looks at a number of brands on a piece of paper and says, ‘there's all these streaming service in market’,” Sneesby told Mi3 after the company’s results presentation on Thursday.

“[Stan has] significantly greater scale than the other players in terms of its financial position when you're looking at the new entrants coming into the market. In addition to that, because it started in 2015, Stan has over 7.5 million accounts on the platform with credit cards. And that means that over time, our cost per acquisition of subscribers, our ability to communicate directly with subscribers based on knowing what they've watched on our platform, is greater than any of the platforms that have entered the market recently… We've got a significant advantage when it comes to a cost per acquisition. So if it gets tough for a while, it's going to be great for Stan versus the rest of the market.”

Nine reported flat subscriber numbers for Stan, at 2.5 million despite 150 per cent growth in Stan Sport subscribers. This is a period of correction, Sneesby said, rather than a looming warning of things to come.

“We went through a pretty solid period of exceptional growth in the SVOD space... And what the major players also said in terms of commentary was, at the back end of this – just purely through the mathematics of how it works with subscriptions and lifetime, we're going to expect to see a level of consolidation in terms of subscriber growth for a period of time. That's exactly what we've seen today,” he said.  

“It's very difficult to try and decouple economic impacts and pressure on the consumer wallet from that factor, and I think it's fair to say you're probably seeing a bit of that in the numbers.”

Big and bigger IDs

Three months after News Corp announced it had eclipsed Nine with 16 million detailed IDs on its group-wide audience base, Nine said it had 20 million logged in users across its digital TV, publishing and radio assets although active users each month was about 10 million. Stephenson said the caveat on the 20 million was that some did not have "substantial subscriber data" but had registered with emails to access content across different parts of the group. The publishing division, for instance, has enforced sign-in to its mastheads after reading one story per month although they do no have to pay. The radio group now had 20 per cent of its audience signed in and using digital streams.

"16 million people are coming to Nine digital properties every single month," said Stephenson. "Of those 20 million signed in users, about half of them are coming back on a monthly basis but some of the 16 million aren't signed in because they're going to nine.com.au," he admitted.

"But all those log-in initiatives have combined to grow that first party data asset. One of the things that we've been really conscious of communicating is that 20 million is fine but that kind of gets you the seat at the table. What is important is ... how often can we get those people to come back so that we can increase our daily active and monthly active users? And then what do we understand about these people?"

Stephenson said Nine's broad sweep of IDs and single user sign-ins across the group's assets contrasts with Seven's narrower play with 7Plus.

"With us, if they're consuming 9Now, if they're listening to 2GB or 3AW, reading The Sydney Morning Herald, The Age, The Financial Review, if they're searching for homes on Domain etc., we're creating billions of data points that create rich segmentation for us to deliver more targeted advertising and be able to do that at scale, because of those 20 million IDs," said Stephenson. He claimed circa 4.2 million logged in users are using 9Now each month with the rest coming from Nine's other business units in publishing, radio and real estate.    

People-based marketing slow

Nine was the early mover among local media companies in identity-fuelled people-based marketing, forcing audiences to sign-up and log-in with personal details for content in its attempt to counter advertiser budgets pouring into Google and Facebook which boast detailed user profiles. Despite Nine's progress with building a large, known audience database, Stephenson told Mi3 two years after announcing the initiative, market progress had been slow. Nine's initially launched "Audience Match" capabilities via a deal with Adobe but it has since inked ID alliances for targeting with Salesforce, LiveRamp and Karlsgate. 

"What we misread was the amount of work that would be required with brands – marketers and agencies – to help us collectively understand how they could use this product and how it would fit within everything else that they were doing," Stephenson said. 

"As a result of that, we did get off to a slower start than I would have liked. First party data is the currency of the future: being in all of the (ID) platforms and being easy to buy is critical – and we're there," he added. However, "the take up from advertisers has not been what I expected. I think we were a little bit ahead of the curve. We're now in a good space and I think the next twelve months are going to be really interesting."

Attention seeking 

Nine was also early in the market swing to advertising attention metrics, designed to determine the level of attention - if any - being paid to ads rather than whether they are just delivered as an "opportunity to see".

It was the first major media group here to conduct and release its attention findings earlier this year with Amplified Intelligence on the differing active and passive ad attention levels between linear TV, BVOD and mobile but Stephenson said Nine was now working on a more advanced approach to attention beyond the one-off benchmark study.

"We are doing a lot of work in the background at the moment on attention," he said. "There's no point me just telling somebody that at a point in time, when we did this really unique piece of research, this is what we found. That's an interesting piece of information but the next question is, 'So what? What do I do with that?'."

He said Nine is now working on the answers in terms of "meaningful products" for advertisers. 

"There is absolutely no doubt that attention is going to be a critical part of the narrative that we have in market. We've done a tranche of research which is at a fairly granular level. It's giving us real insight into areas of our schedule where people are paying higher attention to our high levels of engagement that potentially advertisers are not taking advantage of today. That's an interesting insight but for it to be meaningful for advertisers, you need to start to create an ongoing measurement. There's a lot of work that we're doing in the background to understand what that might mean and how can we create products for advertisers."

Group results

Nine’s total revenue was $2.689 billion in FY2022, up 15 per cent year-on-year from $2.332bn. Group earnings before tax and indexation (EBITDA) were $700.7m, up 24 per cent. Net profit after tax was $373.5m, up 35 per cent.

The graph below outlines the revenue and earnings each division contributed to Nine’s bottom line.

Nine’s “biggest variable” in predicting its future performance is the advertising market, Sneesby told analysts at its results presentation. Which is why it is decoupling its revenue from purely advertising and adding subscriptions and licensing sources.

“The decoupling of a large part of our revenue streams gives us greater confidence at this point in the cycle versus prior years,” he said. “It is the advertising cycle that is probably the biggest variable in where we end up.”

Likewise, Nine has been increasing its revenue from digital sources – 9Now, Stan and digital elements of Domain and Publishing, for example. They have grown from 29 per cent of group revenue in 2020 to 43 per cent in 2022.

Linear TV

Nine’s free-to-air broadcast remains the largest single slice of its revenue, with $1.119bn – up 7 per cent year-on-year. It reported $285m in EBITDA, an increase of 14 per cent and Nine’s highest ever free-to-air profit.

Total Television, which combines free-to-air and the network’s broadcast video on-demand (BVOD) platform, 9NOW, accounted for $1.270bn.

BVOD is a growth engine for Nine, but it is still a fraction of the overall television or broadcast revenue – 9Now earned $151m for Nine, up 41 per cent from $107.1m last year.

In a Total Television market that rose 12 per cent year-on-year, Nine rose 7 per cent. In a BVOD market that rose 47 per cent, 9Now rose 41 per cent.

Sneesby and Stephenson said the network would invest more over the next year in improving the experience on 9Now – including its advertising experience, which was criticised by major advertisers earlier this year.

“Alongside content, a key part of what we're projecting in cost increase is included in content, marketing, product and technology - all associated with 9Now,” Sneesby said.

“And the reason for that, particularly in product and technology, is we've made a number of investments which will continue to make into 2023, which are designed to make 9Now an absolute premium experience.”

Streaming

Stan increased revenue by 22 per cent to $381.2m in FY22. But more investment in both Stan Entertainment and Stan Sport cut into profits, which declined by 28 per cent to $28.5m.

There were more than 2.5 million active Stan subscribers, Sneesby said, but this was more or less the same figure reported in February’s half-yearly results.

“Over the year, we've grown subscribers at a point where a lot of businesses are either flat or backwards,” Sneesby added.

“We're expecting to see revenue growth and EBITDA growth into FY23. We also said that we're going to increase expenditure within the business over that period of time, but the rate at which that expenditure is increasing will be slowing. In other words, we won't grow costs next year at the same rate that we grew the last year.”

NBC Universal fight

Stan faces a bidding war, according to the Sydney Morning Herald, to renew its content deal with NBC Universal. Sneesby said the streaming service will invest in more originals if the deal doesn’t come through.

“Everyone assumes that there's going to be a mad fight for that… Stan's content supplies coming from over 60 different distributors. They just signed a new output deal with Sony. They've got output deals with Starz and Lionsgate and MGM and a range of other players. And their original content production next year will release 20 original titles, which is bigger in volume of releases than any major studio output deal can deliver to the platform,” Sneesby said.

“So the bottom line is, whether Stan renews or doesn't renew any output deal isn't a function of whether we win or lose. It's a function of whether we think the numbers make sense. If the numbers make sense, we have to go ahead with it. If they don't, we'll just make more originals. We are operating in a business that's approaching $400 million of runway. It's profitable. It's making 20 shows a year, shows that have got budgets of $20 to $30 million a year. This isn't 2015 anymore and we're not sitting on 500,000 subs. It's a profitable business, it's been profitable for three years … They have de-risked their dependency on any one output deal.”

Publishing

Nine’s publishing business, which includes the metro mastheads, nine.com.au, Pedestrian Group and Drive, increased its revenue by 18 per cent to $593.5m and earnings by 53 per cent to $179.5m. Digital revenues accounted for 60 per cent of publishing, with print subscriptions and advertising both dropping by 6 per cent.

Radio

Nine Radio, which includes 2GB, 3AW, 4BC, and 6PR, brought in $102.4m in revenue in FY22, up 13 per cent year-on-year. Earnings rose 81 per cent in the radio division, to $15.2m. In a radio market that grew 10 per cent, Nine Radio rose 13 per cent.