Can HBBTV save free-to-air TV?

A new technology could avert the decline of the free-to-air broadcasters

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published November 19, 2013 1:06 pm AEDT

Regional free-to-air broadcaster, Prime Media Group (ASX: PRT) says the advertising market has slowed, despite a strong start to the new financial year. But an interesting new technology could be an answer to the structural decline of the free-to-air industry.

Prime broadcasts Channel Seven content across Northern NSW, Southern NSW and Victoria, and says it has managed to hang onto its 40.4% share of the total advertising revenue in its markets. CEO Ian Audsley said today at the company's AGM, that a number of major advertising categories had reduced their spend during and after the election period, balancing out the uplift in government and political advertising.

Mr Audsley added that the company has little visibility beyond the January trading period, with a number of national advertisers adopting a 'wait and see' approach, causing softness in the ad market leading up to Christmas. Prime also says it faces challenging trading conditions; particularly in Canberra and Southern NSW, where the change of government and the Coalition's announcement of public sector job cuts have hit the market hard. As a result, Prime is forecasting core net profit for the 2014 financial year of between $31 and $33 million, lower than last year's $35.4 million.

On a more positive note, Prime has extended its affiliate agreement with the Seven Network – owned by Seven West Media (ASX: SWM) – through to June 2019, although Prime says it is paying more under this agreement.

Prime also notes that Australian broadcasters are embracing hybrid television, known as HBBTV. This platform connects viewers to the internet via the television signal, and could be a revolutionary technology allowing free-to-air (FTA) broadcasters to display additional content, including video on demand, access to back catalogs plus other content. Seven is currently trialling the service, and expects to launch its offering in May 2014.

Foolish takeaway

HBBTV could offer new channels, targeted advertising as well as an interactive TV guide as just some of the features. Nine Entertainment and Ten Network Holdings (ASX: TEN), owners of Channels Nine and Ten respectively, are also reported to be working on hybrid TV plans. HBBTV could well save Prime Media.

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