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Rooster to feather duster: Ten falls to number 4

There was a time when Ten Network Holdings (ASX: TEN) was flying high. While it hasn’t topped the ratings in any consistent way for decades, the company once rated very highly among the prized ‘high disposable income’ demographics.

Commercially, Ten’s best year for both sales and profit was in 2008, when it topped $1 billion in revenues for the only time (although it went very close last year), and turned in over $250 million in net profit.

Those days feel a long way off now, with the company’s television stations running fourth in the ratings race all too regularly these days, behind Seven West Media (ASX: SWM) and Seven Group Holdings’ (ASX: SVW) Seven network and the financially beleaguered (though increasingly popular) Nine Entertainment.

Ten has struggled with all of its big hopes this year – its drama/reality show The Shire not doing as well as hoped, and Everybody Dance Now axed due to poor ratings. Television is a business in which success begets success – popular programs provide a better ‘lead in’ to other shows, and a strong news program can set up the night’s viewing. Breakfast is also seen as a key timeslot, but unfortunately Ten has struggled in both areas recently.

TV is also – at least to some extent – something of a zero sum game in which one networks gain in viewership is often another’s loss. Of course, some programs can gain viewers who wouldn’t otherwise have been watching the box, but with free-to-air viewership struggling to grow, that circumstance is more the exception than the rule.

Thus, with Nine and Seven performing well, Ten is being hit from both sides.

Long-term Ten shareholders must also be hoping for better days ahead, with the company’s share price having fallen over 85% in 5 years.

With a board that includes Lachlan Murdoch, Gina Rinehart and ‘Hungry’ Jack Cowin, there’s no lack of business experience (and Murdoch’s alma mater is his father’s business at News Corp (ASX: NWS), so he has no lack of media pedigree), but the company seems at a loss to turn its performance around.

Ratings success doesn’t always equal business success, but a commercial network running fourth behind the ABC is always going to struggle to turn in top quality results.

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Scott Phillips is an investment analyst with The Motley Fool . The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691).

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