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

Good morning, everyone, and thank you for joining us for our first half FY '24 results briefing. I'm Mike Sneesby, CEO of Nine Entertainment, and joining me here today is our 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. Nine continues to lead the way in the creation of local content and public interest journalism, distributed across the breadth of our business across television, both free and subscription, publishing, audio, and marketplaces. Our businesses rely on the quality of our content to attract audiences and drive commercialization opportunities. In television, publishing, and radio, Nine news products have continued to attract loyal and trusting audiences, while many of our journalists have gained industry recognition for their work, including an astounding 14 Walkley awards and 5 Australian podcast awards during the half. In 2024, we've been particularly pleased with the performance of our new look, Melbourne News, which has won the ratings every week since launching on January 14 and has boosted audiences in the time slot by 8% compared to the corresponding period last year. Sport remains central to our television businesses. Over the half, Nine has broadcast and covered some of Australia's greatest sporting moments, including the State of Origin, the NRL finals series, the Rugby World Cup, UEFA, the Ashes, and the Cricket World Cup, while the recently completed Australian Open reached almost 13 million people across Australia with average audiences up a massive 23% on last year. Nine's entertainment programming has attracted leading audiences across free and subscription television. Married at First Sight was the biggest show on television in 2023, while we have also successfully licensed formats for shows like The Summit and Stan's Love Triangle internationally. Stan's original dramas like Scrubland and Court launched with strong subscriber sign-ups and to critical acclaim, whilst Nine's drama Warnie was the highest rating free-to-air drama for 2023 in the all-important 25 to 54 demographics. Nine's focus on lifestyle was reflected in the relaunch of good food and travel sections of our Metro mastheads with plans to develop both titles on a cross-platform basis. And, of course, season 19 of The Block remained one of Australia's favorite TV shows. Nine's marketplace businesses are at a different stage of maturity, but are both focused on multiple monetization strategies across their respective verticals, supported by Nine's unrivaled access to audiences and their associated behaviors through our group-wide data and technology. With revenue opportunities across advertising, subscription, licensing, and transactions, Nine's focus is to take our premium and offer unique content to as much of the country as we can. And over the past 6 months, Nine's content has, on average, reached around 20 million people each and every month. In calendar 2023, Nine's content was distributed across all of our assets, including the #1 metro free-to-air network, the #1 BVOD service, the leading local SVOD service, Australia's #1 and #2 most red mass heads as well as Australia's most red premium business title, Australia's lead talk radio network and #1 audio streamer. Nine's 60% owned domain benefited from the recovery of the housing market, maintaining a strong competitive position, while Drive is gathering momentum as a growing and profitable Australian automotive destination. Our digital footprint continues to grow, so does the value of Nine's unique consumer data asset. Across all of our platforms, Nine has a total registered audience of nearly 22 million Australians and each month, 16 million Australians visit 1 or more of these 9 assets, giving us greater capacity to create value through this increasingly significant pool of data. Nine's consumer data enables us to make informed decisions around the development of their digital products and their content. Data is paramount to the success of our subscription businesses, for example, around 60% of Stan's gross adds across the half resulted from the reactivation of existing account holders delivered through data-driven marketing initiatives. This obviously has a marked impact on subscriber acquisition costs, which are now estimated to be around 11% lower than they were 3 years ago. It also helps to inform us about viewing preferences and content engagement, which is crucial for the future direction of the business. Observing content consumption trends also enables Nine to make new content decisions based on both data and human experience. It also enables our tech teams to monitor audience behaviors and explore new products and processes that help to keep our audiences engaged. As our audiences grow, our ability to sell meaningful ad-targeting opportunities also increases. For the 6 months of December, Nine recorded double-digit growth in data-supported digital ad revenue, primarily 9Now, but also publishing, and we expect that growth to continue. As our digital base and associated data grows, data will power the future of Nine's AI initiatives. During the half, we focused on understanding the strategic value of AI across Nine's ecosystem, prioritizing based on both value and ease of implementation. Across the half, we've launched the listen function on our key mass heads, enabling audiences to choose an audio version of articles from the Sydney Morning Herald, The Age, and the Australian Financial Review. This is a potential precursor to offering a personalized news product sourced from our major mass heads, but delivered by audio and fueled by AI. In October, Nine also launched Nine Ad Manager, which now has more than 1,000 registered clients, more than 50% of whom have created a campaign with booked campaigns at 100% yield premium. These clients are primarily SMEs, who represent new relationships for Nine and who are looking to advertise their products or services on a postcode-specific basis. We've recently begun to use AI to generate our closed captions for the today show, which will deliver material savings once implemented across a broader range of programming. We are incredibly excited about the applications and opportunities relating to our first-party data set. We are currently investing in the next generation of our consumer data platforms and supporting technologies. And this will enable far greater insights, new data-related products and services and underpin the use of AI across our business, integral to our future as Australia's digital media company. Moving now to our results. Whilst the advertising market over the past 6 months was challenging, there were some clear highlights across the period. Now, accounting for almost half of total group revenues, Nine's digital revenue grew by around 5% for the 6 months, with growth in each of the key digital assets, streaming, metro media, audio, and marketplaces. This growth was underpinned by our growing digital audiences. Across the 6 months, we recorded growth in audiences across each of our key wholly-owned platforms. At 9Now, we recorded growth of 14% in daily active users and 48% in live minutes streamed. Digital audiences across key properties like the block and the NRL were up by 7% and 36%, respectively. At Stan across the 6 months, content consumption grew on both a total and a per-subscriber basis. At our total audio business, streams grew by 18%, while subscriber sessions at our key metro titles increased by 6%. While traditional media revenues were down on PCP, we were happy with our audience and revenue share results. For calendar 2023, the basis of our agency deals, Nine's free-to-air revenue share of 40.4% was a more than 20-year high. For the 6 months, Radio's linear ad revenue share held at around 16%, while Nine's Metro Media print business outperformed the market and further grew its revenue share. Subscription and licensing revenues are now around 30% of total wholly owned revenue with 8% growth in the half and growth at both Stan and Publishing. Contributing to this were price increases that stand entertainment and Stan's sport and solid subscriber numbers, whilst publishing revenue benefited from the growth in active subscribers and an overall 5% higher subscriber ARPU. Price increases at both were enabled by strong audience and subscriber engagement, a result of Nine's commitment to premium and exclusive content. We removed around $28 million of underlying costs from the business across the half, whilst continuing to invest in content and key areas of growth. This equated to almost 9% of our addressable wholly owned cost base, excluding Stan, and remains part of an ongoing program. 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. For the 6 months to December, Nine reported group revenue of $1.4 billion, down marginally on the prior comparable period, and group EBITDA of $316 million. Group net profit after tax and minorities and before specific items was $134 million, which included the impact of higher interest costs. On a statutory basis and inclusive of a specific item cost of $36 million and minorities of $15 million. Net profit for the year was $114 million. Turning to costs. We are pleased with our performance over the past 6 months. As Mike mentioned, we have worked hard on our underlying cost base, resulting in a reduction of around $28 million in the half. Reported costs were higher, but this reflected investments of around $15 million in the growth of Stan, which was more than offset by higher revenue as well as almost $20 million relating to sport. We also invested in our cyber tech spend by around $4 million and our employees through an average salary increase of 3.5%, which added just over $10 million. So, in fact, whilst reported costs were up, we removed around $28 million of underlying costs across the half as we focus on maximizing our efficiency in light of the challenging environment in which we continue to operate. Slide 10 details the composition of specific items, which totaled a pretax cost of $52 million for the half. Aside from domain, restructuring costs, including redundancies, totaled around $5 million. Inventory write-downs and provisions included some remaining rights from the MVC contracts, which was entered into in 2019, primarily for 9Now. This contract technically ended in 2023, but we retained some rights, a portion of which are no longer being commercialized or used. It also includes an onerous contract relating to the U.S. Bachelor battered series for which we have a life of series obligation. As you would know, it is not our usual practice to write off content as clearly the cash payments continue. However, we believe it makes sense for us to rebase our programming costs looking forward. As a result of these write-offs in FY '24 and FY '25, our reported program costs will be $8 million and $30 million lower, respectively, than previously expected. On Page 11, we look at operating cash flows, focused on the wholly-owned business, so it ties into wholly-owned net debt. For the half, cash flow from operating activities was $117 million, excluding the Domain Group. The key delta in the first half relates to the working capital build due to the AO and the Olympics. There is an annual seasonal build relating to the timing of tenant payments and receipts, which reverses in the second half. This year, there will also be an incremental payment to the ROC ahead of the Olympics in Paris in July. This latter impact would clearly not reverse until H1 FY '25. Adjusting for these, Nine's cash conversion was a strong 98%. On page 12, we have reconciled net debt of the wholly-owned group from the starting position at 1st of July of $339 million to the $363 million we have reported for the 31st of December. Beyond the operating cash flow, movements from wholly-owned businesses as detailed on the previous slide, Nine distributed dividends of $81 million to shareholders, and capital expenditure was $45 million. Cash tax paid of $42 million was around $50 million down on H1 FY '23 due to the reduced profitability across the period. During the half, Nine also invested $11 million in our on-market buyback. We bought back and canceled a further 5.5 million shares. The increase in finance cost payments of $11 million to $25 million is primarily a result of the higher average interest rates across the period. With these results, we have also announced a fully franked FY '24 interim dividend of $0.04, which equates to an annualized fully franked yield of around 4.6%. On a wholly-owned basis, importantly, our balance sheet remains strong, with leverage at the end of December of around 0.8x EBITDA, providing operational and strategic flexibility. I'll now hand back to Mike to add some further color on the divisional results.

Thanks, Matt. Looking first at total television. The December half reflected the impact of a markedly softer advertising market, which impacted both Nine and 9Now. Across the half, Nine recorded a total TV revenue decline of 9% to $602 million, with more than 15% of this revenue derived from digital sources. The real positive for total television in this result comes from our audiences. Across the full schedule, we have reported growth in both metro linear broadcast and BVOD audiences for the financial year-to-date. And so far, in 2024, the trends have been even more promising. The Australian Open recorded 23% growth in average total national TV audiences with 19% growth in metro free-to-air audiences and 53% growth in BVOD. Married at First Sight for 2024 has started strongly with national TV audiences up on the same time last season and with 9Now accounting for around 1/3 of this audience. This growth in total TV audiences gives us renewed confidence about market revenues as and when the advertising cycle begins to recover. For calendar 2023, in the 5 metro markets, Nine was once again #1 network and primary channel in all the key demographics. The underlying free-to-air market was challenging. The metro free-to-air market declined by 13% in the half. Regional markets overall performed better with regional free-to-war ad revenue down 5.8%. For the December half, Nine's Metro free-to-air revenue share was 39%, which resulted in a calendar 2023 share of 14.4%, a more than 20-year high. The benefits of the wind affiliation, coupled with the integration of our sales teams led to further share gains in regional markets, up 1.7 percentage points for the half on PCP. There was further growth in Nine audiences across the half, with strong growth in daily active users, live streams, and live minutes, reflecting 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 advertiser experience. The traditional BVOD market grew by around 13% for the half, of which Nine attracted a 45% share. This share was impacted by Nine's relatively weaker performance in November and December, which we believe has subsequently been reversed into 2024. VOZ is now launched, enabling the combined measurement and sale of both national free-to-air and streaming by reach and frequency as well as measurement and optimization. And we continue to believe in the significant role VOZ will play in the future of total television. As Matt mentioned earlier, during the half, Nine continued to strategically increase its investment into premium content and technology while reducing other operating costs resulting in broadly flat reported total television costs. Specifically, an $18 million increase relating to sport, including the increased investment into NRLW and Cricket through the World Cup and the Ashes as well as increased tech and cyber spend and higher employee costs being more than offset by other cost efficiencies. So, in fact, total underlying TV costs were down by around 4%, an outcome we are pleased with, but we continue to focus on further efficiencies. Turning now to Stan. For the 6 months, Stan delivered another impressive set of financial results, headlined by growth in EBITDA of 41% to $25 million. Stan's revenue growth of 11% to $228 million for the half reflects the strength of the group's engaged customer base and strong content proposition, enabling price increases across both entertainment and sports subscriptions to be consolidated with limited impact on churn. OP for the period grew by 11% on PCP, while current paying subscribers are just over $2.2 million. This consolidation of paying subscribers was a pleasing outcome given the economic environment and notwithstanding pricing increases. Stan originals have been a significant driver of performance, delivering 4 of the top 7 series shown on Stan over the past 6 months. New seasons of Bump and the Tourists as well as Scrub Lands, a co-commission between Nine and Stan, all attracted strong viewership as did the latest installments from Billions and the True Crime series, Dr. Death. The now-resolved actors and screenwriter strike has had some impact on the availability of licensed content, most notably, Yellowstone Season 5, which was delayed from November 2023 to 2024. Stan sport continued to strengthen its consumer proposition, successfully broadcasting the Rugby World Cup in the half as well as securing the rights to the World Rugby Sevens, which were broadcast over summer. Coverage of the Paris 2024 Summer Olympics and Paralympics is expected to keep subscriber momentum strong. These sports will complement Stan's already strong lineup, including domestic and international rugby, UEFA Champions League, Grand Slam Tennis, and an emerging Motors Board and Fight Boards proposition. Stan's margins expanded across the half with cost growth of just 8%. Sports costs were down marginally for the half, primarily reflecting changes to the phasing of Rugby costs across 2023. Stan continues to successfully manage the balance of growth and profitability and consolidate its strong market position. The global SVOD market is evolving much as we expected, with consolidation clearly underway. After years of focusing predominantly on subscriber growth, the industry has broadly returned to a profit and cash flow focus, which naturally leads towards greater prioritization of content licensing and other distribution partnerships, particularly in markets like Australia. As the profitable local leader in the space, Stan remains well-positioned to continue to benefit from these trends. Domain reported last week and its result reflected the turnaround of its key property markets in Melbourne and Sydney, coupled with strong pricing and cost performance. Domain reported EBITDA of $68 million, up 32% on a continuing basis, which excludes Domain Home Loans. Nine's consolidated results for Domain of $67 million, up 37% including DHL. Domain noted that it had finalized its exit from the DHL joint venture, whilst remaining optimistic about the future opportunities of consumer solutions within its marketplace strategy. The 12% growth in digital revenues was driven by core residential business, while strong listing volumes in Melbourne and Sydney were broadly offset by declines in Queensland and Western Australia. Domain recorded strong growth in controllable yield, a function of both price and depth, which underpinned 16% growth in residential revenues. Domain also recorded strong performances from its media and commercial real estate businesses as well as Domain Inside. Total costs increased by 3%, and the group reiterated previous cost guidance, a mid-to-high single-digit increase for FY '24 on the FY '23 base. Management continues to be committed to EBITDA margin expansion across the full year. Turning now to Page 18. In total, Publishing reported revenue of $289 million and a combined EBITDA of $78 million, down 19% on half 1 FY '23. Within this result, Nine's core metro business markedly outperformed with a weak digital programmatic advertising market impacting Nine's other digital publishing assets. Around 61% of revenue was derived from digital sources and more than 41% from subscriptions and licensing. We were very pleased with our subscriber performance at Nine Publishing, both in terms of subscriber numbers and ARPU. Increases in subscriber numbers and price at the age, the Sydney Morning Herald and the Australian Financial Review more than offset the decline in print masthead sales. The ability to lift price reflects Nine's ongoing commitment to quality, public interest journalism and remains a further opportunity, particularly as we continue to invest in our content. Total subscribers grew to more than 480,000, up 7%, while registered users increased to more than 1.5 million. The softness in the broader advertising market did flow through to publishing, print advertising held up relatively well, while Digital Publishing fell by 17%. This was predominantly driven by softness in the programmatic market, most notably in Nine's advertising-based publishing assets with the metro mastheads markedly outperforming. Half 1 FY '24 publishing costs increased by 3%, due primarily to wage and print cost inflation, which were partially offset by other cost initiatives. Turning now to audio. On revenue of $53 million, Nine Radio reported EBITDA of $4 million. The radio market held up through much of the half, finally succumbing in November and December to the weakness experienced across the advertising sector and the economy as a whole. For the half, Nine's Radio linear ad revenues declined by 5% against a 4-city market decline of around 4%. Partially offsetting this, Nine's digital audio revenues grew by 45% as Nine's focus on total audio reflected in its #1 commercial streaming share across each of the relevant survey periods. The contribution from digital streaming, which is now material and continues to be the fastest-growing revenue segment for radio creates longer-term opportunities. As listeners embrace online streaming through smart speakers, apps and websites, Nine single sign-on, our incremental content, growing data proposition, and our cross-platform sales initiatives provide exciting growth opportunities for our total audio business. Radio costs increased marginally with incremental investment in digital and associated content offsetting underlying cost-out initiatives. Before we turn to trading, I'd like to say a few words about the current regulatory environment. We urge the government to continue its focus on ensuring the right policy settings are in place that allow for a strong and vibrant Australian media industry. We acknowledge the government's recent comments confirming its support of the essence of the News Media bargaining code and its intent to enforce the code, including by designation of digital platforms if required. Notwithstanding these comments, the media landscape has evolved significantly since the code was drafted, and it requires the government's urgent attention to ensure Australian media companies are being fairly compensated for the ways in which global digital platforms are driving value from our content. For example, Nine's premium video content continues to drive huge audiences on social media platforms, while we're also witnessing the rapid growth in generative AI services, which utilize our public interest journalism to build and train their models. Given how quickly the landscape is evolving, it's critical the government moves quickly on this issue. We'd also encourage the government to take on board important feedback from the free-to-air industry in relation to proposed legislation on the issues of prominence and much-needed updates to the anti-cycling regime. And finally, we strongly advised the government to reconsider proposals that would see unsustainable content quotas placed on streaming services, which will favor global digital platforms to the detriment of local media companies. I'll now turn to current trading. Notwithstanding a challenging advertising market, Nine continues to focus on the strength of its competitive position by investing in content and growing its revenue share across all of its key markets, whilst ensuring the efficiency of its cost base. In free-to-air television, Nine has started calendar 2024 as the leader across all key demographics with clear share growth on the same time last year on both a network and primary channel basis across all of the key demographics as well as total people. More importantly, Nine's metro free-to-air audiences have shown growth through FY '24 to date. This improved audience trend gives Nine confidence that the group is well positioned when economic conditions and hence advertising markets begin to recover. In the current quarter, advertising markets remain difficult with Nine's metro free-to-air ad revenue expected to be down in the mid-teens on a percentage basis on the same quarter last year. 9Now continues its positive growth trajectory with revenue growth in the low to mid-teens on a percentage basis expected in the March quarter over PCP. Over the past 12 months, Nine has focused on realigning its total TV cost base with an increased investment in content and technology more than offset by other cost reductions. 9Now expects full-year reported total TV costs to be down marginally on FY '23. Nine continues to expect full-year EBITDA and revenue growth at Stan in FY '24 over FY '23. Revenue growth in 2024 is expected to be primarily driven by ARPU. Nine's publishing business continues to benefit from the growth of digital audiences with Q3 digital subscription revenue growth in the low double digits on a percentage basis, underpinning a strong performance from the mastheads. However, the programmatic advertising market remains weak. Nine continues to expect FY '24 publishing EBITDA to be slightly ahead of the half 2 FY '23 run rate. As Domain commented with its result last week, trading for the first 6 weeks of half 2 reflects ongoing year-on-year growth in new for-sale listings in Sydney and Melbourne, with early signs of improvement in other states in February. Domain continues to expect EBITDA margin expansion in FY '24, supported by improving listings, price increases, update on new depth contracts, and continued cost restraint whilst continuing to invest in its marketplace strategy. Nine Radio Q3 broadcast advertising revenues are expected to decline in mid-to-high single digits, while digital revenue continues to grow strongly. Over the past couple of years, Nine has continued to focus on its vision of creating Australia's digital media company with a clear strategy, commitment to execution, and a focus on continuing to further strengthen our competitive position. This result highlights the value of Nine's broad media business with diversified earnings across subscription, advertising, and a growing portfolio of digital assets. As we look through the impact of the cycle and Nine's result, it's worth reiterating our strategic priorities. We believe Nine has the opportunity to create value through the combination of 3 unique capabilities across both our traditional and growing digital platforms. Firstly, our ability to create and distribute premium content at scale from Australia's favorite TV shows to journalism that matters for all Australians, our investment in content, and the people who create it is unmatched in the local market. Secondly, our growing first-party database across 20 million Australians will continue to underpin the effectiveness of our investment in content and product, powering smarter decisions and creating a robust foundation for AI initiatives across the business. Together, these content and data capabilities increased Nine's opportunity to build out its relationship with audiences, integrated across our platforms, delivering scale advantages in line with the global tech platforms. As audiences consume our content and engage across Nine's digital platforms, there will be increasing opportunities for monetization in multiple areas through advertising, subscription, licensing, and transactions. With the right people in technology enabled by innovative use of artificial intelligence and supported by the power of the Nine branded assets, we believe we are well-positioned to continue to grow and establish ourselves as Australia's digital media company. That concludes the formal part of our presentation today. We'll now move to the couch and we'll be joined by Nine's Chief Sales Officer, Michael Stephenson. So now, we're going to open the line for questions.

[Operator Instructions]. Operator, if you can pass through our first question, please?

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

I've got 3. I'll go one by one. First one, just on ad markets. Seven West obviously a potentially better fourth quarter. So, just wondering if you're seeing any of those green shoots or if not, if maybe Steve can at least confirm that based on SMI, it looks like 4Q should be an easier PCP comp than 3Q. Just any color on the fourth Q outlook.

Yes. Thanks, Eric. I think as per the results, obviously, in Mike's commentary, Q3, we see being down in the mid-teens. At this point, whilst very early days in terms of our system being opening, it looks like Q4 will continue to be challenging. As you rightly point out, from an SMI perspective, the comparable PCP does make it a relatively easy quarter. That being said, the economic conditions that we operate in are still difficult. What I am increasingly more confident about, however, is that we are, if not at the bottom, certainly very close to the bottom of the ad cycle. And as you just heard in the results in terms of our audience performance across both linear terrestrial television and also a live streaming and catch-up television in 9Now, our audience performance is exceptional and our audience share is exceptional. So, as that market returns, and of course, it will, I'm very confident that we're well placed to take and continue to increase our market share.

Next one, maybe for Mike then. News Corp made some comments about being a core content provider for AI. I'm just wondering if there's any potential for NEC to monetize any of the content you give to AI or social media. And if so, would that be as material, say, the Facebook contract?

Yes. Look, some of the commentary that we just gave, obviously indicates our view around the importance of our content and in particular, our journalism in training and supporting AI engines, particularly the big global platform. So, certainly, there is a strong basis and commercial opportunity that I think we can look at evolving over time. Early days for us. We obviously have a range of agreements in place already with the likes of Meta and Google on the base of the News Media bargaining code. But certainly, I think the future of AI will be heavily dependent on quality journalism and therefore, it makes sense that those partnerships evolve.

And last question for you and Matt maybe. Just given the recent press, are you broadly happy with your existing stake in Domain? And maybe if Matt can elaborate on what Nine and Domain are doing together to accelerate Domain's growth.

Yes. So maybe I'll take the first part, and Matt can talk a bit about what we're doing directly with the team at Domain. But as we said previously, we feel like the stake that we have in Domain today enables us to do the things that we need to do and to be able to drive value between our 2 businesses. We've consistently talked about the way that audiences are delivered from Nine into Domain, and Matt can talk a bit about how that's evolving and where that sits. But increasingly, the exchange of data and the importance of that data as part of our broader data proposition. So, maybe, Matt, if you want to talk about some of the specifics.

Yes, sure. Thanks, Mike. Thanks, Eric. So yes, look, we stepped up our work with Domain. I suppose just the tangible sort of stuff we're working through. First on awareness. So, if you saw the Australian Open, you'd have seen that we've sponsored Domain through that, so from an awareness driving that. Also looking at traffic driving from our publishing assets into Domain. We've worked hard in the last 6 months on that, and we'll improve that even more. But we grew traffic by about 13% into Domain from publishing assets as well. And that will increase, as Mike says, about as we digitalize the businesses and get closer and the data improves will work through. And then finally, Nine Ad Manager in Steve's area, we're trialing that with about 20 agencies at the moment as well to see how those assets work with those agents. So, there's some work going through. We're still working through it, but some good steps so far.

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

The first one for me, probably for Steve, just on digital programmatic advertising in the publishing business, which is obviously taking a big step down. Is that a structural thing there? Or would you be expecting most of that revenue to come back? That's my first one.

Yes. Thanks, Fraser. When we talk about the programmatic revenue line, we're really referring to digital display advertising. Of course, increasingly, that's traded programmatically. And as you would have noticed from previous results, our focus really has been on increasing our first-party data asset and a number of signed-in users to enable data to be utilized across both displays as well as the Nine-now product. And so, I think into the future, as our first-party data and utilization across both the metro business at nine.com.au increases, we can see improved monetization of digital display. But as we stand in this result today, it obviously is mass audience, mass reach, incredible amount of inventory, and therefore, increasingly more commoditized in the absence of data. And that's really what we've seen. When you think about programmatic, whether that's digital display or Nine-Now, of course, it's one of the first revenue lines that you see impact when you go into the downturn of economic cycle, but it's also one of the first revenue lines that you see return because of the ease of turning it on and off.

And then Mike, just on Stan and paying subscribers. It's obviously a solid result to hold them given the competitive environment and cost of living and that kind of stuff. But what's going to take to get that growing again? And do you still think there's a good sort of subscriber growth opportunity for Stan?

Yes. Thanks, Fraser. What we're seeing in terms of the subscriber numbers and that consolidation is consistent with what we'd expected in commentary we've given previously in the market. So, it's not really a surprise as we come into a tougher economic time. And obviously, some of our free television and BVOD audiences are the beneficiaries of a tougher economic situation where consumers are changing their behavior and looking for greater value. As we come through the cycle, again, it will provide greater opportunity for top-line subscriber growth in the business. So, I don't think we're at the top of the market, but we're certainly seeing some impacts on the way that consumers are spending. You'll probably also note from the commentary that we've said ARPU growth being the driver of revenue. So, even in a relatively tougher consumer market, we expect to see Stan's revenue growth coming from ARPU through this part of the cycle. And then as I said before, flowing back to a world where we see more sub-growth beyond that part of the cycle.

And just the final one. Just wondering, there was a little bit of loss of market share in 9Now in the half. I know you've said that you expect that to recover this half. But can you just tell us what happens in the half to drive that?

Yes. I'll get Steve to talk to that.

Yes. So, both obviously in linear television, a record share, 20-year high, and also in BVOD for the full year a 48% share. Of course, the BVOD market operates very much like the linear market in terms of the agency deals that we do, and those agency deals are on a calendar year basis. So, the first part of that year, we were a 48% share, we just effectively balanced through the agency deals into the second half of the year as the primary driver. Secondly, we did introduce at the beginning of calendar '23 seasonal-based pricing. So, you would have heard me talk often about sort of the flat nature of BVOD pricing, and we are increasingly trying to add both a more dynamic nature and seasonality to that. As a result of that, we reduced our pricing in the first half of the year, where we had increased supply and, of course, increased our price in the second half of the year calendar to take into account the fact that we have lower supply and high demand. What I didn't anticipate was the market changing in October and November. And so, we did get caught a little bit with the highest yield in the market and less demand and therefore, less sell-through, which was the real impact. Of course, that corrects into this quarter and beyond.

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

I just had 2, please. The first one was just in relation to the dividend. Can you confirm, is this a function of the working capital drag in the dividends? And should we expect this to revert in the second half after your normalized cat ratio?

Yes. Look, we continue to retain the same approach to dividends, and that is to look at a payout ratio in the 60% to 80% range over the full financial year. So, I think nothing changes in terms of that approach.

And then just a second one on Nine publishing. So, obviously, there's been a pretty reasonable step up in subscribers, which is good. But can you talk a little bit about how you're thinking about the ARPU piece here and if there's any scope for pushing price a little bit more aggressively, just given the penetration of the market in this one?

Yes. The publishing performance, as I mentioned in the commentary, has been really pleasing, the subscriber performance in particular. And you will note that we have increased pricing in some parts of the subscriber base. And the result of that pricing has yielded a very pleasing result in terms of limited impact on churn. It gives us great confidence in the ability to look at pricing going forward right across our publishing business. So, I think confidence in the content, confidence, and engagement means we've got that lever to pull in the pricing space.

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

I have 2 questions as well. Just the first one, just to follow on the BVOD question. I guess some of your competitors are starting to catch up in terms of BVOD capabilities. So, how are you thinking about the natural or longer-term share that Nine should have in beetle should it convert free-to-air at the time?

Look, I think firstly, it's important and we've spoken about this quite a bit in recent presentations in the market. You really need to start to think about 9Now and its position in the broader digital video advertising market. That market is greater than $3 billion. And the relevance of shifting share, particularly in the short term between free-to-air networks, BVOD services is much less important or impactful to our longer-term business. And in fact, there will be times where other networks grow their share and grow their revenue, which, in fact, we think, is very good for the category. It's a bit like the SVOD category when it started and standard Netflix were both in the category, it lifted all boats. So, I think there is a change in the way we need to think about that. It's really share of that total $3 billion-plus and how we go and chase that share.

And then with Stan, that 11% ARPU growth, are you able to give us the split between the benefits from price rises versus, I guess, take-up of and sports and migrating up to 2 years? And how should we be thinking about the contribution of these 2 levers moving forward?

Yes. Look, I won't break down specifically what the contribution is from each, but your point is correct. There is ARPU growth that comes from price increase and there is ARPU growth that comes from the uptake of sports subscribers. This year, in particular, being an Olympic year and Paralympic year, and Stan broadcasting content from the Olympic Games, we expect that to be a driver of Stan's sports in particular this year. So, I think we will see the mix of ARPU coming from sport a bit stronger in the coming financial year versus what we've seen today.

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

My first question is around the audiences. And I mean, you've obviously pointed to audience growth in TV. But I'm just interested in whether you're getting much traction with media agencies when you present those audience numbers. Because if I look at what's happening in the TV Ad market, there certainly seems to be a disconnect and there are other mediums, which are doing better. So, do you mind, I mean this is probably one posted, like how does that discussion go? And how do you reconcile that audience growth with what's happening in the market?

Yes, I think it's a really good question. Obviously, we've seen, I think, strong audience growth in the financial year-to-date. And to be totally honest, an even stronger start to the calendar year off the back of the Australian Open and then an incredibly strong Marriot first site. Increasingly, when we talk to marketers and advertising agencies, we talk in a total television basis. However, what I do find within that right now is linear television free-to-air TV, I think, has found its level. And we're confident that those audiences can maintain broadly where they are today through the next part of the cycle as we continue to invest strategically in content. I think we probably can do a better job to be totally honest around promoting that as an industry to both agencies and marketers alike because the power of television is unrivaled, of course. We know this. in combination with BVOD is even stronger. But if it's linear television free-to-air television that drives both of those businesses.

I think, Steve, probably also worth noting that the agency arrangements always follow the audience outcome. And so, audience results this year convert to agency results in the subsequent year. So, we'll certainly see an ability for us to use that strength in audience both on a competitive basis and on an absolute basis as we go into the next round of our discussions with agencies as well.

And then, I mean, if I look at the immediate Q3 trends in the TV ad market, obviously, they remain challenging. You mentioned that could well continue into Q4. In your view, are you seeing some revenue share losses as well in Q3 in free-to-air? Or is it all market-driven? And do you expect as you go into Q4 having the Olympics will help you share a little bit? I mean I'm conscious that often if advertisers want to be on the Olympics. And I know it doesn't fall in the second half, but they almost need to be with Nine ahead of it. How are you thinking about that?

Yes. I mean, Mike, again mentioned in the result, calendar year '23 was a 20-year record for Nine and for anybody for that matter of fact. So, to be a 40.4% is an unbelievable achievement. In the first quarter, I continue to see our revenue share being dominant. We were a 51% share based on SMI in January. We're in the middle of Married at First Sight. We've got an excellent agency deal framework that will support all of our ambitions. And of course, we have the Olympic Games. The Olympic Games proposition, as we've explained in some detail previously, is an all-of-company 8-month program of advertising across all of our assets, starting with the Gangwon use Olympics in February on the road to Paris. So, the 4 major partners as an example that we've already secured are already investing with Nine, and we see increased share from those advertisers. So, I'm confident that with the strength of our audience, the Olympic Games, the strength of our agency framework that we will see continued to audience revenue growth this year, and I'm very confident about it, I'm already seeing it.

Last one is on Stan. Was a very good first-half result, particularly at the EBITDA line. I'm interested in any comments you can make around whether you can expect the same growth rate to continue into the second half. And you obviously had the benefit of the price increases, which diminishes a little bit. I think you'll still get a bit more from spot in the second half. But do you think that growth rate slows down? And is there anything in the Stan cost phasing, which will be different in the second half?

Yes. Look, I probably wouldn't go into further detail beyond the guidance to say that we are expecting our full-year EBITDA to be up versus the last financial year. So, I'm not going to sort of go down and break that further, but we will see growth year-on-year in full-year EBITDA.

I mean, can you talk to at all whether it's going to be lower or you can't really?

No, look, I think what we've given in guidance is pretty clear.

[Operator Instructions] Our next question comes from the line of Kane Hannan from Goldman.

Just the TV cost base, on a slightly better outlook in this result. Is that all relating to the blog programming costs you spoke to and maybe lower commissions in the tough ad markets? So, can you just talk about the initiatives you're taking there? And then could take there if things would stay soft going forward?

Yes. Now, look, in fact, consistent with what we provided in the commentary, we've actually increased our investment around the total television business into both premium content and technology, which is underpinning the consumer experience for 9Now as we head into an Olympic Games. And we've taken other operating costs out of the business to offset those investments. So, if you sort of peel back the layers of that, it's removing operating costs to invest in the things that matter most. So that's been a very pleasing outcome. In terms of levers going forward, if the market continues to be difficult, well, there are further levers. We've continued to take the view that focusing on content and not pulling premium content investment through the cycle is a strategy that makes sense. And you'll see that free-to-air audiences being up over the financial year-to-date, a considerable turnaround to what's been a long-term trend for free-to-air and similar in terms of the growth of BVOD. Those businesses are positioned really well with that audience result as the cycle turns. So, we would be hesitant to pull levers further unless it got drastically worse. We think, as Steve had mentioned before that it's fair to assume that we are somewhere near the bottom of the cycle. In terms of the timing of when that might turn back up, it's hard to say that the business is positioned really well in terms of its investments and the prioritization of our investments.

And just in terms of the Paris Olympics given how Solgaard markets have been, I suppose, 18 months since you bought the rights. Do you still think you'll make a decent return on the POS component of the rates?

Yes. In fact, in the 18 months or so since we signed the deal, maybe a little bit less than 18 months, the deal looks better and better. There's no doubt that major sporting events are something that are disproportionately outperforming in terms of audience results for television. So, we're extremely pleased by how that's evolved over the period of time since the deal was signed. Steve has announced 4 of our top partners for the games. We've made really good progress in terms of getting those partnerships in place and our targets in terms of generating revenue. And our cross-platform strategy is something we spoke about when we talked about Nine's unique ability to monetize the Olympic games, not just across broadcast, television, and BVOD, but across our broader assets, including Stan. Those plans have come together really nicely. And in fact, those are major sponsors who are already on board are sponsoring and spending across all of our platforms, not just in television. So, the strategy is playing out as we expected, and we're really confident about the ability to generate the revenues against the cost of the Olympic Games.

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

Just a couple of questions from me. First one, just on your $28 million cost savings, presumably most of that was in television. But can you talk about any cost savings that you're doing perhaps in publishing and radio?

Yes. So, in those areas as well, there's a cross that you've got some procurement savings that are coming through. There are some people cost savings coming through in the second half, as we go in the second half, we see improvements because of some work done across printing and distribution through there as well. So it's, of course, a number of things, but those are the types of areas where we're taking costs out.

And my next question is on the proposal to Ben gambling Ad and what's your view on that? And what's Nine's suppose exposure to that area?

Yes. Look, obviously, there was quite a bit of focus and coverage going back probably 3 or 4 months now in terms of the government's plans around that. I think the complexity of changing the dynamic of gambling advertising is probably greater than maybe what was expected to begin with. There's a significant amount of dollars that comes from the gambling category that underpins the strength of our local sport. And so, I think the reason why we're seeing this sort of legislation taking longer is because it is far more complicated than I think what was initially thought. In terms of where we end up as an outcome, look, I think it's hard to say. We would expect some change in terms of the regulation, probably some level of limitation. But certainly, we think that in that case, we've got opportunities to grow other categories and offset any potential impact of changes based on what we know today.

And your next question comes from the line of Brian Han from Morningstar.

On Stan, did it actually benefit from the Hollywood strike relative to your competitors because it's not a hostage to the regular flow of U.S. content?

Yes, that's right. So, on an absolute basis, everybody had some kind of impact. And as we said, we saw shows that shifted in the schedule. But on a relative basis versus the competition, Stan, I think, has and should fare better because of their proportion of original content. You'll see over the summertime stands lineup of original releases, premium content coming through when a lot of the other platforms just didn't have that throughput. So, we don't get specific data on the market in terms of subs. It's hard to get a sort of short-term track on who's sitting where. But I'm quite confident that through this period, Stan has outperformed the general market because of that positioning and that investment in local content.

And Matt, just a quick one. Can you please remind us how much you guys will need to prepay in this fiscal 2024 year for the Olympics?

Yes. Look, I don't think we've given guidance exactly how much, but from a working capital point of view, we will make some payments as we go up to June, and they will be in the tens of millions of dollars as a prepayment down. And then as we go to the Olympics and Paralympics in July and August, receiving the money back through before the end of the calendar year.

That concludes our Q&A session for today. I would like to hand the call back over to Mike for closing remarks.

Well, that wraps up the results briefing. Thank you for your attendance, and we'll see you again at our next results briefing in August.