CBS betting on heavy programmatic push to resurrect Ten Network

CBS is planning a takeover of debt-ridden Australian broadcaster Ten Network in a bid to revitalize a market ravaged by falling advertising revenues – hinting that a programmatic advertising push will be pivotal to Ten’s recovery. Given the recent departure of Foxtel’s SVoD service Presto, CBS has more room to maneuver a launch strategy for its All Access streaming service – but the most watched TV network in the US will be notably wary of Australia’s volatile market.

The remaining two top broadcasters in Australia, Nine Entertainment and Seven West Media, may have missed their chance to take a dominant market share but it is unlikely either were capable of saving Ten Network. Therefore, US investment looks like Ten’s best bet, with the added bonus being that CBS has experience in navigating the Australian video landscape through its 33% holding in the TV channel Eleven, a joint venture between the US firm and Network Ten (the Ten Network-owned commercial network).

Ten Network has long been in the shadow of Nine Entertainment and Seven West Media, but CBS’ takeover puts it in a stronger position to retain broadcasting rights to key US shows and also gives CBS control over the ad-supported catch up service Tenplay, which is one part that might benefit from programmatic, as well as DTT network One and the remaining stake in Eleven.

Cord cutting has devastated the books of the top three Australian broadcasters by almost $1.2 billion in losses over the last year, but there is certainly room in the market for another OTT service to be successful. CBS has confirmed it will be launching All Access in Australia if the acquisition receives approval, following the company’s recent international expansion effort which kicked off in Canada.

The self-proclaimed programmatic expertise which CBS boasted of this week suggests the company is planning a revamp of the ad tech side of Ten Network. There is also the potential to build on a trend which is picking up pace in the US, where major content businesses are employing data-driven ad strategies with less reliance on Nielsen’s traditional metrics.

CBS Chairman and Chief Executive Leslie Moonves said, “We have been able to acquire it at a valuation that gives us confidence we will grow this asset by applying our programming expertise in a market with which we are already familiar.”

CBS has previously described its programmatic push as “bullish” and has contracted native ad exchange firm Bidtellect to supply inventory on desktop and mobile in the US, and it may well choose to switch out Ten Network’s existing programmatic suppliers. Network Ten uses an audience-based programmatic trading platform from local Australian firm Multi Channel Network (yes, named after MCNs).

The streaming market in Australia is currently made up of four main players – Netflix, Amazon Prime Video, Stan and Quickflix. Home grown SVoD offering Stan is jointly owned by Ten Network’s rivals Nine Network and Fairfax Media, which our own data has in a distant second spot in the market with 600,000 subscribers last year, behind Netflix with just over 2.2 million.

Amazon only launched its video service in Australia at the beginning of this year but our figures have projected it to quickly overtake flailing third-placed SVoD service Quickflix. Although Quickflix was bought out by US media tycoon Erik Pence for just $1.3 billion in October last year, which HBO previously owned an 8% stake in.

Foxtel’s Presto was closed down at the end of last year and the operator then began merging its content into Foxtel Play as part of a strategy to mimic the success of HBO Now. Faultline Online Reporter said at the time this spelled bad news for Seven West Media and Nine Network – which have been left out in the cold after stubbornly deciding against combining their assets to launch a decent competing service. Seven chose to team up with pay TV operator Foxtel, while Nine signed a deal with Fairfax Media to launch Stan.

CBS’ acquisition of Ten means things could start to get even worse for Seven West Media and Nine Network, which hold around 35% to 40% of FTA viewer share each, as the US firm prepares to inject cash into Ten Network to match the spending of its two rivals – spending which it currently lags behind by some $250 million a year.

However, the success of OTT video in the country is ultimately in the hands of the National Broadband Network (NBN), the government controlled business taking over all existing broadband networks of Telstra and Foxtel. The two operators account for virtually all the broadband lines in Australia, and many think the project will end in disaster, especially if the NBN awards all that business to a single supplier such as Nokia (Alcatel).

The acquisition of Ten Network requires approval from creditors and the Foreign Investment Review Board, while the Australian Competition and Consumer Commission has stated it would not oppose a deal as it is unlikely to result in a “substantial lessening of competition in any relevant market.”

Local media outlets and analysts have valued the deal at between $160 million to $200 million. That looks like quite a bargain, although Ten Network went into administration in June after posting first half 2017 losses of $232 million and has net debt of around $43.5 million.

CBS Studios President and Chief Executive, Armando Nunez, said, “We are committed to the efficient, reliable and successful turnaround, operation and development of Ten to support continued growth in Australian media.”

Ten Network Chief Executive, Paul Anderson, said, “We are very excited about further developing that relationship with CBS as an owner and strength that it will provide to the company at this critical time.”