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Nine turns from US shows to lift ratings

AAP logoAAP 24/08/2016 Stuart Condie

Nine Entertainment has negotiated its way out of a costly contract to broadcast US TV shows and is refocusing on local content in response to disappointing ratings.

The broadcaster, which on Thursday reported a seven per cent decline in underlying full-year profit, has set aside $86 million to pay its way out of the unprofitable deal with Warner Bros.

Nine had been obliged to purchase a list of shows for as long as new series were being made - even if no one watched them - but is now aiming to hike the hours of premium Australian content by 50 per cent over the 2017 calendar year.

That includes Doctor-Doctor and House of Bond dramas, plus the likes of Australian Ninja Warrior, Hamish and Andy, and This Time Next Year.

"The ratings and revenue performance of our core free-to-air business was disappointing in the first six months of calendar 2016, due to a combination of the challenging ad market and poor programming outcomes," chief executive Hugh Marks said on Thursday.

"However, we are taking positive steps to regain momentum in our ratings and revenue, with a well-advanced content plan for 2017 incorporating 50 per cent more premium local television content."

The loss-making contract with Warner Bros - which produces titles including The Big Bang Theory, 2 Broke Girls, Arrow and Gotham - resulted in a $46 million impairment charge in the 2015/16 results released on Thursday.

Among other items to weigh on the broadcaster was a $7 million increase in legal fees partly related to April's botched child abduction story in Lebanon by Nine Network's 60 Minutes crew.

Revenue for the year to June 30 was down six per cent to $1.29 billion and underlying net profit declined 7.1 per cent to $120.3 million.

However, the bottom line was buoyed by the $640 million sale of the Nine Live ticketing and events business, with Nine bouncing back from last year's huge loss with a full-year headline profit of $324.8 million.

Nine, which last year lost $592.1 million largely due to a huge writedown on the value of its free-to-air TV licence, used some of the proceeds of the Nine Live sale to cut its debt by $346.7 million to $177.6 million.

Nine warned that the metropolitan free-to-air ad market was again expected to be "flat to down marginally" over 2016/17, with regional markets performing even more poorly.

The broadcaster hopes its renegotiated affiliate agreement with Southern Cross can offset some of that regional underperformance.

The outlook for Stan, Nine's streaming joint-venture with Fairfax Media, was more positive.

Nine has so far spent $55 million on the on-demand service and said more than 500,000 of 1.1 million subscribers were classified as active at the end of June.

The service is set to break even, in cashflow terms, during 2017/18.

"We expect to invest up to $80 million to get there and, given the leverage, longer term returns could be significant," chief digital and marketing officer Alex Parsons said.

At 1305 AEST, Nine shares were up one cent, or 0.98 per cent, at $1.03.

NINE'S FULL-YEAR PROFIT

* Net profit $324.8m v $592.1m loss

* Revenue down six pct to $1.29b

* Final dividend down 1.0 cent to 4.0 cents per share, fully franked. Full year dividend 12 cents per share.

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