The pressure is on for Kerry Stokes's network, Shares editor Mike Dobbie writes.

Seven Network is not only a free-to-air television broadcaster but also has management rights to the 52,000 seat Telstra Dome in Melbourne's Docklands, is in a joint venture to operate ticketing agency Ticketmaster7 and runs magazine publishing business Pacific Publications, which has titles including New Idea, That's Life! and Better Homes And Gardens.

In the past year Seven has broadcast the Olympic Games and Rugby World Cup. But, as Seven's executive chairman Kerry Stokes admits in the company's annual report: "Our performance in broadcast television has been disappointing. We have not met our objectives in television and our company's focus over the coming 12 months is to reinvigorate and restructure programming."

This is a big challenge for Seven, and the pressure on the company from the sharemarket as well as its media competitors is intense.
Last week Seven sold most of its shareholding in listed  telecommunications company B Digital for $51.7 million, a good price, which should allow the company to book a profit before tax of $32 million after transaction costs. Regardless, the company's 2005 profit will be below last year's. But there are some signs that its ratings are picking up, particularly in news and current affairs, and Seven is confident that its programming line-up next year will help improve its position.

While Stokes is executive chairman of the company, the other directors include former McDonald's Australia boss Peter Ritchie, former magazine publisher Dulcie Boling and former accounting professor Murray Wells. Executive director David Leckie (formerly CEO of Nine) is Seven's CEO of broadcast television. And Nick Chan is running the magazine business.

Reasons for investing

• Aegis Equities Research says cost-cutting initiatives are on track.
• The company's main focus now is to boost the ratings and to convince media buyers that higher ratings can be maintained.
• Eventually, if improved ratings can be sustained, there should be a boost in earnings.
• Aegis is expecting an improvement in the second half of this financial year.

Reasons against investing

• The company's poor performance, if it continues, will put a strain on its financial position, says Aegis.
• As with any TV company, the success of new programs (and their associated costs) is a key risk.
• A lot hinges on Leckie's ability to implement further cost and programming initiatives.

Verdict

• Seven is slowly turning around and goes into 2005 with a strong programming line-up.
• But it has disappointed before and the network must demonstrate that improvements can be sustained if it is to win back the confidence of investors.
  The other factor to consider is that expected changes to media laws could see Seven become a takeover target.
• In Shares magazine, out now, we find five blue chips and 10 small caps set to soar. Call 1800 032 577 to subscribe. www.sharesmag.com.au.