War at MCM as founder Tony McGinn seeks to fire chairman Julien Playoust
The board of MCM Entertainment Group, one of Australia’s largest independent providers of radio shows, is in turmoil, with its founder and biggest shareholder pushing for the company’s chairman to be fired.
The management of MCM Entertainment Group – which supplies eight national radio programmes to networks Southern Cross Austereo, ARN and DMG – is split over the future strategy for the company’s video platform Movideo.
Papers lodged with the ASX reveal that Tony McGinn, who owns about a third of the company he founded in 1983, wants to fire the company’s chairman Julien Playoust.
McGinn, who is also CEO of Movideo, is unhappy that the board has decided to focus on the profitable media side of the business and cut costs at the loss making online video arm which he manages.
Key radio shows produced by MCM include Take 40 Australia and The Hot Hits Live From LA, both of which Southern Cross Austereo has just signed a new contract for which will run for at least another four years. MCM also produces the Jono and Dano show for ARN and helped deliver the Gaga Live event. Its TV business includes the Live At The Chapel franchise.
Despite the row over Movideo, Mumbrella understands that the MCM Media side of the business remains strong.
Movideo’s big customers include the Ten Network.
The group also owns digital agency Igloo.
The last financial year saw the group slump to a $1.3m loss, after a $1.8m profit the year before.
The MCM board is to hold a showdown at an extraordinary general meeting on October 21.
McGinn has tabled a resolution to fire Playoust as chairman, and also from the board.
According to the ASX document, the board is recommending against the move. MCM was listed on the ASX nearly four years ago when it raised about $14m by going public.
Its share price is now about half what it was at launch, with a market capitalisation of about $7m.
The move by McGinn marks a rapid falling out since he brought Playoust into the company just a year ago. Playoust is non executive chairman with a salary of $90,000 in the most recent figures available. Playoust has a business background including at Anderson Consulting and Accenture along with sitting on the boards of Tatts Group, Australian Renewable Fuels and private equity firm MGB. He is also MD of investment company AEH Group.
McGinn, on a salary of $459,000, relinquished his group CEO role just two months ago to focus on Movideo. Simon Joyce stepped up from running the media business to become the CEO of the whole group.
According to its ASX update from the MCM Entertainment Group board, Playoust’s appointment was “at the instigation of Mr McGinn”.
A statement from Playoust states: “Mr McGinn seeks to remove me as chairman and director because he does not agree with MEG’s current strategy.” According to Playoust, McGinn is the only director who disagrees with the strategy which is to focus on building the media side of the business (which brings in more than 80% of the company’s revenue), cut costs and investment at Movideo and to raise capital.
Playoust described continuing to invest in Movideo as a “cash burn”, adding: “It has the potential to prejudice the future of MEG.”
According to previous ASX documents, the company has already invested $6m in Movideo which costs $2m a year to run.
He said: “MEG has an urgent need for cash to fund its growth strategy and day-to-day operations. MEG has tried for approximately 12 months to raise capital.” The board said it was looking for $3m and had an investor ready to offer $2.7m waiting in the wings. Playoust said that other board members had pledged to quit if he was fired.
McGinn’s statement to shareholders said: “After 12 months working with the chairman I believe he has limited knowledge of MEG’s industries and operations. I also believe that he lacks strategic vision.”
McGinn opposes the fund raising which would dilute the value of shares owned by existing shareholders.
Mumbrella could not reach Playoust, while McGinn and Joyce declined to comment. However the company issued a statement from Joyce saying: “This proposed resolution and the resulting EGM will have no impact on the day to day operations of MCM Entertainment Group and its three core businesses, MCM Media, Movideo and Igloo, which will continue as normal. I would like to reiterate that the foundations have been laid to achieve growth targets and the business is set to realise a unique competitive advantage by combining its three areas of specialisation: content, technology and design. In addition, the company has materially improved its financial performance this financial year with revenue growth, new client contracts and continued investment in product.”
When you underprice all your video platform sales to undercut your opposition, you’re going to wind up with an unsustainable business model. Movideo won Ten by grossly underestimating the costs involved.
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A swing from $1.8m profit to $1.3m loss ($3.1m hit to shareholders) says it all! This company doesn’t need capital, it needs to return to sound strategic management. Which is obviously why its largest shareholder has stepped in. Any responsible chairman would resign and accept their strategy didn’t work and allow the company to return to the days of profit and preserve shareholder value. Not look for scape goats.
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Any media business will only survive moving forward if they can reliably deliver online video and audio. Sounds like the board is short sighted.
Pushing into online video will be expensive up front – especially if done correctly, but the sooner you do it, the sooner your make back the investment.
If you dont push an online stream now, you will get left behind.
Sounds like the founder knows what he is about.
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Movideo sounds like the future to me. Seriously how can a board get the future so wrong. Has this Chairman heard of the digital revolution?
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What is the media pedigree of this Playoust Chairman? I have searched online and can find nothing. He’d only have to read Simon Canning’s article in the Media section of the Oz today to realise how wrong he is,( http://www.theaustralian.com.a.....6140314515).
MCM has been one of the most progressive digital media pioneers in Australia for a decade and they have built a good business and market share accordingly. Surely the point of listing on the ASX was to grow and take on new digital media frontiers. From what I can tell movideo seems to fit that brief well.
Good luck to them I say, a smart and gutsy Aussie company having a go internationally – a long way from top 40 radio shows, which I note are still going strong after allmost 3 decades. Finally, I am curious why McGinn would make this move in a business he founded and is the largest shareholder in? Must be more to it maybe?
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Commenters 2, 3 and 4 all sound like the same person…
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I guess you can argue the case on both sides but for my money it goes like this…
One guy has build this brand with his own passion and sweat over 28 years, and has always taken a truly long term view of his business and it’s potential.
He has been behind every success at MCM since it was founded (by him).
He’s also made some mistakes (just like the rest of us) and one of them is biting him in the bum now.
The other guy has been there for 5 minutes, knows nothing about the media and entertainment business and seems to be out for a quick buck.
Let me think about it….
Go get him Tony.
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Hi Anon @11.45pm.
I can confirm that the message from “Andrew” and the message from “Joel” both came from the same IP address.
Cheers,
Tim – Mumbrella
Tim, it amazes me that people still multiple fake names from the same IP address despite you outing them consistently
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Me too, Paul.
I talk a bit about astroturfing on Background Briefing on ABC Radio National at 7pm tonight: http://www.abc.net.au/rn/backg.....316825.htm
Cheers,
Tim – Mumbrella
some of the comments are hard to stomach
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I concur with the boards current strategy and are thrilled that they are defending it. My vote is with Playoust. MCM Media works extremely hard in a declining market to maintain growth. There’s no doubt in my mind that MCM Media is currently in more need of support and cash-flow at the current time.
rein it in!
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Movideo needs help either way, it’s rubbish to use.
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