the story so far in Australian broadcasting: the Nine network is fighting hard to regain its ratings crown after losing to Seven in 2007; pay-TV viewing is growing at the expense of the free-to-air broadcasters; and most sections of the media, except online, are having to contend with the slowing Australian economy. The highest interest rates since 1996 and record fuel prices have combined to push consumer confidence to a 16-year low. That’s been reflected in a 15 percent slump in metropolitan TV ad revenues in the first half of 2008; some 550 lay-offs at publisher, radio broadcaster and TV producer/distributor Fairfax Media; and a plummeting stock market. “The economy is biting hard,” says media analyst Peter Cox. “The free-to-airs are in a panic mode: they’re losing advertisers and viewing hours to pay-TV and online. And while online spending is growing, that doesn’t totally replace the revenue that’s been lost.” In August, Goldman Sachs JBWere Investment Research warned, “We are cautious on cyclical Australian media stocks for two key reasons: significant earnings risk, and structural headwinds” such as audience fragmentation. “Consumers are enjoying new technologies (e.g. broadband, 3G mobile) and new forms of leisure (e.g. gaming) which are fragmenting media consumption,” the broker said. “However, despite these risks, Australian media stocks are not trading at historical floor valuations and are trading at a significant premium to global media stocks.” Another broker, ABN Amro Equities, has downgraded its outlook for the total TV ad market in the fiscal year ending June 2009, predicting it will decline by 3 percent. This year the Nine network led by chief executive David Gyngell has programmed aggressively to regain momentum after a calamitous 2007, when Seven won 38 of the 40 weeks in the official ratings in total viewers and all 40 weeks in the 25-54 demographic. Also, Seven was the victor in 27 weeks in Ten’s target demo of 18-49. Through mid-2008, Nine held a narrow lead in primetime across the 5-city metro markets, with a 36.1 percent share of total people among the commercial networks (up 2.6 percent), with Seven at 35.8 percent (down 4.0 percent) and Ten at 28 percent (up 2.1 percent). Boosted by hits such as Aussie crime drama Underbelly, Ramsay’s Kitchen Nightmares and Domestic Blitz, a lifestyle/renovation series that combines house and garden makeovers with personal style overhauls for deserving families, Nine had a 35.6 percent share in the 25-54 demo, (a jump of 7.4 percent), with Seven at 33.9 percent (down 8.2 percent) and Ten 30.5 percent (up 1.9 percent). “What these figures say is that Nine has made a good start on its rebuilding, and is very much back in the game, thanks to the strong support and loyalty of our viewers and our clients,” said Gyngell, who returned to the helm in November 2007 after running Granada America. “The challenging task ahead is to consolidate this strong first half growth,” added the exec, pinning his hopes on a bunch of new series including FremantleMedia’s game show Hole in the Wall and The Strip, a cop show set on Queensland’s Gold Coast, and a second helping of The Chopping Block. Even so, while acknowledging Nine’s ratings had improved, ABN Amro stated, “We don’t expect this to translate into market share in any meaningful way until 2009.” In June, that broker controversially valued the 25 percent stake in Nine’s parent PBL Media held by James Packer’s Consolidated Media Holdings (CMH) at zero, due to “weak operating metrics, high debt and minimal visibility”. Packer sold 75 percent of PBL Media, which also houses ACP magazines and stakes in dominant pay-TV group Foxtel, Fox Sports and ninemsn, to private equity group CVC Capital Partners, for about $A3.4 billion (US$2.8 billion). Rupert Murdoch’s son Lachlan hatched a deal with Packer to buy CMH but the deal fell over in April when Lachlan couldn’t raise the private equity he needed to finance his share of the bid and Packer decided he wanted to reduce his stake in the joint venture to 25 percent. In the first 25 weeks of the ratings year, excluding the Olympics when Seven dominated, Seven led the field in 12 weeks and Nine won 10, with one week tied between the two. Seven’s mantra has long been that it’s not obsessed with finishing at No. 1 but building its market share, revenues and profits. “We focus on growing hit shows and that has worked really well for us,” said Tim Worner, Seven’s Director of Programming and Production. “We have certainly continued to do that this year and we started five or six new ones out the back of the Olympics,” he added, referring to family drama Packed to the Rafters, factual series Find My Family and new seasons of City Homicide and Dancing with the Stars. Network Ten’s 5-city metro primetime audience in 25-54 slipped by 1.9 percent in the year to mid-August, excluding Easter and the Olympics. Network Head of Programming Beverly McGarvey is confident the broadcaster can more than make up the lost ground with Australian Idol, new Aussie series such as Rush, Kenny’s World and Bondi Rescue: Bali, and the new seasons of House and NCIS. In June, Ten flagged that its TV earnings would fall by 10 percent in the 2008 fiscal year. Asked if the economic downturn would have any impact on its programming budget, McGarvey said, “Not really. We have relatively fixed costs with our long-term output deals and Australian drama quota. You can’t make massive amounts of changes without hurting the schedule, which we will not do.” Collectively, the share of viewing of free-to-air networks is continually under attack from subscription TV. TV viewing in the five capital city metro markets in first 25 weeks of calendar 2008 was up by a slim 1.4 percent on last year and just 1 percent in prime-time, according to OzTAM. Free-to-air viewing inched up by 0.5 percent in overall viewing, while STV showed a healthy 4.7 percent gain. As of June 2008, Foxtel had 1.54 million subscribers, up 6.7 percent on the prior year but down from the double-digit increases of the past few years. Foxtel CEO Kim Williams attributed the lower growth rate to “consumer caution” amid the economic downturn, but said he remained optimistic, particularly as the firm plans to double the number of HD channels in the next 18 months and to introduce a broadband download service in early 2009. Rural and regional satcaster Austar had 678,200 subscribers as of March 2008. Media Partners Asia forecasts the STV universe will grow by 9 percent to 2.3 million subs by end 2008, up from 2.1 million at the end of 2007. Foxtel launched its HD service in June, initially offering five channels: BBC HD, Discovery HD, National Geographic Channel HD, Fox Sports HD and ESPN HD. And it offered an enhanced version of its PVR, monikered Foxtel iQ2. TiVo belatedly made its debut in Oz in late July in a joint venture with the Seven Media Group. Priced at $582, TiVo isn’t tied to a subscription plan, unlike the Foxtel iQ2, but it can’t record pay channels. The FTA broadcasters each introduced an HD channel in the past year or so, mostly offering complementary programming to their flagship channel, with some simulcasting. Each will launch multi-channelling services in January 2009, which could cause more fragmentation and increase pay-TV churn, according to Media Partners Asia. In April, a study by the Australian Communications and Media Authority found that just over two out of five Australian households – 42 percent – are watching digital television over the airwaves. That figure rises to 54 percent when viewers of digital subscription television services are factored in. However ACMA’s survey found 24 percent of households say they are still not interested in upgrading to digital—a worrying sign as the government intends to switch off analogue signals by 2013. Some 70 percent of Australian households have internet access and fast-growing broadband reaches 76 percent of those homes, according to ACMA. The average consumer spends 22.1 minutes online per day, logs on the net 6.5 times per week and views 41 pages each session. Internet advertising surged by 59 percent to $569 million in the eight months to September, fuelled largely by search engine and directories marketing. At that rate, online spending could reach $832 million by the end of this year, which would overtaking the radio and magazine advertising sectors. PricewaterhouseCoopers’ Media and Entertainment Outlook forecasts the internet’s ad share of the total media pie will increase from 12 percent last year to 21.5 percent by 2012. PwC projects traditional media such as TV, print and radio will lose 11 advertising share points in the next five years, slipping to 70 percent of what will be a $12.4 billion industry by 2012. Plans initiated by the previous Liberal/National Party Government to issue new digital licenses for limited-frequency services have stalled. Channel A is to provide narrowcasting, datacasting and community television; Channel B is primarily for mobile TV services. ACMA chairman Chris Chapman said the former government had never resolved how to fix technical problems that dogged the B channel in parts of Sydney, Brisbane and Queensland’s Gold Coast; and Channel A is beset with concerns about the impact on existing Community TV services. In June, Communications Minister Senator Stephen Conroy called an indefinite halt to the process of issuing new licenses.