With ad revenues down across the board, don’t be surprised if you see more legacy media companies pushing for mergers this year.
Australia’s legacy media is struggling and is under increasing pressure to start a new round of mergers and acquisitions as ad revenues dry up. The reelected Coalition government in Canberra will come under pressure to allow the country’s remaining media groups to look at new link-ups or marriages. But would this sufficiently cut costs and slow the slide in revenues and profits?
The state of play
In the past month, earnings downgrades or worse have been issued by Macquarie Media, Foxtel and, yesterday, Seven West Media. In all cases the problems stem from falling ad revenues (and in the case of Foxtel, slumping subscriber numbers), no cash flow and an impossibly large debt burden. Seven West Media’s woes are also compounded by a still too-high level of debt, which is a lingering legacy of the company’s formation in 2011. Even the newly merged Nine/Fairfax, the biggest listed Australian media group, warned in early May that free-to-air TV ad revenues remain weak.