Broadcaster, Ten Network Holdings Limited (ASX: TEN) has seen its shares lose 7.9% in mid-afternoon trading, despite the S&P/ASX 200 Index (Index: ^AXJO) climbing more than 1%.
The company owns the commercial free-to-air Ten television channel, which broadcasts in Australia's five main metropolitan areas of Sydney, Melbourne, Brisbane, Adelaide and Perth, as well as associated channels Eleven and One, and the digital platform tenplay.
The company's shares have fallen 2.3 cents to 26.7 cents, after announcing that its television revenue for this financial year will be around 4% lower than the previous year. The broadcaster says its revenue market share for the nine months to end of May 2014 stands at 20.7%, considerably less than that of its main rivals Seven and Nine, owned by Seven West Media Limited (ASX: SWM) and Nine Entertainment Co Holdings Ltd (ASX: NEC), respectively.
Here's why Ten's shares are falling…
- Advertising revenues have been consistently falling. High quality ratings are needed to attract advertising dollars, which Ten is struggling to do.
- Despite increasing its costs by 8% to buy programming such as the Sochi Winter Olympics and the Glasgow Commonwealth Games – which begins at the end of July 2014 – Ten has been unable to dramatically turnaround its slumping ratings. Those two events added a combined $55 million to Ten's costs.
- The pool of advertising dollars is moving away from free-to-air television to online and digital media. This is a structural change happening to the whole industry, and the trend is likely to continue.
Perhaps the best thing for long-suffering shareholders would be for News Corp (ASX: NWS) to follow through on the rumours and bid for the struggling broadcaster. Of course, News Corp needs suggested amendments to the existing media laws to be legislated to do that – which may not happen anytime soon.
While there may be some value in Ten if the company can turn around its sliding fortunes, the risks are fairly high that it could go out the back door in quick smart time as well.
