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“You get squeezed on cost,and you get squeezed down the pecking order in the great Australian projects that you can get access to. The unintended consequence of that is squeezing out local players. Fast-forward 10 years,the global players will go ‘we’re glad that government forced us to do that because we actually ended up squeezing all the local players out.’”

Sneesby said it would also drive up the cost of local production,forcing Nine to spend more money offshore. “It’ll be likely that[Stan] will have to direct some of its spend offshore,which either means more licensing,or more things co-produced in international markets. You do actually push investment out and force local businesses to look for other ways of competing.”

Arts Minister Tony Burke announced plans in January to introduce rules that would force streaming services to spend a certain amount of money – about 10 per cent of local revenue – on local production by mid-2024. The rules,introduced as part of the new National Cultural Policy,have been welcomed by the Australian production sector,but are fiercely opposed by the TV networks and streaming platforms. Burke is meeting with the affected parties in Canberra over the next two weeks.

‘You get squeezed on cost,and you get squeezed down the pecking order in the great Australian projects that you can get access to. The unintended consequence of that is squeezing out local players.’
Nine CEO Mike Sneesby

Sneesby’s comments are his most outspoken to date on the matter,and are indicative of the concern parts of the media sector have on the introduction of these laws. They were made as Nine,the owner of radio,streaming,real estate and publishing assets includingThe Sydney Morning HeraldandThe Age,reported a decline in profit for the first half of the fiscal year,with rising costs in its broadcast,streaming and real estate divisions outweighing advertising and subscriber revenue growth.

The company reported a 5 per cent increase in revenue for the December half to $1.4 billion,but earnings (before interest,tax,depreciation and amortisation) fell 9 per cent to $370.5 million. Net profit was $183 million,down 14 per cent. Group EBITDA was in line with forecasts provided to the market in December,but was weighed down by a 12 per cent increase in costs in broadcasting and a 17 per cent increase in costs at Stan. Sneesby said the cost increases were all content-related,but that they were translating to an increase in market share.

Those costs are only expected to rise further as new record-breaking deals with Tennis Australia and the International Olympics commence.Nine extended its agreement with Tennis Australia for more than $400 million in November,and signed a $315 million deal earlier this month to broadcast the Paris 2024 Olympics,the Los Angeles 2028 Olympics and the Brisbane 2032 Olympics across its television,radio and digital assets.

“If the costs were up and we weren’t getting the share outcome,that will be a big fail,” Sneesby said. “Or if we’re investing in new formats that weren’t flying,then that would be a big problem.”

Nine’s chief strategy officer Matt Stanton did not directly answer questions about whether the company could break even on the Olympics deal. “We are very confident on the value we got with it,” he said.

Nine did not provide earnings guidance for the second half of the financial year,arguing it had limited visibility. Nine shares closed at $2 on Thursday,down 3.2 per cent,but analysts from UBS,Barrenjoey,Macquarie,Credit Suisse,Jefferies and Goldman Sachs said the performance was in line with their expectations.

UBS media analyst Lucy Huang said the share price fall was due to concerns about macroeconomic conditions. She said she wasn’t “too worried” about Nine’s cost increases unless the ad market deteriorated significantly.

“Overall operationally they’re performing very well,” she said,pointing to the fact that the broadcaster garnered 50 per cent of the metro TV advertising market in January. “They’ve never really done that before.”

“We’re actually pretty confident around their share gains story over the next six to 12 months,” Huang said. “But the big question is definitely going to be how do they trend given there are still a lot of concerns whether we will go into a recession.”

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