Nine Entertainment Co Holdings Ltd (ASX: NEC) share price has put on quite a show since the pandemic. Will the latest agreements make the Nine share price even more popular?
NEC share price
Agreements with Facebook and Google executed
It’s official and as expected, Nine has signed agreements with Facebook (NASDAQ: FB) and Alphabet Inc (NASDAQ: GOOG).
The Facebook deal allows Nine to supply news video clips and access to digital news articles on Facebook news products. This will be for three years with a minimum amount payable over the term.
As for Google, Nine will only be providing news content, so no video for Google’s News Showcase and other news products.
The agreement with Google is over five years and the amount payable is a fixed annual fee that will increase in the early years.
What now for Nine?
Nine managed to keep costs down and benefited from accelerated growth across its digital segments.
These agreements will enable Nine to capitalise on the rapid growth in digital media consumption.
Investors should also account for the termination of Google’s previous sales agreement on programmatic advertising sales revenue from 1 March 2021.
In light of this, Nine expects growth in the publishing division’s earnings before interest tax, depreciation and amortisation (EBITDA explained) in FY22 to be between $30 million to $40 million.
It seems Nine was benefiting from the digital media trend as gross margins continued to rise until COVID hit. With these agreements, I think there are more cost efficiencies to come.
This is an example of a structurally growing segment, something I like to focus on as part of the Rask Investment Philosophy.
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