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Seven cracks the big tech wall to get $30 million in a deal with Google

The Gang



The Seven network has breached the walls of big tech, securing a deal believed to be valued at $30 million a year to provide news to the newly created Google News Showcase.

The surprise announcement was tacked on to the end of Seven West Media’s half yearly results video call.

CEO James Warburton said simply that “Seven has entered into a LOU [letter of understanding] to form a long-term partnership with Google to provide news content to Google Showcase”.

The news comes as legislation to force big tech to pay Australian media outlets for their journalism is due to be voted on in Parliament this week.

A winner

Jason Sternberg, lecturer in media and communications at QUT, said Seven’s deal was a major win.

“It is a signal that the Australian government has won the war, or at least a big battle, with Google and Facebook. I’d call it a pre-emptive strike,” Dr Sternberg said.

But in some respects the deal looks to be something of a backdown.

Earlier this year Nine chairman and former treasurer Peter Costello said the big tech giants should pay media companies $600 million a year, or 10 per cent of their Australian revenues according to his estimation, while News Corp chief Michael Miller asked for $1 billion a year.

Easy pickings

Seven was the soft touch among Australia’s big media, according to independent media analyst Peter Cox.

“Seven has been going along with Nine and News, but it has not been speaking out like they have,” Mr Cox said.

“After announcing the deal, Mr Warburton said it was not an attempt to undermine the legislation which he said ‘Is unequivocally coming into effect’.

“Nine and News have been arguing for much more, but they will now be looking at the $30 million Seven is said to have got and saying, ‘Well, what are we worth?’”

Mr Cox said in relation to Seven’s deal Nine and News would probably be looking at $50 to $80 million, adding that Seven had done well to get anything out of Google.

The move could pave the way for other media companies to win similar deals with Facebook and comes after Google threatened to withdraw its search engine from Australia if Parliament passed the legislation in its current form.

“That threat was a pretty sly thing, but they have now decided not to pull out of Australia as that would have seen them vacate the field to Microsoft,” Dr Sternberg said.

The deal leaves open the question of whether Seven can make it work.

“They had a long-standing relationship with Yahoo, but that didn’t work all that well,” Dr Sternberg said.

Seven also announced that it had taken the No.1 slot in both free-to-air television and broadcast video on demand (BVOD).

A recovering advertising market saw the group turn in a profit of $116.4 million in the December half, compared to a loss of $49.4 million a year earlier.

Seven won the ratings war with arch rival Nine and “secured No.1 position in broadcast and BVOD audience share,” Mr Warburton said.

But Nine was still ahead on revenues, as ratings leads generally take 12 months to be monetised into higher ad revenues.

As this chart below shows, though, Seven’s revenues are rising faster than Nine’s and in the December quarter it almost equalled Nine’s revenue share.

Seven’s stronger ratings are based on the success of revamped favourites like Big Brother, Farmer Wants a Wife and SAS Australia, which saw its average audiences grow 75 per cent in the December half.

The kick up in TV advertising has been “remarkable”, according to Chris Walton, partner with media buyer Nunn Media.

“Not only have we seen a recovery from the pandemic slump, but we will see year-on-year advertising growth as the market recovers from weakness prior to that,” Mr Walton said.

Meanwhile, younger demographics continue to desert broadcast TV in favour of BVOD and Seven is leading the charge.

Mr Warburton said 80 per cent of Seven’s BVOD users were under the age of 50, and it is “No.1 in the core demographic between 25 and 54”.

Revenues in the BVOD sector increased a remarkable 73.2 per cent in the December half, but only accounted for $47.7 million compared to $562.9 million for broadcast TV.

However, the future for BVOD is positive, with Mr Walton saying ads in that space earned “more per viewer, because the audience is more engaged and is generally a better demographic”.

Source: Seven

The total BVOD market is expected to more than double by 2024 to almost $500 million, according to PWC.

And the stoush over cricket broadcasting rights is continuing to bubble away.

Mr Warburton said he had not given up on his fight with Cricket Australia over what he called “onerous sports contracts”.

He said Seven was also looking at investing in a streaming service.

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‘Mountain of equity’: Millions of home owners could save thousands





If you’ve become a home owner in the past five years it might be worth getting an appraisal – you’re probably sitting on a “mountain of equity”.

As we’re all aware, house prices have soared lately. And while that’s bad news for rapidly worsening inequality, it also means those that do own a home could save money on their mortgages, upgrade their properties or even borrow to finance that renovation they’ve been wanting to get done.

Refinancing could save you thousands in interest repayments a year.

You’ll be in a particularly strong position if you’ve also been able to keep up with your mortgage repayments during COVID, because you now own a larger proportion of a house that has rapidly increased in value lately.

It’s a virtuous cycle that’s making the gap between the haves and have-nots much larger in Australia by pushing up property prices even faster.

Owner occupiers have been the keystone of the latest property boom, with most being existing owners upgrading their homes.

Who could blame them? RateCity research published this week finds an owner occupier in Sydney who bought at the median price in 2019 with a 20 per cent deposit has now seen their wealth increase by $402,000.

Apply the same conditions to Melbourne and wealth has risen $192,000.

This assumes property owners kept up with their mortgage repayments, which the majority of home owners have done while working from home and taking part in a $300 billion government cash splash during COVID.

“Millions of homeowners are sitting on a growing mountain of equity, some without even realising it,” RateCity research director Sally Tindall said.

How to benefit

If you’re in this situation, getting the value of your home appraised could be the first step to a better home loan or moving up the property ladder.

“If you’ve owned your own home for at least a couple of years, and have been diligent about paying down your debt, you could refinance to a lower rate,” Ms Tindall said.

“Lots of lenders offer interest rate discounts to new customers with loan-to-value ratios below 70 per cent, including ‘big four’ banks CBA and Westpac.”

What’s a loan-to-value ratio? Put simply, it’s the difference between the size of your home loan and the value of your property.

So, as an example, if your home is worth $1 million and your mortgage is $100,000 you have a loan-to-value ratio (LVR) of 10 per cent.

The lower your LVR the easier it will be to refinance your loan at a lower interest rate or borrow more to purchase a higher-value property.

First home buyers might also be able to remove the guarantor on their loan sooner than they thought because of rapidly increasing prices.

About 58 per cent of the lowest variable interest rates available are open only to those with deposits of 30 per cent or more, RateCity said.

In other words, rising property prices may have moved you into the club of home owners that can achieve lower interest rates on their mortgages.

A median Sydney property purchased on an 80 per cent LVR in 2019 could now be refinanced on an LVR as low as 55 per cent.

If those conditions are applied in Melbourne, LVR falls to 63 per cent.


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Here’s why Australians won’t be hit by the soaring gas prices we’re seeing overseas





Australians have dodged the bullet of skyrocketing gas prices currently hitting consumers in Europe and Asia.

While prices in the major gas hubs of those regions have spiralled up by a factor of five, in Australia a brief spike eased in September.

That means local consumers won’t be facing big jumps in household bills into next year.

Australian gas prices jumped in June and July after outages at coal-fired power plants in Victoria and Queensland boosted demand for gas generation.

That spike was short lived due to warm weather in some states and lockdowns in Victoria and NSW eroding demand, according to research by EnergyQuest.

“You’ve had warmer weather though the major capitals, the effects of the lockdowns and increased renewables, which reduced the demand for gas generation,” EnergyQuest CEO Graeme Bethune said.

Power prices fell

Those factors have also fed into power prices, with electricity costs falling in September in comparison with a year earlier.

What is interesting about the table above is that not only did average power prices drop, but the peak price charged by generators when power is in short supply also dropped.

That was despite the ongoing problems at the Victorian and Queensland power generators.

Part of the explanation is that there is increased output from renewables as rooftop solar grew, and new wind and solar generation came online.

That meant that gas power was called on less often to meet peak demand, which in turn held down power prices.

The inverse was true in Europe, where a 20 per cent fall in wind output over recent months helped run down gas supplies, contributing to the price spike, Mr Bethune said.

The future of power prices in part will depend on renewable output.

“If the wind blows strongly and there is plenty of sunshine across eastern Australia then it will keep pressure off gas prices,” Mr Bethune said.

The influence of renewables across the system in the last year is evident in this chart on power supplies.

Although wind has been stable in terms of its contribution to the power equation, outputs from hydro, solar farms and rooftop solar have risen.

The result is that coal has been pushed down from 65 per cent of power production to a record low of 60 per cent and that should help hold down both gas and electricity costs.

Even if offshore gas prices continue to spike Australian gas producers would not be in a position to push up local prices to match it.

“A lot of the export contracts for LNG [liquified natural gas] out of Queensland are set against the oil price and that has not risen by anywhere near the amount gas had,” Mr Bethune said.

“Then you have the federal government which has made clear to LNG exporters that they need to make enough gas available to the local market.

“They’re doing that regardless of the fact that they could make more money in the export market.”

Domestic users are supplied from long term contracts that cannot be easily changed when gas prices rise, so that would be another brake on prices.

However, while it is comforting to know local gas prices won’t spike to offshore levels, Australian consumers are still not getting as good a deal on prices as they should be, according to Bruce Mountain, Director of Victoria Energy Policy Centre at Victoria University.

“For small customers the gas price is not the big deal. The biggest things are the operation of the retail market and the costs levied by the owners of the gas-distribution pipes,” Professor Mountain said.

“Gas supply has been very profitable for the big gas companies.”

That was in part because consumers don’t bargain-hunt for retailers, and the charges levied to use the pipes and wires of the energy distributors are too high.

Regulators set these charges and could crack down on them but don’t, Professor Mountain said.

Since privatisation margins earned in energy distribution have increased dramatically.

Power distributor AusNet Services, under takeover offers from two groups, “is currently making a margin of 19 per cent – they’re far too profitable,” Professor Mountain said.

When power was distributed by [the state-owned] SECV there was a margin of 3 per cent on sales, Professor Mountain said.

Household power bills could be 15 per cent cheaper if the distribution businesses were less profitable, he said, with the situation similar for the gas sector.

But the move away from gas as a household fuel, necessary to reduce greenhouse emissions, will help deliver cheaper energy.

“Devices that use gas [for household tasks] are much less efficient that those using electricity,” Professor Mountain said.

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Scott Morrison talked Glasgow, China with News Corp boss over ‘after-dinner drinks’





Prime Minister Scott Morrison discussed the Glasgow climate summit, China and the Biden administration with News Corp executives in New York last month, the company’s global boss has told a Senate inquiry.

Appearing before a Senate probe into media diversity via video link on Friday, News Corp’s global chief executive Robert Thomson revealed he spoke with the PM about international affairs over “after-dinner drinks”.

Mr Morrison was in New York to represent Australia at United Nations’ talks.

Mr Thomson told the inquiry on Friday he presumed the PM wanted to meet because he knew “many” world leaders attending the UN summit.

“I had presumed he wanted some insight about some foreign policy matters,” Mr Thomson said.

Mr Thomson confirmed Mr Morrison didn’t meet News chairman Rupert Murdoch while in New York. He also claimed there was no discussion of the looming federal election.

Mr Thomson said the Glasgow summit came up “in passing” between the pair, but they didn’t talk about News Corp’s planned 16-page net-zero spread across its Australian publications, which has ignited a firestorm of criticism Down Under.

The main topics of discussion were Japan, China, Afghanistan and the “contours” of the Biden administration, Mr Thomson told the inquiry.

“The Prime Minister and I don’t necessarily agree on China,” he said.

Mr Thomson (on TV) said he presumed the PM wanted foreign policy insights. Photo: AAP

Mr Thomson was also asked by Labor senator Kim Carr about whether News Corp directed local editors to take positions on political issues.

Mr Thomson said News Corp’s New York executives had no involvement in recent features on net-zero carbon emissions and that its Australian editors weren’t told from the US what to write.

But he said the company did expect editors to operate within a certain philosophical framework.

“As a company, we have a philosophy about certain issues,” he said.

“We have a philosophy about individual freedom, about the role of the market, about the size of government.”

Mr Thomson said that – as a former editor – he had “discussions” with News Corp’s editors, but that they had a “large amount of local autonomy”.

Senator Carr and the inquiry’s chair, Greens senator Sarah Hanson-Young, grilled the News Corp executive on the publisher’s track record on climate, accusing its Australian papers of platforming climate deniers for more than a decade.

But Mr Thomson said News Corp has been consistent on climate dating as far back as 2004, citing Mr Murdoch’s 2006 statement that the “planet deserves the benefit of the doubt”.

News Corp Australia has just finished a two-week campaign of climate coverage that included its major Australian mastheads running 16-page spreads about net-zero emissions.

The series had many critics, who argued News Corp had a long-held editorial hostility on climate action, including attacks on past Labor government policies targeting emission reduction efforts.

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