Nine Entertainment Co. Holdings Limited (NEC) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us for our FY '23 Results Briefing. I'm Mike Sneesby, CEO of Nine Entertainment. Joining me here today is our newly appointed Chief Financial and Strategy Officer, Matt Stanton. I'd like to start off by acknowledging the traditional custodians of country throughout Australia and their connections to land, sea and community. We pay our respects to their elders, past, present and emerging and extend that respect to all First Nations people today. For myself, I'm on the land of the Cammeraygal people of the Eora Nation. Through FY '23, Nine has continued to solidify its position at the forefront of media in Australia and further build on its digital future. Whilst we faced tougher economic conditions, which have impacted the broader industry, Nine has risen to the challenge, continuing to drive audience and revenue share and invest in the future of the business. In FY '23, Nine's EBITDA and net profit were both our second strongest on record, beaten only by FY '22's record results. For this, I would like to thank our team and acknowledge their ongoing focus and determination to drive strong business outcomes. Nine's content is what stands us apart from our peers. Across all of our platforms, we are committed to bringing Australians the content they want most, be it sport, which draws the largest and most engaged audiences, entertainment through all of our television platforms, including both licensed and proprietary content, as well as across our radio and publishing assets, and of course, our trusted news and important public interest journalism. This commitment has paid off. In FY '23, we were the #1 metro free-to-air network and primary channel in our targeted 25 to 54, as well as total people. #1 in BVOD, #1 in talk radio and #1 in publishing leadership and Australia's leading local SVOD business. Our content continues to define, who we are and is reflected in our purpose, Australia belongs here. The State of Origin has been one of the biggest events of the year with more than 3 million people watching it exclusively on Nine and 9Now. Married At First Sight remains Australia's biggest entertainment show, capturing the national psyche 4 nights a week over a massive 8 weeks. Nine's journalists investigated and broke the biggest new stories, highlighting to all of Australia, the value and importance of public interest journalism. Nine's leading investigative podcast, the heartbreaking Hannah's Story has received close to 1 million downloads since launching in May, resulting from the collaboration between Nine's podcast team and Queensland's news and radio teams. This important work was recognized this week being awarded outstanding podcast at the Kennedy Awards. And during the year, we reached an agreement with the IOC, locking in the next 5 Olympics for Nine with exclusive broadcast rights to the summer and winter games all the way to Brisbane 2032. The best content Belongs at Nine. This commitment to Australia's leading content has driven strong revenue share growth across all of our advertising platforms, a 20-year high for metro free-to-air revenue share, up 2.5 percentage points on FY '22 to 40.7%, a 49.2% revenue share in BVOD, growth in radio, a market-leading share of the streaming audience. Our content and journalism also underpinned around Nine% growth in subscription and licensing revenues at Nine's wholly owned businesses Stan and Publishing, as Nine continues to successfully diversify its revenue base. Turning now to today's results. For FY '23, we reported group EBITDA of $591 million, in line with the range we gave in early May. And while this is down in FY '22, which was a record year for Nine, it remains the second largest profit we have delivered and one we are proud of, particularly so as our competitive position has been further enhanced across all of the categories in which we operate. Our ability to continue to grow our relative position is reliant not only on our people, but on our amazing suite of media assets. Supported by the growth of our digital television platforms, Nine's total television reach is now close to 18 million people. Together with Nine's publishing and audio platforms, as well as Stan and Domain, we reach almost 20 million Australians every month. It is this broader reach, which gives Nine its unique position. Our ability to distribute content to the broadest possible audience to monetize that content in multiple ways and to use our extensive first-party data to ensure optimization of audience and revenue. On Page 4, you will see the performance of the various parts of our business. There is a clear benefit to all of our businesses from being part of the Nine Group, both in terms of content and monetization, and this continues to be reflected in Nine share gains. Coupled with increasingly diverse revenue drivers, this will help us to continue to deliver strong results through the cycle and will also underpin further improvement in our relative competitive position. The chart on Page 5 highlights Nine's progress, as our business further expands through digital distribution. Total digital revenue across Nine increased by around 5% to almost $1.2 billion for the year and now accounts for around 45% of total Group revenue. Total digital EBITDA was broadly flat, whilst from a wholly owned perspective, digital EBITDA grew by 1.5%. At this point, I'd like to ask Matt Stanton, our Chief Financial and Strategy Officer, to talk through the Group financials.

Thanks, Mike, and good morning, everyone. Nine reported Group revenue of $2.7 billion, up marginally on the prior comparable period and Group EBITDA of $591 million, which was in line with guidance given in early May. The increase in cost for the year of $99 million ex Domain was weighted to the first half. The second half increase of just $19 million ex Domain, primarily comprised investments in content at total television, particularly 9Now and Stan, which helped to underpin our strong content and share performance. Through the year, we removed around $50 million of previously posted costs, as we reflected on the challenging environment in which we continue to operate. Group net profit after tax and minorities and before specific items was $262 million. On a statutory basis, and inclusive of specific item cost of $85 million, net profit for the year was $195 million. Slide 8 details the composition of specific items, which totaled a pretax cost of $119 million for the year. The major components of this related to the impairment of radio licenses, tangible and other intangibles, primarily relating to 9Radio, as well as the impairment of other assets, specifically outstanding and surplus property leases in Melbourne, which have yet to be resolved or sublet. On Page 9, we look at operating cash flows, focused on the wholly owned business that ties into wholly owned net debt. For the year, operating cash flow was $283 million, excluding the Domain Group. At the first half, we reported an $84 million build in working capital, as the implementation of a new finance system late in calendar 2022 impacted our ability to issue invoices. As we foreshadowed in February, this was a short-term issue, which is almost completely unwound over the second half. As a result, our full year cash conversion of 91% was in line with both our guidance at February and with our historic norm. On Page 10, we have reconciled net debt of the wholly owned group from the starting position at 1st of July of $173 million to the $339 million we have reported for 30th of June. Beyond the operating cash flow movements from wholly owned businesses, as detailed on the previous slide, Nine distributed dividends of $220 million to shareholders and capital expenditure was $62 million. Cash tax paid of $127 million was around $11 million above the FY '22 due primarily to higher installments, reflecting FY '22's higher profitability. During the year, Nine also invested $154 million in our on-market buyback. We bought back and canceled 78 million shares. The on-market buyback expires in September, and we have today announced a continuation of the on-market share buyback to resume after this result. The increase in finance cost payments of $13 million reflects an increase in the level of base interest rates and an increase in net debt, primarily driven by the on-market buyback. With this result, we have also announced a fully franked FY '23 final dividend of $0.05. Following on from the $0.06 interim payout. This level of dividend equating to a fully franked yield in FY '23 of almost 5.5% is testament to the ongoing confidence we have in our business and its future. On a wholly owned basis, importantly, our balance sheet remains strong with leverage at the end of June of around 0.7x EBITDA, providing operational and strategic flexibility. I'll now hand back to Mike to add some further color on the divisional results.

Thanks, Matt, and starting with our Broadcast division, comprising Total Television and 9Radio, which contributed around 50% of Group revenue and 54% of EBITDA. Looking first at Total Television. Across the year, we saw strong increases in revenue share at both Nine and 9Now, which helped to offset broad weakness across the market. In a market that declined by 8%, inclusive of regional revenues, Nine recorded a total TV revenue decline of just 2% to $1.2 billion, with around 15% of the total derived from digital revenue. Not only are we leading both metro TV revenue share and BVOD revenue share, but we're also growing our share of the digital video market. This revenue and share result reflects the clarity of Nine's programming strategy and targeted content investments across the year. In calendar 2022 in our 5 metro markets, Nine once again won the year in all key demographics on both a network and primary channel basis. In the December half, in our targeted 25 to 54 demographics, Nine's primary channel led our nearest competitor in prime time by more than 4 percentage points. In the June half, Nine's primary channel was also a clear leader in the 25 to 54 ahead of our nearest competitor in prime time by more than 9 percentage points. This performance was underpinned by the Australian Open, Married At First site, NRL, The Summit and of course, augmented by our leading news and current affairs coverage. Whilst competition for eyeballs continues to increase, it's clear that great content continues to be rewarded with strong audience performance. We spoke about The Block at our first half results. Total TV audiences for the [ 2022 ] season were up by more than 3%. Whilst free-to-air audiences were broadly flat. It was streaming through 9Now that drove this year-on-year audience growth. Married at First Sight in Season 10 told a similar story. Total national television audiences averaged over 2 million, clear growth on last year and with 9Now accounting for around 1/3 of this audience. Season 2023 of the NRL to-date has been great with Nine's average audiences per round up by more than 2% on 2022. Building on this, the State of Origin also delivered significant growth. Live games 1 and 2 recorded growth of 16% and 6%, respectively. And across the series, 17% of audiences watch through 9Now, up 14% on 2022. We're also really happy with the recent Ashes cricket test series, which reached more than 14 million viewers across the 5 tests. During the year, Nine continued to invest in its premium schedule with The Block Treechange, the T20 World Cup cricket, as well as the dating series, My Mum, Your Dad and Nine's new adventure reality format, The Summit. These investments have paid off with significant growth in Total Television revenue share. We continue to believe that there's a real opportunity for Nine to structurally shift the market share paradigm to break traditional market structures and to emerge a stronger player in an evolving market. We are seeing real evidence that this is the case. Full year total TV costs were up by 6.7%, marginally better than the previous guidance of 7%. The 12% first half cost increase, mainly content-driven was followed by a 2% increase in the second half. The primary components of the second half increase were a step-up in NRL costs and the first part of the 2023 U.K. Ashes. Excluding these events, second half total TV costs would have been flat on half 2 FY '22. The metro free-to-air market declined by 11% in FY '23, whilst Nine's free-to-air revenues were down by only 4%. For the year to June, Nine's metro free-to-air revenue share of 40.7% was a more than 20-year high and was 2.5 percentage points up on FY '22. Regional markets overall performed better with regional free-to-air ad revenue down 4.7%, while Nine's owned and affiliated regional stations recorded growth of more than 5%. The benefits of the WIN affiliation, coupled with the integration of our sales team led to the further share point gains in the regional markets, up 2.8 percentage points. Turning to Slide 15. 9Now recorded significant revenue growth of 16% across the year compared with the traditional BVOD market, which grew by 6%. Nine's full year revenue share was 49.1%, up from 45% in FY '22. 9Now's strong growth in all key metrics, particularly live underpinned its revenue performance, growth of 18% in live daily active users and 22% in live minutes stream reflects Nine's market-leading content, as well as the significant investment in technology we've made over the past year, focusing on improving both the consumer and the advertiser experience. The chart on Page 16 illustrates the magnitude of the opportunity. Whilst 9Now attracted half of the traditional BVOD market revenues, this equated to around 7% of the total digital video market, a market we estimate around $3.4 billion, 9Now's share, which is clearly growing. Whilst early days, the move to VOZ, as it is brought into life in 2024 will enable both national free-to-air and streaming reach and frequency, measurement and optimization. 9Now is key to the future of Total Television at Nine, and we will continue to focus on the opportunities ahead. Through content and technology, we continue to stand at the forefront of Total Television in Australia and to believe that there is a real opportunity for Nine to further build on its position in the total video landscape. Turning now to radio. On revenue growth of 4% to $106 million, 9Radio reported EBITDA of $12.6 million. 9Radio's linear ad revenues grew by 1%, ahead of the broadly flat market. Overall, radio cumulative audiences grew by 5% across the year. In addition, over the past 2 years, we have seen strong take-up in streaming with growth across this period of around 19% in total listening hours. Whilst our ratings and revenue performance in radio has continued to be strong across all of our live and local stations, the revenue contribution from digital streaming has now become material and is the fastest-growing revenue segment for radio. In June, the industry released its first Radio360 survey, which confirmed what we had expected. But in live -- the live streaming environment, talk radio formats are likely to significantly outpace their equivalent music formats. Our breakfast shows in Sydney and Melbourne attracted 48% and 53% streaming commercial share, respectively, in this first survey, creating longer-term opportunities, as listeners embrace online streaming through smart speakers, apps and websites. Total audio is the future of radio. Through Nine single sign-on, our incremental content, growing data proposition in our cross-platform sales initiatives, live streaming provides exciting growth opportunities for our radio business. In FY '23, Stan delivered an impressive set of financial results, headlined by growth in EBITDA of 30% to $37 million, Stan's fourth consecutive year of profit and positive cash flow. Stan's revenue growth of 12% to $428 million for the year reflects the strength of the Group's engaged customer base and strong content proposition, which enabled price increases across both entertainment and sports subscriptions. Over the past 12 months, strategic decisions to extend Stan's commitment to originals and to broaden further into sport have helped underpin growth for the Group. It also maximizes Stan's control over its content pipeline, derisking the business in the context of ongoing Writers Guild of America and SAG-AFTRA strikes and positioning Stan well to respond to any opportunities, which arise as a result of the shifting strategy of the U.S. direct-to-consumer market. The global SVOD market is evolving much as we expected after years of focusing predominantly on top line growth, the studios are rationalizing their approach and focusing more on profitability, which naturally leads them towards greater focus on licensing and other content distribution partnerships in markets like Australia. Stan Originals have been a significant driver of performance, proving to be one of the keys to Stan's success, delivering 4 of the top 6 series and movies shown on Stan in FY '23. New original series such as Black Snow, Ten Pound Poms, and Bali 2002, attracted strong viewership, complementing returning series such as Bump and Ru Paul's Drag Race Down Under, as well as original movies, including Transfusion, Poker Face and The Portable Door. These titles performed strongly alongside key licensed titles, including Yellowstone, Your Honor, From, Lucky Hank and The Great. Stan Sport also continued to extend its consumer proposition, securing the rights to the Rugby World Cup and successfully broadcasting the women's tournament, as well as the UCI World Championship cycling event in Wollongong. These sports complement Stan's already strong existing line-up, including the recently extended UEFA Champions League and Grand Slam tennis, commitment to domestic and international rugby, as well as an emerging motorsport and combat sport proposition. Stan continued to invest in the growth of its business with costs up by 11% for the year, which included a second half increase of 6% or 3% excluding sport. Stan has successfully managed the balance of growth and profitability and continues to consolidate its strong market position. Turning now to Page 19. In total, Publishing, reported revenue of $575 million and a combined EBITDA of $165 million, down 8% after a first half that was marginally higher on PCP. In FY '23, our combined publishing business derived more than 60% of its revenue from digital sources and around 40% from subscriptions and licensing both key to the long-term future of the business. Digital subscription and licensing revenue grew by 5% to $180 million across the year, driven by solid subscriber performance across The Herald, The Age and the AFR. While print subscription and retail sales revenue slipped slightly across the year, this was more than offset by digital growth. This strong performance in digital enabled us to increase digital subscription prices, boosting ARPU with a minimum impact on churn. After a strong first half, Nine Publishing was impacted in half 2 by the softer advertising market with combined half 2 ad revenue down 16%. Digital advertising revenue declined by 19% across the half, partly due to softness in the programmatic advertising through the period. Print advertising was also softer in the second half against the previous corresponding period that was boosted by advertising associated with the 2022 federal election. Notwithstanding a more challenging cost environment, which included the new EBA and higher paper and distribution costs, Nine's Publishing expenses were marginally down on FY '22. This was a pleasing performance given the incremental investment in products. During the year, as the new cycle has evolved, we have invested more deeply in our content, content that readers are most interested in, including food and travel, as well as our premium subscriber products. We remain proud of the crucial role our newsrooms play, breaking important stories and producing public interest journalism that is increasingly amplified across Nine's platforms, whilst also driving strong commercial outcomes for the Group. This commitment has enabled us to ensure our news is accurate and informative, as we continue to break the country's biggest stories. Domain reported last week and its results reflected the challenging property environment, particularly in Sydney and Melbourne. Domain reported EBITDA of $109 million on revenue of $346 million. This result excluded the performance of the Domain Home Loans joint venture, which Domain has announced its intention to exit. Nine's consolidated results of $103 million for Domain included discontinued operations. Core digital revenue increased by 1%. Residential Listings revenue declined by 7%, with the 8% increase in controllable yield inclusive of impacts of social boost more than offset by the 14% decline in property listings. Revenue from Agent Solutions nearly doubled primarily due to the acquisition of Realbase in April of 2022 and 25% revenue growth at Real Time Agent, while Domain Insights recorded revenue growth of 16%, boosted by a full period contribution from IDS. Compared with previous cost guidance of $255 million, inclusive of DHL, Domain reported costs of $251 million, with half 2 costs down 18% on half 1. This marginal outperformance was secured through Q4 were reflecting the lower-than-expected listings volumes, Domain put in place initiatives including proactive annual leave management, staff recruitment phasing and further discretionary cost controls in a difficult property market. Domain has made clear progress diversifying its revenue base and building on the foundations of its marketplace strategies. Over the course of the past 12 months, Nine has further progressed its ESG journey. We are focused on 3 key pillars: community, company and climate. In each of these, our progress is tangible. Under community, we continue our Nine Care support program for underserved communities and charities across Australia, whilst exploring how we can have a broader impact on the community. In company, Nine has launched, funded and provided executive support to 5 internal communities, LGBTQIA+, [ all ability ], first nations, gender and culture to foster awareness and understanding and inclusion across the business. And in climate, we are focused on developing the tools and framework, which will give us the ability to fully measure our corporate greenhouse gas footprint. I'll turn now to current trading. Reflecting the generally softer economic environment, FY '24 has begun much as FY '23 ended. The advertising market remains subdued, particularly in free-to-air, digital display and print publishing. Against this backdrop, Nine has continued to outperform in each of its operating segments. In television, for calendar 2023 to-date, Nine remains the clear ratings leader across all key demographics, almost 5 percentage points of share ahead of the next placed channel on a prime time, primary channel and network basis in our targeted 25 to 54. The metro free-to-air market is currently expected to decline in the low double digits on a percentage basis in Q1 FY '24 over PCP. Nine now continues its growth trajectory with low double-digit percentage revenue growth expected in the September quarter over PCP. Comparables on FY '23 are expected to ease from late in the first half of FY '24. Across Total Television reflecting both Nine's ratings and sales performance, Nine is expected to outperform the underlying advertising markets and gained further share. Excluding the NRL step-up and the increased cricket costs, the Ashes and the ICC Men's Cricket World Cup, Nine expects Total Television costs will be broadly flat in FY '24 over FY '23 with first half costs reflecting these incremental sports and second half costs expected to be down on half 2 FY '23. Consistent with Group commentary in February of 2023, Nine has implemented a range of cost initiatives across Total Television, which are now expected to enable us to absorb inflationary costs, as well as ongoing investment in technology. 9Radio's, Q1 advertising revenues are expected to decline in the low single digits on a percentage basis, supported by the doubling of digital revenues with an increasing contribution from streaming. Driven by higher ARPU and paying subscribers, Nine is expecting further growth in both revenue and EBITDA in FY '24 for Stan. Nine's Publishing business continues to benefit from the growth of digital audiences with digital subscription revenue growth expected to be around 10% in Q1. After a strong half 1 FY '23, Nine's FY '24 Publishing EBITDA is expected to be slightly ahead of the half 2 FY '23 run rate, as we continue to invest in content and products, while managing inflationary cost pressures in what continues to be a challenging advertising market. As Domain commented with its result last week, trading for the first 6 weeks of FY '24 reflects some early recovery in new sale listings in its key Sydney and Melbourne markets, offset by some weakness in Queensland and Western Australia. With cost growth estimated in the mid- to high single digits on a percentage basis from the base of $237 million ex Domain Home Loans, Domain expects to resume EBITDA margin expansion from FY '24 supported by year-on-year listings growth, price increases, take-up of new depth contracts and products and continued cost restraint, balanced with investment in its marketplace strategy. Before we open the line for questions, there were 2 topics I wanted to briefly touch on the Olympics and Paralympics and artificial intelligence. We have recently announced some of our plans for the Paris Olympics. Across Publishing, audio and television, including streaming, Nine will bring the Paris Olympics and Paralympics to all Australians with an unprecedented cross platform strategy. For the Olympics, Nine will offer 2 dedicated 24-hour free-to-air channels with the today show hosted live from Paris. Every big moment, live and free. For 24 hours each day, Nine now will stream every event live free and in full HD across 40 dedicated sports channels. And Stan will offer every minute, every replay, live on-demand and ad-free plus daily recaps, highlights, mini matches and full replays of all sports, as well as a 24-hour dedicated Olympic news channel. Nine will also provide unprecedented editorial coverage and analysis across Nine Publishing, including the live streaming of major events on our mastheads, while Nine Audio will provide 24/7 coverage via dedicated streaming and DAB+ channels, as well as daily podcasts across all stations and apps. We will deliver more Olympic and Paralympic content from Paris than ever before. We have recently gone to market with the first wave of commercial opportunities for advertisers. We have developed a powerful games advertising proposition, which is built on uniting Australia through our unrivaled content offering. Our proposition includes a 10-month marketing platform for advertisers, the road to Paris. Starting with the Gangwon Winter Youth Olympic Games in January, running all the way through to the Paris Olympics games and culminating with the Paris Paralympic Games in September. We have unlocked the depth and breadth of Nine's offerings and services, our new partnership with the [ AOC ] and Paralympics Australia, and we've created a connected platform for brands that has never been seen before. And the response to our unique proposition has been very promising. Moving to AI. Much has been written, particularly over the past 6 months about the impact of artificial intelligence or AI and specifically generative AI on the media sector, as well as the rest of the Australian economy. Understanding the opportunities and potential threats of AI is part of the day-to-day operation of our business. Focusing on how Nine currently uses AI and what the opportunities are for the future development, as well as continuing to understand the potential risks associated with the accelerated rollout of various AI technologies. AI is already embedded in many of Nine's current operations, some specific areas, where AI is in use include user segmentation and engagement optimization across our 14.2 million signed in 9Now users, as well as personalized content recommendations and process automation across our publishing assets and at Stan. Nine will also shortly introduce advertisers to our new digital video advertising platform, which uses generative AI to create and distribute bespoke video advertising across 9Now. We also see potential for Nine to use AI to drive meaningful longer-term benefits in content production, operational efficiency and commercialization throughout the business. Of course, there will be challenges as well, the most immediate being that of companies utilizing our content and data, as the basis for training AI platforms. This is not unlike the reliance that social media platforms have on Nine's content, which resulted in mutually beneficial commercial agreements supported by the News Media Bargaining Code, and we continue to look for positive engagement with the government to address the potential risks, which the growth of AI will pose to the local media landscape. Whilst the current market conditions remain challenging, Nine's broad base of revenue and scale enables us to maintain investment in content and products. This is expected to result in further improvement in Nine's competitive position through the cycle, while the Group also remains disciplined around operating costs and underlying efficiencies. Nine's strong cash flow and balance sheet enables the continuation of the buyback, a targeted 60% to 80% dividend payout, as well as providing the flexibility to consider our strategic investments that will underpin the longer-term growth of the business. That concludes the formal part of today's presentation. We'll now move across to the couch and take questions from the line. So now I'll open the lines to questions. And at this stage, Matt and I will be joined by Nine's Chief Sales Officer, Michael Stephenson, who I'm sure most of you know. So operator, if you could pass through the first question.

[Operator Instructions] Your first question comes from the line of Eric Choi from Barrenjoey.

Should I go one by one or just by both of them, Mike.

Maybe go one by one. So for those who are on the line, if you've got a double or triple headed question, maybe just shoot them through a question at a time, and we'll take them, they come.

Just the first one, really simple one, Michael. Just contrasting your outlook comments versus 7, and I know they're talking total TV, whereas you split FTA and BVOD. But just the comments around September being slightly up, might imply they're doing slightly better than what you're implying. So I'm just wondering, do you think Stan actually taking share? Or do you think there's some noise in those numbers that they've quoted?

Yes. Well, obviously, we don't sort of talk about other people's business on our annual results call, but I might get Stevo, just to get -- or give a bit of color around how we're seeing the market evolve, as we hit FY '24.

Yes. Thanks, Mike, and thanks, Eric. I think the first point, just to reiterate is that Seven's commentary was certainly around the total television outlook, whereas the commentary that Mike has given in the results is focused around free-to-air television, metro, regional and BVOD, and obviously, we separate those out. In terms of what we're currently seeing in the market, from a free-to-air point of view, both metro and regional, July and August is largely in line with what we saw as we sort of ended Q4 of FY '23. We haven't seen a significant change into the first 2 months. Into September, we have seen, I would say, a material improvement from what we saw in the first 2 months, and I'm very positive and continue to be confident that we will continue to take market share both in metro markets, regional markets and in BVOD. From a BVOD perspective, again, Mike's given guidance that we expect the market to be growing in mid -- sorry, low double digits for Q1. In terms of beyond that, television, which obviously is the greatest indicator, I think, of market strength. Television systems are only recently opened, so it's a little too early for us to give guidance on what Q2 looks like. Other than to say the conversations that I'm having regularly with media buyers in the market certainly seems to be more optimistic in showing signs of improvement.

Awesome. Just a second one, just stepping away from all the cyclical stuff and moving to BVOD, it was finally coming online? And Mike, I guess, you invested ahead of it at the FY '22 results on BVOD marketing and tech. And just chatting to the agencies, they're sort of saying the first network to launch an integrated solution that lets combine free-to-air and BVOD together will be the big winner. Just wondering if you can give us an update on how close you are on launching an integrated solution or how much that historic investment is helping you win readership at BVOD?

Yes. I might address the investment over the last 2 sets of results, you will have heard me talking about investment in our digital platforms and the growth opportunities, and the 3 levers we usually talk about in terms of opportunities for investment, content, marketing and technology products, as the 3 areas. And right through this cycle, even though there's been a challenging advertising market environment, we've continued to maintain that investment, and as you can see through this year's results, it is being reflected in the growth of our share in the market. So we're very happy with the progress we've made and the decisions we've made around that investment. In terms of VOZ and the integrated sale, I might get Stevo, again to give a bit of commentary around how Nine has approached that to-date and how we see it moving forward.

Yes. I mean, my view is that to win in that market, you've got to be the leader in content, you have to be the leader in data, and you have to be the leader in technology. And I think from Nine's perspective, we lead in all 3 of those areas. When it comes specifically to technology, I do think you're right. I think when you see the convergence, Total Television landscape of both linear, metro, regional and BVOD, those that can trade those audiences seamlessly across platforms, we'll have a competitive action in the market. And thankfully, we launched Nine Galaxy about 5 years ago with exactly that functionality. So we've been trading with all of our media agency partners and clients fully cross platform center for quite a number of years. That being said, the launch of -- the imminent launch of VOZ, as a currency [indiscernible] already in agency systems for the purpose of insight and analysis. We'll supercharge, I think the agency desire to transact in that cross platform sense, which I think puts Nine in a very good position.

Your next question comes from the line of [indiscernible] from E&P.

Okay. I'll fire off my 2. The first one, I'm just wondering if you can provide us with the exact quantum of the NRL step-up and the cricket cost step-up into FY '24. And is it similar to the 2% increase that we saw in total TV costs in the second half?

Yes. Look, I don't think -- we gave some sort of indications previously on what the agreement with the NRL look like. We haven't given specific numbers to the market, but it will be close to that in terms of just thinking about the percentage, it will be close to that number in the combination of the 2.

Okay. Sorry, close to that number for the full year, right, not just for the half.

Correct.

Okay. Great. And then the second one, it looks like 9Now revenue only grew in the mid single digits year-on-year in the fourth quarter after you saw pretty strong growth in the third quarter of about 22%. I don't know if you can confirm whether that's correct. And as part of that answer, you've obviously been guiding to the first quarter in '24 [ growing in ] the low double digit, so that looks to be a pickup. And I appreciate Stevo's comments [ just then ], but is anything changing in the market? Is it just a bit lumpy and did Binge and Netflix perhaps capture some share in the fourth quarter, and that's petering off now?

I mean, there are seasonalities to BVOD revenue because the growth on a quarter-by-quarter basis can be aligned to particular content that you've got in market. So that's probably, to some degree, impact -- impacts that on a year-on-year basis. But our view from moving forward certainly has not changed. BVOD as a category, 9Now within that continues to be a growth driver of our business. And you can see in the FY '23 results, our BVOD revenue grew by over 16%. And our share of the digital video market continues to grow. The opportunity within that $3.4 billion market is significant, and I mean, that's really where our focus is ongoing. I don't look at it on a quarter-by-quarter basis likely, I've really got to plan around the long term and accelerating into the digital video market, which is what we're doing.

Okay. Great. And do you see -- sorry, just Binge and Netflix, are you seeing them being fairly aggressive in the market trying to capture some share? Or do you think they're going after that digital video market as well?

Yes. I mean, I think having -- they've obviously introduced ad funded [ tiers ] into their platforms. I think that's a good thing for premium professionally produced content and creating a broader marketplace for advertisers to access that content, as opposed to social video, which, of course, is not as premium, not as valuable and doesn't deliver a good return for advertisers. So I think that's a positive thing. Of course, what we have at Nine is size and scale and continuing to grow that, as we think about BVOD, as a part of a Total Television combination is really the competitive advantage that we've got.

Your next question comes from the line of Lucy Huang from UBS.

I've got 2 questions as well. So just firstly, in terms of cost growth in Stan, how should we be thinking about that coming into FY '24. Given your comments around international content players being more rational and willing to license, are we seeing that putting a bit more downward pressure on content cost growth in Stan coming into next year?

Yes. I mean, there's a lot of things that are sort of at play in the market at the moment, obviously, the dynamic with international studios and that sort of shift away from absolute direct-to-consumer into more licensing. So I would expect that, that shift in strategy will bring more content availability into market. In fact, we've seen that already. So naturally, you'd expect that, that supply/demand dynamic starts to be beneficial in the local marketplace. We are also seeing, of course, the strikes in the U.S., in terms of writers and actors, and that is going to put pressure on content supply. I think Stan on both fronts, sits in a good situation, as pressure comes off the broader direct-to-consumer strategy, that benefits Stan over the longer term. And Stan shifting to a larger pipeline of original productions, which are primarily produced here in Australia and have less impact from the strikes in the U.S. combined with Stan's live sports strategy means that it is likely to be less impacted than the average market of international players. So I think both of those things are positive to Stan over the next 12 months to 24 months.

Wonderful. And then just my second question is on BVOD growth. I guess, 9Now is growing in the low double digits in the first quarter. How much do you think is, I guess, share benefits versus maybe the market overall in BVOD recovering?

Yes. I might get Stevo to just give a bit of color on that one.

Yes. I think [ I'll let ] -- further to my earlier comment. I mean, I think we continue to grow our share of that traditional BVOD market, but it is not really where our focus is. The digital video market is $3.4 billion, $3.5 billion. It's growing in the mid-single digits. And I think that really creates the opportunity for us to -- for us to grow beyond the traditional market dynamic, and that is really our focus and our opportunity. And of course, to do that, you've got to have, as we mentioned before, the best content, the best data and the best tech, and you've got to open yourself up into these new demand sources and certainly that's what we'll be doing and sharing more with the market and upfront and other things around initiatives that we've got in that space.

Your next question comes from the line of Kane Hannan from Goldman.

So Metro Media annualizing that second half run rate is going to be a softer full year number. Can you talk about -- is that all the advertising market coming through? Or are some of the investments you're making, the Brisbane Times expansion impacting the OpEx line?

Yes. Look, it's a combination of 2 things. It's a slightly softer revenue market, and then also some of that cost inflation coming through. I might get Matt just to give a bit more detail around what we're sort of seeing and how that cost performance is looking.

Yes. Thanks. Yes, the second -- FY '24, we are seeing some increases in the publishing side, a bit of it in softness in the revenue, but there is a combination of investment in product, as well as some costs. So some of the good work that was done in FY '23, we are seeing some costs coming through around EBA and print and distribution. But we are also doing some investments in product and tech. So we've got the Brisbane Times you mentioned, and a couple of Good Food, for example, drive business as well. So it's a combination coming through, as we invest, but also some of the costs we had sort of deferred a bit from FY '23 come through.

Yes. Perfect. And just the CapEx guidance next year is a pretty decent step-up. Is that the radio spend I think we've spoken about previously? Or just interested to talk about what's driving that step-up?

Yes. Matt...

Yes. No, look, it's not so much the radio spend. There is some -- some radio spend, but it's investment in product and tech predominantly across the Group. So where we see a good opportunity, we'll continue to invest, as Mike said in product and tech, and that's coming through in a number of the businesses.

Your next question comes from the line of Roger Samuel from Jefferies Australia.

I've got a question regarding the Olympics. So you mentioned that some of the content will be available on Stan. So how do you differentiate the content that subscribers would need to pay for versus free on free-to-air? And I'm just wondering does the Olympics should accelerate the growth in subscribers for Stan?

Yes. Look, I think there's still more details that we haven't yet announced on the specific proposition that will differentiate both of our free and subscription services. But some of the things that you would have heard in the commentary there are Stan's proposition obviously being ad-free. The inclusion of a 24-hour news channel, potentially different feeds, variation in production, and there are a range of other initiatives, which we are yet to announce because they're work in progress, but differentiated content that come through on that platform. And of course, the ad-free component for those consumers, who have a preference for an ad-free product and are prepared to pay a subscription fee for that.

Okay. And just on Olympics as well and I know you've -- you're starting to have some conversations with potential sponsors for the Olympics. It's pretty early days. But in general, would you say that the ad market is still pretty short, but the Olympics could change that, and we can have a discussion to bring forward some of the commitments from the sponsors.

Yes. As you say, it is early days. We've literally just kicked off the campaign in the last couple of weeks with primarily those who are IOC partners and AOC partners and sort of major sponsors. But Stevo can just give a bit more of a sense of how we see that unfolding over the next period.

Yes. So as Mike -- as Mike pointed out, we are halfway through our initial presentations, which -- which are presentations to both IOC and AOC partners, who have first rights obligation, too. We have an Olympics and Paralympics arena right here in 1 Denison Street, which we're using as our home base, if you like, to make all of those presentations. The feedback so far, whilst early days, I think, has been very positive for a number of reasons. One, obviously, the strength and power of the Olympics and Paralympics games, as a platform for brands, but also the very unique set of assets that we have at Nine, and the rights that we've negotiated across all of our platforms, from television to digital to publishing, and of course, to audio. So that's a very unique proposition. It's one that has never been seen in this market or an actual fact globally. So it's interesting. It's unique. It's obviously got scale, and it will be an enormous event with less than 12 months to ago. So halfway through and very positive at this stage.

Your next question comes from the line of Brian Han from Morningstar.

Just 2 quick questions. Number one, how much of Nine's BVOD revenue do you think is from advertisers, who don't spend any money on your free-to-air channels?

That is an excellent question. We have right now about 1,500 advertisers that utilize 9Now, but don't advertise on Nine. So that is a -- is a really strong and obvious data point that we're making inroads into the digital video market. They're using our streaming or on-demand platform, but not using our traditional television platform. What is most interesting for me outside of that number is the growth in revenue that we're seeing from those advertisers. So not only are we finding advertisers new into our platform, which, of course, creates greater demand, but they're also spending more. So 2 really good, I think, data points.

That's great. But you're not willing to share what kind of percentage of your revenue base is from those 1,500 advertisers.

I would have to come back to you on that. I can't think of that off the top of my head.

Okay. That's right. In Stan, can you please remind us what percentage of your content cost base is on original and local programming?

Yes. Look, we haven't -- we've never split out the cost base by original programming versus licensed program. It's not something that we've broken out in the cost. But I think suffice to say that as we've ramped up original programming, it's taken a larger slice of that overall cost. But again, as we see the dynamic of the market shape up over the next couple of years, we may choose to sort of shift the mix between what's available in licensing versus original. So you could expect that to change over time. It's not necessarily going to be fixed.

Your next question comes from the line of Darren Leung from Macquarie.

My 2 questions are just around SVOD. Obviously, the subscriber number hasn't moved that much, but can you provide a bit of color around churn, and if you're seeing any sort of big movements around take-up or any trend around consumer-related weakness? Any detail there, please?

Yes. I reflect back on the outlook we gave at the half year results; we did say that we expected some softness in the subscriber market for SVOD generally over this period of time. I think we've seen that broadly across the category locally and internationally in results that have come out. In Stan specifically, when we gave that outlook around the February time frame, we were coming out of what is the traditional summer peak of subscriber sign-ups, where off the back of that peak of acquisitions, you get a period of softness. In addition to that, we put through price increases around the same time. And of course, there has been a bit of pressure on the household consumer spending. So those are sort of 3 factors all at play are what are driving that flat view in terms of subscribers over the period. It's a bit difficult to break out, which of those factors are driving more than the others. But suffice to say, I think we will see an opportunity for longer-term growth at Stan, but I think in the short term, a slightly softer market for streaming subs.

Got it. And the second question was, can you walk through the logic or what hurdles that Nine need to see before we start thinking about embarking on a potential cost-out program, either in digital and publishing or the TV business more broadly?

So I just -- I missed the start of that. What are the -- can you just repeat the question?

Yes. What do we need to see across the business or the market before we embark on a cost-out program?

Yes. Look, I mean we spoke again at the last results, and I think in some of the commentary, you'll see there, we've spoken about cost discipline across the business. And to give you an example, in the Total Television space, we've spoken about the fact that notwithstanding some of the one-off or cost increases NRL and cricket that we'll see this year that our cost base is flat or is expected to be flat. Within that cost base, we're not spending on the same things that we were spending on last year. We've actually made cost efficiencies or cost savings in certain areas of the business, which have enabled us to, a, absorb inflationary cost pressures, but also continue to invest in marketing, in tech and product, and in our content. So we are within that flat cost envelope taking cost out and redirecting that expenditure into things that are going to help us to grow the business.

Your next question comes from the line of Fraser Mcleish from MST Marquee.

Great. Just a couple for me. Just, Mike, firstly, anything you can see on the sort of your thinking on the digital platform revenue and particularly that and I think the Facebook agreement, which comes off at the end of '24. And then just, Matt -- and just on Olympics, now that you kind of firmed up the plans a bit more, are you able to give us some idea how you're able to allocate costs? I mean, are you kind of broadly able to match for Paris, particularly sort of cost to revenue and get a broadly sort of breakeven result?

Yes. I'll take the Facebook and Google question, and then, I'll get [indiscernible] talk to the Olympics question. But -- so in terms of Facebook and Google, yes, we've spoken previously in the market with those 2 partnerships in place, the Google partnership runs for a longer period of time. And as you say, the Facebook partnership is up in 2024. Look, I think it's pretty clear, Facebook has made some indications in market around its shifting business model, particularly as it relates to news. But one of the things we're really confident and positive in is that these relationships and partnerships aren't simply a check that gets written to media companies. There is an exchange of value that takes place. And of course, Nine is providing very important content to Facebook in exchange for the fees that are paid for that content. What I would say is that the nature of that content, the kind of content from Nine, that is helping to support viewership and audiences on Facebook is evolving over time. What was predominantly at the start of these sort of partnerships driven by text and image-based news is very quickly shifting towards video content and other forms of content. And if you're on Facebook yourself, you'll see that Nine's entertainment content from Married At First Sight to The Block, as well as our sport content around NRL, and our other major sporting events is taking a bigger piece in terms of what's driving those social videos on the social media platform. So I think it's not a simple question or a simple question, as do those agreements get renewed? And are they worth this much? But it is how do we continue to evolve those partnerships over time. And of course, in the commentary earlier, I also spoke about AI and how that could impact. So AI also becomes one of those discussions to be taken up. And also new platforms that are not currently in commercial agreements with Nine, and we've all seen TikTok, for example, evolving quite significantly. And again, our video content appearing more and more across TikTok and driving audience results for TikTok. So there are a broader range of opportunities that's really up to us for now go out and start to develop those relationships and the opportunities around that.

Okay. I'll pick up on the point, Fraser, on the Olympics. So -- as you know, we spent -- we committed to [ $305 million ] on Olympics, but that's over a 10-year period. And you do have to remember from a point of view, and I think you're talking about the next Olympics, as in Paris comes up in our FY '25. So if we think about that, the value that we attribute to the Olympus is not straight line. So it does build, and as we get to Brisbane through that. So that's the first point. I think the second point really is we do have -- we're going through the process at the moment -- as Stevo talked about at the moment with the IOC partners and the AOC partners, and we'll get some view there. But where we're thinking for FY '25, we don't see there's going to be a material EBITDA impact from the Olympics. Some of it will depend on the market, where the market is at the time and some of the cost levers we have so. But from our point of view, we're very happy guys. [ Of course, there are ] a lot of content platforms for us, but we don't see a material impact in FY '25 from here.

[Operator Instructions] And you have a follow-up question from Eric Choi from Barrenjoey.

Just quickly, I think you've disclosed the 2.2 million paying Stan subs for the first time. So I'm just wondering, has that number actually increased despite that give Stain about the same? And I guess, how much did that benefit from the Stan Sport free trial ending?

Yes. So the ratio of paying to active subscribers hasn't changed markedly. The reason for introducing paying subscribers to the information we've provided to market is that over time, what we'll see in the SVOD category, in the streaming category in general, as the take-up gets to a point, where everyone had their free trial. It won't make sense to continue to have free trials in market. We've seen other platforms removed their free trials. And so ultimately, what will happen is, as free trials get removed, paying subscribers obviously become that important metric. So we've introduced that metric in anticipation of what might happen over the next set of periods, so there's some consistency in the reporting, as we move forward. The removal of the free child for sport is only very recent, so it's difficult to say what the impact will be there. But again, removing the free trial from Stan Sports has been a precursor to a range of event sports that are building on the platform. And again, it doesn't make sense to be giving a free trial on sports when you've got relatively limited period sporting events on platform. So again, it's just consistent with the way the business is evolving.

Nice one. And can I just follow on from Fraser's question on Facebook. Is it correct to say that they would physically need to retool their feed, otherwise, it goes down the arbitration path again? And if that's the case, like have you actually seen any evidence of Facebook rejigging their feed?

Look, I don't have any specific information around them changing their product or what that looks like. But certainly, at a broader level, moving away from retooling or evolving the product, there is an exchange of value and exchange of content for dollars that takes place. So in order for that to evolve change or disappear, there would have to be a change in the nature and the way that our content is being consumed and distributed on the Facebook platform.

And that concludes our Q&A session via the phone lines. I'd like to hand over to our speakers.

Well, that's a wrap, I think, for these results briefing. And thank you, again, everyone, for your attendance. We'll see you for our next results briefing in February.