1. NEC Buys Out
Mi9
Ciaran Norris
17/10/2013
Background
After a 16 year joint venture, NEC, owner of Channel 9, has announced that it is to buy Microsoft
out of their joint venture, Mi9. The deal will mean that Microsoft will no longer have a major say in
the Australian media market, though it still has a strategic agreement with NEC. It also means that
NEC is now free to take its digital offering in any direction it sees fit, whether or not Microsoft
agrees.
Details/Implications
Australia differs from many markets in that, until now, two of the biggest global digital media
owners, MSN/Microsoft & Yahoo!, had run joint ventures with local media partners rather than
running their own wholly owned properties. This gave MSN & Yahoo access to local content,
particularly video, and gave the local media owners access to global technologies. With this move, it
seems that one of those local broadcasters no longer sees as many benefits in such a partnership.
When the Mi9 partnership was originally formed the media landscape was a very different place; no
Google, no iPhone, no Facebook, whilst broadband had barely taken off, which impacted the type of
content people can access. Now search, in the form of Google, takes the lion’s share of online
advertising, whilst the driving forces behind growth are video, social and mobile – none of which
Microsoft has done a particularly great job with.
The rise in video, particularly, means that more and more of Mi9’s revenues are likely coming from
the digital versions of shows originally broadcast on Channel 9 and NEC’s other TV stations, but
revenue presumably had to be split with Microsoft. In return Microsoft was able to offer
Outlook.com (formerly Hotmail), Skype & Bing. In fact the recent decision by Yahoo!7, the local JV
between Seven West Media and Yahoo! to go against the global search partnership with Bing and
use Google to power its search product, shows just how hard it now must be for global owners to
force their products on local partners.
The deal will allow all of those involved to sharpen their focus: Mi9 on content and data, much of
which they will still be getting from the 15.5 million connected Microsoft ID customers, as well as
really pushing a combined TV & video message, whilst still allowing it to sell across all of
Microsoft’s local products. Microsoft, meanwhile, will presumably continue its new focus on devices
(Xbox, mobiles) and services.
For most advertisers, this move will have almost no impact – if anything if it means that a local
media owner now has more flexibility to partner with whichever tech provider they see fit, it’s
probably a good thing. What’s more interesting is what it heralds for the other local JV and what it
means for Microsoft globally.
With Yahoo!7 having recently rejected Bing it is hard not to think that they might also look at a
similar, more loose partnership. At the same time this begs the questions as to whether, when its
new CEO is appointed, Microsoft might not reevaluate its entire advertising business if they are, to
all intents and purposes, retreating from direct contact with one of the most lucrative media
markets in the world.
Summary
NEC’s decision to buy Microsoft out of Mi9 will have little impact on most advertisers, although it
may affect those with global alignments with Microsoft. What it is likely to do is free Mi9 up to really
concentrate on highlighting the integration of its content with its NEC stable-mates and is also likely
to raise questions about other similar joint ventures.