CHART OF THE WEEK

SWM and NEC – BVOD financial metrics (A$mn)

FTAs downgrade earnings

Australian TV advertising revenues by sub-segment (A$bn)

Both Nine Entertainment (NEC) and Seven West Media (SWM) have lowered their earnings guidance for 1HFY20 due to a softer than expected spending environment in TV adex. Both broadcasters now expect a mid-to-single digit decline in TV adex (from low-to-mid single digit decline). As a result, both NEC and SWM have cut their earnings estimates. This is in-line with Venture Insights’ view that TV adex will continue to decline as audiences transition away from the traditional TV format. Lower than expected economic growth will only add to the woes of the FTA broadcasters. However, we do expect BVOD and Stan to be the key drivers of both audience and earnings growth going forward. BVOD market is up 34% YoY in September 2019. For a more detailed look at the future earnings and market outlook for FTAs in Australia, click through to read our FTA earnings update. 

NextDC FY19 – growing fast with the market

Data centre revenue by segment (A$m)

NEXTDC’s FY19 results and FY20 outlook is in line with Venture’s recent Australian Datacentre outlook. FY19 revenue was A$179.3m (up by 15%) with contracted utilisation up by 31% to reach 52.5MW. EBITDA also increased by 13% to A$85.1m. While datacentre capacities in NSW continue to grow steadily, the capacities in WA and QLD will increase by more than 200% at the end of the proposed builds – reflecting increased focus on Perth and Brisbane markets due to new cable builds. Venture Insights’ expects the relative market shares of major DC players will converge over time. Australia has a mix of international and local players in the DC market but offer relatively small areas of product and service differentiation. On pricing, Venture Insights’ forecasts hyperscale pricing for major datacentre operators including NextDC to gradually decline driven by a surplus of capacity builds. For a more detailed look at the datacentre market in Australia, along with five year market forecasts, click through to read our Datacentres and Submarine Cables market outlook.

Webscale Playbook – Baidu

Baidu, often referred to as “China’s Google”, is embarking on a new journey to pursue growth outside its core search and advertising business. Baidu has been spending more on R&D than capex, as it ramps up its pursuits in AI and connected cars. Capex spend, currently 7% of revenues, is likely to remain well below 10% as Baidu prioritizes research activities and relies on partners for much of its cloud infrastructure. Baidu is also developing its own AI chip (Kunlun) and building cloud capabilities to support its AI-driven businesses, particularly autonomous vehicles. For a more detailed look at Baidu’s efforts in the datacentre and cloud computing space, click through to read a report from our US research partner, MTN Consulting. 

ACCC criticises Facebook’s fake ads

Facebook share of digital display advertising in Australia (%)

Close on the heels of its court action against Google, ACCC chairman, Rod Sims has called out Facebook over fake ads by supporting miner Andrew Forrest’s push for Facebook to take more action over fake ads on its platforms. The ACCC chairman also said that the regulator would investigate the potential legal implications of Facebook hosting fraudulent ads and whether posting such advertisements can be made illegal. Facebook on its part has said that scammers are using sophisticated cloaking technology which show different versions of the ads to Facebook’s review system vs what is shown to users on the platform. Following on from the court action against Google, the ACCC’s move is in-line with its intent to take the tech giants to court over violations relating user privacy and data security. Click through to read our report on the ACCC’s final report on Digital Platforms Inquiry for more on how the ACCC plans to take on the tech giants.