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Can Ten Network Holdings Limited survive for much longer?

Old media stocks like Fairfax Media Holdings (ASX: FXJ) and the commercial TV networks are struggling while the ‘new media’ stocks such as REA Group (ASX: REA), Seek Limited (ASX: SEK) continue to soar.

Ten Network Holdings Limited (ASX: TEN) is by the far the biggest loser, and programming changes have so far not fixed its issues. According to Mumbrella, Channel Ten had just over a 6% share of the TV audience on Sunday night, only just ahead of other networks’ secondary digital stations. Channels Seven and Nine recorded audiences of 25.5% and 27.6% respectively. And it’s not the first time Ten has had ratings that low.

No wonder shares have dropped 18.8% in the last month and 90% since March 2004.

The coverage of the Big Bash cricket competition was an abject failure, and Ten’s share of viewers is consistently falling. Quite simply Ten has got its programming mix wrong. The Winter Olympics rarely figured in the top ten shows –  suggesting that chasing second tier sports events is not going to turnaround the broadcaster’s performance.

Additionally, there is more competition for our entertainment time and free-to-air programming is a huge turn-off especially amongst teenagers.

And why is that?

It’s the rise of online services such as Netflix, Foxtel and its mobile Go and Presto movie services, YouTube, and other internet services such as FB, Twitter and WhatsApp. No wonder ad revenues are migrating to online sites and services.

Mergers between the metropolitan networks and their regional affiliates are unlikely to save them. Changes to Australia’s media-ownership laws are “rearranging deck chairs on the Titanic”, according to shareholder activist Mark Carnegie.

What they need to do is embrace digital and the online space more.

In Ten’s case, it needs to snag some tier 1 sports events, fix their news programming, and bundle their shows with online sites and apps — much like Nine Entertainment Co Holdings Ltd (ASX: NEC) do with The Block and Ninemsn). Seven West Media Ltd (ASX: SWM) (with Yahoo) and Nine with Microsoft have this capability.

They could also take a leaf out of ABC’s or SBS’s book and cut down the ad breaks, or have them in-between shows. It’s one of the reasons why I hardly ever watch commercial free-to-air TV (on any network). I seem to spend more time watching ad breaks that diminish the value of the show I’m watching. And here’s a question – how effective do the networks think the advertising is? After one ad break, I can hardly remember what the first ad was, never mind the seventh and eighth ones.

Have you ever wondered why people can spend a day or weekend watching one or several series of TV shows like Sex And The City? Now The Walking Dead I have and without the ads it has much more continuity and I find it much more enjoyable. Not that you’d find The Walking Dead on commercial free-to-air TV anyway.

Foolish takeaway

I’ve written several times that Australia is too small to support three commercial free-to-air networks profitably. Ten may be too far behind its rivals Nine and Seven to be able to catch up, and it’s not a stock I’ll be buying anytime soon.

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Motley Fool writer/analyst Mike King owns shares in Seek. You can follow Mike on Twitter @TMFKinga

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