Warren Buffett, well-known for his incredible investing history and his witty remarks, once said, “turnarounds seldom turn.” It seems that this advice would apply perfectly to investors who were hopeful of making big gains from the struggling Ten Network Holdings Limited (ASX: TEN), whose shares have plunged roughly 82% over the last four years to just 27.5c.
Television networks rely heavily upon major sporting events at the beginning of the year to launch new and returning television series. Unfortunately, its coverage of the Sochi Winter Olympics and the Big Bash Cricket League failed to attract audiences to key shows like Secrets and Lies or Puberty Blues and analysts are now fearing 2014 could be the struggling network’s worst year in history. Some are even suggesting that the network may not have a backup plan should its upcoming series of Offspring, Kiefer Sutherland’s 24: Live Another Day and the latest Masterchef Australia also fail to spark interest.
Ten’s task to return to shareholders’ favour will certainly not be an easy one. For starters, its upcoming shows will be competing with Nine Entertainment Co Holdings Ltd’s (ASX: NEC) The Voice, as well as Seven West Media Ltd’s (ASX: SWM) new shows, Intelligence and The Killing Field, starring Rebecca Gibney. Further, although CEO Hamish McLennan’s strategy to broadcast second-tier sporting events was a step in the right direction to attract audiences, the programs simply cannot compete with the first-tier sporting events like the AFL or the Australian Open tennis, both shown by Seven.
As if the competition against other free-to-air networks wasn’t problematic enough for Ten, it must also contend with the rising popularity of Foxtel and streaming services, as well as online services like Facebook, Twitter and YouTube. This will be particularly problematic for Ten given it generally targets a younger audience than its peers.
What was once a quality business would now more accurately be described as a speculative investment than an informed one. If Ten can turn the ratings around and improve its profits, the gains recognised by shareholders could be incredible, but that is looking less and less likely as time goes on.