Free TV: Two horse race

Channels Nine and Seven eating Ten’s lunch

a woman

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Free-to-Air TV is increasingly becoming a two horse race between Nine and Seven, latest advertising data shows.

In a report by accounting firm, KPMG, Seven and Nine both increased their share of the advertising market at the expense of Ten, as the national television advertising market shrank by over 3% to slightly under $2 billion.

Seven, owned by Seven Group Holdings (ASX: SWM) saw its share rise more than 2% to 40.3%, while Nine’s share rose by more than 3% to $38.1%. Ten – owned by Ten Network Holdings (ASX: TEN) saw its share fall by more than 5% to 21.6%, as viewers increasingly shun its programs.

While some analysts are forecasting an improvement in advertising growth in 2013, the structural shift away from Free-to-Air to other media formats is set to continue.

As the pie gets smaller, the pressure on the weakest link, Ten will increase, as Seven and Nine are likely to ramp up their attempts to take more market share from Ten. With free-to-air viewership struggling to grow, one network’s gain is often another’s loss.

As we’ve mentioned previously, Ten’s television stations run fourth in the ratings race, behind Seven and Nine and even the government owned ABC. A commercial network running behind the ABC is always going to struggle to turn in top quality results.

Bigger economies like France and Germany have just two free-to-air networks, and Australia could be headed down the same path. Fund manager Laurence Freedman suggested late last year that we may only need two commercial free-to-air networks, and the only question is; which two will be left?

Foolish takeaway

With other entertainment avenues such as the internet and Telstra (ASX: TLS) and News Corporation’s (ASX: NWS) Pay-TV service, Foxtel, competing for their leisure time, a declining ad market, and stronger free-to-air competitors, it appears the writing is on the wall for Ten.

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