Can HBBTV save free-to-air TV?

Regional free-to-air broadcaster, Prime Media Group (ASX: PRT) says the advertising market has slowed, despite a strong start to the new financial year. But an interesting new technology could be an answer to the structural decline of the free-to-air industry.

Prime broadcasts Channel Seven content across Northern NSW, Southern NSW and Victoria, and says it has managed to hang onto its 40.4% share of the total advertising revenue in its markets. CEO Ian Audsley said today at the company’s AGM, that a number of major advertising categories had reduced their spend during and after the election period, balancing out the uplift in government and political advertising.

Mr Audsley added that the company has little visibility beyond the January trading period, with a number of national advertisers adopting a ‘wait and see’ approach, causing softness in the ad market leading up to Christmas. Prime also says it faces challenging trading conditions; particularly in Canberra and Southern NSW, where the change of government and the Coalition’s announcement of public sector job cuts have hit the market hard. As a result, Prime is forecasting core net profit for the 2014 financial year of between $31 and $33 million, lower than last year’s $35.4 million.

On a more positive note, Prime has extended its affiliate agreement with the Seven Network – owned by Seven West Media (ASX: SWM) – through to June 2019, although Prime says it is paying more under this agreement.

Prime also notes that Australian broadcasters are embracing hybrid television, known as HBBTV. This platform connects viewers to the internet via the television signal, and could be a revolutionary technology allowing free-to-air (FTA) broadcasters to display additional content, including video on demand, access to back catalogs plus other content. Seven is currently trialling the service, and expects to launch its offering in May 2014.

Foolish takeaway

HBBTV could offer new channels, targeted advertising as well as an interactive TV guide as just some of the features. Nine Entertainment and Ten Network Holdings (ASX: TEN), owners of Channels Nine and Ten respectively, are also reported to be working on hybrid TV plans. HBBTV could well save Prime Media.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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