Nation media posts half a billion loss, why?

Heraclitus, a greek philosopher once said that 'change is the only constant in life', and the media industry is a prime example of how constant change is. From the early days when news were announcements from the palace and one had to attend events in person, to the modern times when you can know what's happening anywhere in the world in real-time or watch an event that happened decades ago all thanks to the internet. This article for instance, would probably not be available to you if it weren't for the internet. The media landscape continues to evolve and quite rapidly as a matter of fact.

Unfortunately, legacy media is having a hard time keeping up with the changes, and this isn't a local issue, it's a global problem. Traditional media is losing relevance in an online-first world. CNN, an American legacy media news network, has seen viewership plummet to record lows; their parent company Warner Bros Discovery, posted a $9.1B write-down on its troubled network assets. Their stock -WBD- dropped 10% on this announcement as investors continue to lose confidence in legacy media's ability to turn this around. WBD's case was an exception; they posted the write-down after losing their deal with the NBA, who picked Amazon as their new partner. Deals with sports organizations had been keeping WBD afloat and buying them time to figure out their next steps.

Our very own Nation Media Group isn't any different, they recently posted a KES 572M loss in their HY '24 earnings, this came on the back of a poor FY '23 performance, posting a KES 205M loss. The company attributed the loss to a depressed macro-economic environment and weakened consumer spending, this is partly true as the economy hasn't been strong with a lot of unrest in the nation hence why consumer spending was weak. According to my sources, the government owes some of these media companies billions in unpaid advertising fees. And this is a problem that is costing these media companies, forcing them to probably book these dues as losses. It also costs the economy at large, as these companies continue to lay off employees. Standard Media recently announced its plans to lay off 300 employees while Nation spent KES 119M in staff restructuring expenses this year. You'd expect a government not to sabotage its own industry, but that seems not to be the case.

Nation media is competing with online platforms and influencers for ad revenue. This is a fight that will determine the future of NMG, with dwindling newspaper sales & ad revenue they had no choice but to shift their focus to digital media. They're working on this, with a reasonable increase of 14% in digital revenue and a 6.7% increase in their digital footprint year over year. They have to grow, on these fronts, at a faster rate to ensure they stay afloat, these aren't impressive numbers. The competition is giving customers(advertisers in this case) more value for their money, with ads selling for as low $5, and insights on reach allowing advertisers to sleep soundly. Consumers on the other hand, keep coming back for more from their favorite creators.

Conclusion

Nation Media lacks a differentiating factor that can keep viewers coming back, for WBD(a fellow legacy media company) it was sports and for online platforms its the outsourced content creation. This is a question that every business should ask of itself, 'why would a customer choose us, what value do we offer?'. The future looks bleak for NMG nonetheless, with the right team and great leadership NMG can answer this question and double-down on their why, and in the process turn this around.

Their stock currently trades at KES 15, a fraction of its KES 300 high. The company seems confident that they can turn this around; they completed their second share buyback program, showing investors that they believe their stock is grossly undervalued. An amazing turn around, though highly unlikely, isn't off the table, anything is possible. For now, all we can do is wait and either buy or sell NMG stock based on what we believe the future holds for NMG.

Resources

NMG HY '24 Financial-Results , NMG investor relations , Article from CNN on the decline