Financial Analysis

Business and Financial Analysis of Seven Network Limited

Business and Financial Analysis of Seven Network Limited

Business and Strategic Analysis

Analysis of the economy, the industry, and the place of SEV in the industry

The Seven Network Limited (SEV) operates within the 'media' industry group and is comprised of two main business segments; television and magazine. SEV is one of the three main free-to-air (FTA) commercial networks in Australia. According to statistics, SEV publishes one in every four magazines sold in Australia. Furthermore, SEV has made several investments and recently formed a joint venture with Yahoo! to penetrate the internet market (Berger 1982, p. 80 -98).

According to the Australian Communications and Media Authority (Acma, 2008), past trends show that Australian commercial television has achieved revenue growth well above the economy. Since 1979, real GDP grew on an average of 3.2% per annum, while commercial television revenues increased at a rate of 3.8%. Expenditure on advertising is directly influenced by corporate profits. During periods of economic expansion, television advertising revenue increases while in times of weak economic growth, companies often cut their marketing budgets, reducing television advertising revenue growth. Hence, commercial television revenue is positively correlated with changes in GDP growth.

SEV's main competitors are Networks Nine and Ten, all highly competitive in terms of widespread national coverage and program ratings. According to industry reports, rivalry amongst the 3 networks is evident through the acquisition of regional affiliates following the amendments of media ownership rules under the Broadcasting Services Act 1992. Currently the aggregated markets of the media industry allows major networks to extend their audience reach to more than 90% of the Australian population, thus attracting 80% of all television advertising revenue.

As of today, SEV controls the greatest national coverage through the ownership of eight different ownership groups, including the 3 major commercial networks and controlling more than one commercial television license. Rivalry between the commercial channels also exists in the form of program ratings, where commercial spots can be sold during the breaks of the program. It should be noted that the larger the audience for that program, the higher the cost for advertisers to purchase a commercial spot, thus igniting competitive bids for the rights to broadcast major international event programs (Armstrong 1995, p. 150 - 187).

A differentiating and valuable variable for SEV owned TV network is the fact that it primarily caters to the demographic strata of 25 to 54 age slot. Thus the company has immensely invested in Australian drama, lifestyle programming and in-house reality series like Dancing with the Stars. After dominating in advertising revenue, the Nine network fell behind SEV in 2007; SEV had 29.9% of the prime time market, while Channel Nine had 26%. Other rivals competing for market share include broadcasters Pay-TV carrier, Foxtel, SBS and ABC. Nevertheless, the free - to - air networks still dominates with a viewership of 85% (Couldry & Curran 2003, p. 200 - 254).

SEV's Pacific Magazines' key competitors are ACP Magazines LTD and FPC Magazines, all of which publish ...