Seven West Media For personal use only Contents Our Strategy Corporate Social Who We Are 2 Responsibility Our Strategic Framework 4 Risk, Environment & People 25 The Year Ahead 6 Seven in the Community 31 Executive Letter Governance Letter from the Chairman 8 Board of Directors 35 Corporate Governance Review of Operations Statement 39 Group Performance – Directors’ Report 53 Key Outcomes and Summary Remuneration Report 57 of Financial Performance 10 Auditor’s Independence Group 12 Declaration 83 Seven Network 16 Seven Studios 18 Financial Statements Digital Platforms 20 Financial Statements 84 Publishing 22 Directors’ Declaration 137 Other Businesses & Independent Auditor’s Report 138 New Ventures 24 Company Information 142 Investor Information 143 Shareholder Information 144 For personal use only Our StrategyOur 01 02 03 04 05 06 07 08 Seven West Media Limited West Seven For personal use only Annual Report 2019 1 Who we are Create. Engage. Grow. We create premium entertainment, Our focus is on creating news and lifestyle content for local and world-class content that international audiences. engages audiences at We are Australia’s largest producer of premium television. The shows we scale and drives growth create are watched in over 190 territories, and are proving to be worldwide hits on for our partners and our global streaming platforms. own businesses. Our brands BROADCAST DIGITAL For personal use only 2 We engage audiences anytime, anywhere, Our digital audiences and revenues on any platform, and every month 19 million continue to grow rapidly, accelerated by Australians turn to us to be informed, to be our data, insights and technology. We are inspired and to be entertained. also investing in new disruptive businesses where we can leverage the power of our We are Australia’s most-watched television assets to drive growth. network for a 13th consecutive financial year, and we are also number one in the We continue to evolve our business, key advertising demographic of P25-54 reshaping our operations to position us across the day. for future success. We are Seven West Media. We own our future. PRODUCTION & DISTRIBUTION PUBLISHING OTHER For personal use only 3 Our Strategic Framework and Performance Dashboard We are implementing three strategic pillars in our long-term growth strategy. Our performance dashboard tracks the accomplishments and progress against these strategic pillars. Focus on Transform the the Core. Operating Model. Improve ratings and revenue performance Deliver on operating cost saving targets Grow returns on content investment Drive efficiencies in existing assets Create, secure and curate the best local and international content Partner with competitors in non-competitive areas to Maximise the return on our content improve profitability investment through every window and overseas sale Evolve to a leaner & more agile operating model while protecting content quality Milestones Achieved Milestones Achieved Grew revenue share to 38.8% and Cost out at the top end of guidance ratings share to 40.3% across the day range, leading to $38m net cost #1 share of primetime viewing reduction with savings across all business units Strengthened 7NEWS’ leadership position with audience share growth Completed exit from Yahoo7 JV in every metro market Ongoing cost savings initiatives Sports portfolio outperforming with implemented for FY20 realisation For personal use only AFL audiences up 10% and cricket Completed Sydney office exceeding projections consolidation Increased investment in produced Established playout JV with content and digital platforms broadcasting partners 4 Our StrategyOur 01 02 03 04 05 06 07 Grow new Revenue Streams. 08 Drive greater digital adoption and yield Introduce new content monetisation formats Invest in data, automation and targeted advertising to maximise inventory yield Invest in adjacent verticals where we can leverage the power of our assets Milestones Achieved Seven’s digital EBIT reached $15.1m with revenue up 67% YoY 7th consecutive year of EBIT growth in Seven Studios Media Limited West Seven New commissions secured from Netflix and Facebook Launch of 7NEWS.com.au which For personal use only ranked #5 News site within 90 days of launch Early stage investment portfolio Annual Report 2019 grew 24% YoY to $95m Digital subscriptions launched on thewest.com.au 5 The year ahead For personal use only 6 Our StrategyOur The year ahead 01 02 Seven’s upcoming Summer of Cricket will deliver more primetime 03 Test and Big Bash coverage, and combined with the 2020 AFL season, Seven will screen premium sport every week of the 04 year. The strong performance of the 2019 seasons will support a significant increase in how we monetise these premium events. 05 We will build upon the strong programming Seven Studios will invest in its global footprint, growing 06 foundations delivered by our market-leading core audiences and revenue by producing and distributing of news, sport, breakfast and drama shows with a its hit shows to broadcasters and digital platforms refreshed slate of bold entertainment programming around the world. 07 to strengthen our prime time performance. We will continue the transformation of our company, We will capitalise on the growing BVOD market and ensuring we become even more efficient and invest in our portfolio of direct to consumer digital effective at delivering the world class content that our 08 products, driving yield using insights from our rapidly audiences want, when they want, on their preferred growing data and technology capabilities. These platform. investments will also enable greater efficiencies in how We will identify and invest in new disruptive we serve and meet our customer needs through real businesses, while supporting the growth of our existing time programmatic buying and audience targeting. portfolio, to create long term value for shareholders. And we will be gearing up for Tokyo 2020, which will be the most-watched Olympic Games ever, and the biggest digital event in Australian history. We will identify and invest in Seven West Media Limited West Seven new disruptive businesses For personal use only Annual Report 2019 7 Letter from the Chairman Welcome to our annual report for shareholders. It has been another twelve months of substantial Creating and owning our own content. change for Seven West Media and a challenging Live event programming, news, sport and water- year for the media industry. Political and cooler entertainment. economic uncertainty has resulted in decreased consumer and business confidence, both at Seven West Media is proud to be a leader in home and around the world, which has affected all three areas and we now have a sharp focus advertising expenditure. on growing our revenue base across our core business and through new opportunities. Your Board and Executive Team are making some tough, but necessary, strategic decisions to But, as we forge ahead with our strategy, it is change the way we do business in future. imperative that we are allowed to compete on a level playing field. The Board and I thank Tim Worner for the enormous contribution he made during his Last year, the Australian commercial television 26 years of service to the Group, the last six networks invested around $2 billion on content, as Chief Executive. of which 85 per cent was spent on local content. Together we employ 15,000 Australians and We are delighted that James Warburton contribute $2.8 billion to the local economy. Since has returned to lead the company through Seven West Media was formed in 2011, we have our next chapter of growth, with a sharper paid $420 million in corporate tax. focus on growing revenue and continuing the transformation of this great company. And we do this while complying with local content quotas and a Code of Practice that require us to Our underlying principles remain the same – meet community standards, including ensuring create world-class content and use it to create our news and current affairs programs are deep engagement with audiences and greater accurate and impartial. value for our business, our advertisers and you, our shareholders. The global digital giants that we compete against for advertising dollars have no such restrictions, We are confident in the strength of our company, and have paid a tiny fraction of the tax they owe and thanks to our market-leading broadcast Australia. So, the Australian Competition and assets and our investment in growth areas such Consumer Commission’s Digital Platforms inquiry as Seven Studios, Seven Digital and Seven West was a critical milestone in addressing the effect Ventures, we have much to be optimistic about. that these foreign organisations are having on In this environment, our company’s key elements local media and advertising, and the impact they are more valuable than ever. have on the supply of news and journalism in this country. The power of world-class brands that people love and trust. For personal use only The power of world-class brands that people love and trust. 8 Executive LetterExecutive 01 02 We welcome the ACCC’s Final Report, which makes a 03 number of recommendations that, if enacted, will go some way toward correcting the regulatory disparity, and supporting the valuable contribution that local media businesses make to Australian society. 04 We are encouraged that the Government has accepted the need for reform, and that these digital platforms 05 need to be held to account and their activities made more transparent. We anticipate that the Government’s response will address the substantial bargaining imbalance between these digital giants and 06 local media business, and potentially provide a real opportunity for our company to better monetise our content on these platforms. 07 In December we were delighted to welcome Colette Garnsey OAM as a new non-executive and independent Director of Seven West Media. Colette 08 is a highly-experienced and well-regarded Director with a long successful executive career in customer- focused industries.