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I rarely watch free-to-air television these days. My news comes via the ABC, and sport and the occasional movie are consumed via pay-TV. Like many, I also source content from a range of websites and smartphone apps, in a rapidly changing media world.
So, it was with some surprise that I sat down to watch this season’s The Voice. A nagging 12-year-old convinced me to watch the first episode and Sunday-night viewings are now a regular event in our household (I’m betting on Team Seal)! 
Public interest in The Voice and blockbuster reality-TV shows, such as MasterChef and My Kitchen Rules, shows free-to-air TV still has an almighty presence when it works. No media channel can capture millions of Australians quite the same way as TV.
But Ten Network Holding’s slide into voluntary administration this week shows the downside for TV operators: a diverse, fragmented, often free media market is crushing advertising rates and volumes in traditional channels. 
That trend is not new. Still, it is remarkable that Ten initially lost the support of key shareholders when its programming was improving (broadcasting the cricket Big Bash league, for example, has been a huge success). 
Then there is regulatory risk around proposed media-ownership reforms, which could spark a wave of mergers or acquisitions. The changes, on balance, should be good for the free-to-air TV providers given the proposal to abolish TV licence fees. The Government’s media-reform package was expected to be introduced to Parliament this week. 
Some analysts estimate the reforms could add up to 10 per cent to the earnings of Nine Network Entertainment Co Holdings and Seven West Media. The interest may be a little overdone given the Broadcast and Content Reform package is comprehensive and complicated, and still needs Parliamentary approval. 
The big issue, of course, is structural change as free online content decimates traditional media business models and as offshore giants, such as NetFlix, change TV viewing habits with on-demand content. That trend is not going anywhere and a few mergers of TV and print media companies, should they occur, will only provide short-term relief at best.
But every stock has its price. The proposed reforms and Ten Network’s woes should help Nine and Seven. It’s too soon to know how the Ten saga will be resolved, but a good bet is Nine and Seven increasing their market share at the embattled network’s expense.
Nine Network rallied from a 52-week low of 84 cents to a $1.40 peak.  Nine has a strong balance sheet, is highly cash-generative and has capital to diversify into digital media business – a luxury most traditional media enterprises cannot afford.
However, Nine looks fully valued after the rally. The stock rallied five per cent this week on news about Ten. A consensus valuation of $1.91 per share, based on a handful of broking firms, is too bullish. Morningstar values Nine at $1.50 a share. 
Nine would look a lot more interesting below $1.20. A sufficient margin of safety is required to buy the stock given the structural headwinds facing the free-to-air TV sector and regulatory reforms. Best to stand clear for now as speculators drive Nine higher on news of Ten’s demise.
Seven West Media looks better value, for speculators. The owner of Seven Television, the West Australian newspaper and magazines, has almost halved from its 52-week high of $1.22. Sharply lower earnings due to a soft advertising market and the high-profile news of an affair between Seven West CEO Tim Worner and Amber Harrison weighed on the share price.  
Chart 1: Seven West MediaSource: The Bull
Full-year earnings could fall further than Seven management has flagged, such is the risk of a faster deterioration in advertising markets. 
The implementation of proposed media reforms could soften the blow for Seven’s earnings and Ten’s woes could increase Seven’s rating share and exceed analyst expectations. Seven needs to quicken its cost-cutting initiative to maintain earning margins. 
For all the threats, Seven is the top network by ratings and revenue and has a stranglehold on marquee programming, such as the Australian Football League, Australian Open Tennis, Melbourne Cup and other key national sporting events. As an aside, Ten’s Big Bash cricket product would look good on Seven, and challenge Nine’s cricket programming.
Moreover, Seven’s strategy to produce more television programming (excluding sports) than its peers makes sense as networks invest more in content to keep viewers and maintain margins. Gradual improvement in the West Australian economy in the next three years should be a small tailwind for Seven through its newspaper business. 
Share-valuation service Skaffold values Seven at 97 cents, falling to 90 cents in 2018 and 81 cents in 2019. Investors should always look for stocks with a rising return on equity and intrinsic value over the next three years. In Seven’s case, the extent of the price fall may have created gains over 12 months, albeit with higher risk.
Clearly, the TV stocks suit experienced, active investors who can tolerate volatility. The experience of other media segments shows how far earning and valuations can fall when structural change in viewing and advertising habits quickens. 
The market may have factored too much downside into Seven and too much upside into Nine at current prices. But if the networks can keep attracting millions of people to blockbuster programs, without being crushed on costs, a gradual recovery can unfold. 

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• Tony Featherstone is a former managing editor of BRW and Shares magazines. The information in this article should not be considered personal advice. The article has been prepared without considering your objectives, financial situation or needs. Before acting on the information in this article you should consider its appropriateness, regarding your objectives, financial situation and needs. Do further research of your own or seek personal financial advice from a licensed adviser before making any financial or investment decisions based on this article. All prices and analysis at June 14, 2017