Seven West Media in talks to offload production assets amid cost-cutting drive
Slim TV produces shows like Legacy and Mystic and GSTV creates programs such as One Lane Bridge, Hillary and The Casketeers. Seven declined to comment.
Ms Hegarty, who announced her departure as Seven Studios chief executive due to the “ongoing transformation” of the business and the “significant financial and operational impact of COVID-19”, is leading the negotiations. Seven’s director of production, Andrew Backwell, will run the local production arm once Ms Hegarty exits in June.
Seven Studios creates content for broadcasters but makes most of its money from distribution deals and productions with international streaming services. Back to the Rafters, a spin off of local drama Packed to The Rafters, was commissioned for Amazon Prime last year and Seven also created Zumbo’s Just Desserts for Netflix. MKR is one of the biggest international cooking formats in the world and Home and Away has deals in place with the UK and New Zealand.
Given the discussions are about the sale of overseas entities, any transaction will be worth a lot less than the $400 million forecast by UBS analyst Eric Choi several months ago.
Revenue from productions and the sale of program formats for the half year was $53.2 million, while earnings before interest, tax, depreciation and amortisation was $24.7 million, Seven’s half year financial results disclosed.
Seven chief executive James Warburton had previously been in talks with local production companies like Endemol Shine to outsource more of its programming. The talks with Beyond are underway as the business tries to get rental reductions from landlords that own the Melbourne and Sydney offices. Seven sold its property in Western Australia to Primewest Property Investors for $75 million and completed the $40 million sale of Pacific Magazines to Bauer Media, but is still looking for ways to free-up cash. Sources said no agreement with landlords had been decided.
Seven had net operating cash-flows of $13.7 million and net debt of $541.5 million at half year results but significant advertising revenue decline caused by the crisis has put further financial pressure on the company.
Revenue fell by almost a fifth in the first quarter of the year to $186.6 million and the declines have continued due to the crisis. Interim Standard Media Index data, which tracks the advertising bookings of most of Australia’s media agencies and accounts for about 70 per cent of the market, shows Seven’s revenue had fallen by 36 per cent in April to $43.4 million.
By comparison Nine Entertainment Co (owner of this masthead) fell by 29 per cent to $43.5 million while Ten dropped by 17 per cent to $26.8 million. SBS’ revenue fell by 23 per cent to $3.4 million. These numbers could change slightly due to late bookings.
Like many media companies, Seven has tried to adapt to conditions. It has reduced staff salaries, axed roles in sales and production and has applied for the Morrison government’s JobKeeper package. Before the crisis Seven also put a halt on children’s programming production.
The company will also benefit from spectrum tax relief provided to commercial broadcasters by the Morrison government and is looking to renegotiate its lucrative AFL sports rights deal.
Seven shares were up 2.5 per cent to 8¢ per share at close of business on Friday.
Zoe Samios is a media and telecommunications reporter at The Sydney Morning Herald and The Age.