Southern Cross Austereo released its first half FY2020 results yesterday which showed revenue had tumbled 8% for both its radio and TV business.
Moments after the analysts call, CEO Grant Blackley spoke with Mediaweek and talked frankly about the chance of revenue returning, the size of the TV profit, the positioning and profits at radio brands Triple M and Hit and the company strategy for its most underperforming asset – 2Day FM.
Operating climate and revenue crash
There has been a very broad contraction across every market in every segment and there are some strong cyclical influences. There are also some strong structural influences also impacting the market. We reported revenues back 8.2% for the half – similar results for both the TV and radio assets.
The exception was our collection of digital radio assets where revenue was up 140%.
The [revenue] issue facing the market will cycle over itself and we will start to see things hopefully get a bit better. We have seen the insurance category come back with some vigour. We are starting to see banking and financing improving. It will be interesting to watch the telco market after the recent merger.
Federal government spending has been subdued since the election and we think that will improve in the next six to 12 months.
The digital audio sector is growing quickly and we will continue to invest and release new products over the next year. There are a series of opportunities we are going to create and we have the platforms to support new launches. Personalisation and on-demand are in high demand and we need to match that demand.
Will you need further cost-cutting if revenues don’t recover?
We have done a substantial amount of work on our cost base already and our costs are forecast to be $5-10m lower than the prior year.
Regardless of market conditions we will continue to employ more automation across 55 markets.
SCA didn’t make a lot from TV in the last six months?
$13m for the six months is a solid number for the half, albeit down 20% year-on-year.
Is SCA cutting into Seven/Prime’s strong regional leadership?
It is hard to cut into their dominance, but we have made improvements. We achieved a 38.5% share in terms of revenue. That comes from both having good sales teams and increased ratings. People don’t change their viewing habits as quickly as we would all like. Nine’s continued investment in programming will underpin our efforts in regional Australia.
Seven maintains its heritage position in Tasmania [where SCA is an affiliate] and we maintain a commanding position in that marketplace.
How is radio revenue split between Hit and Triple M networks?
We don’t break them out, but I can tell you the revenues are not dissimilar. [Total audio revenue for six months was $211m.] They both have very clear identities and we have slightly more stations in the Triple M portfolio. They are both well performing networks with close to 40 stations each.
Is the Triple M brand better defined than Hit?
What Triple M has is a very distinct brand proposition in the market. It doesn’t have as much competition as stations under the Hit brand. The direct competitor to Triple M is probably [ARN’s] Pure Gold brand. For the Hit stations they compete with the KIIS and Nova networks. However advertisers invest more in that sector. The key is trying to identify a position that resonates for the Hit Network and one we can further invest in and nurture to create a more distinct position for the Hit Network.
In fairness, [Nova Entertainment] has taken the smooth network, an older format, and is delivering at the upper end of that with a different strategy. Perhaps no different to what we have done with Triple M with a very defined position.
What is the 2020 strategy for 2Day FM breakfast?
We have only had one survey result survey so far with the more music format in survey 8 last year. We saw an increase in cume of 60,000 and there hasn’t been a survey since that time. We will stick with music definitely until we get results from surveys 1 and 2. We have a new content chief in Dave Cameron and he has his views. He is very much supportive of the fact that music gives us a point of difference to [Nova and KIIS]. It also allows us to be unencumbered by the past which gives us more latitude for the future at whatever time we choose to either maintain music or we introduce a different breakfast format.