Kyle and Jackie and SCA – Why next month is critical for ARN: We talk to Ciaran Davis

Next month is big for ARN. They will finally complete the takeover of nearest rival Southern Cross Austereo — at least, this is the plan, and Kyle and Jackie O will start in Melbourne – again, if all goes according to plan.

First though, the full-year results. Net profit before tax for Australian Radio Network was down 33% in 2023. Earnings are down 22%, revenue is slightly down – just 3%.

Advertising is down across the entire media industry, so this comes as no surprise to anyone, least of all ARN chief Ciaran Davis, who spoke to Mumbrella shortly after presenting these results. Not surprisingly, he was focused on the positives.

“The resilience and relevance of radio is as strong as ever,” he insists.

“Audiences across the board are up, our audiences are up 4% on last year, driven by a great Breakfast show performance. And when audiences are up, that drives advertiser engagement. Radio is still, according to SMI, 7-8% of overall advertising.

“The increasing investment that we’ve made in our sales capability to integrate metro, regional, and now digital content, and sales opportunities, is resonating well, our ability to provide that integration in campaign responses through integration, through talent integration, and then, increasingly, the sophistication of our targeting capabilities means that that we’re actually, you know, in a pretty good spot – from an advertiser perspective.

“As a medium, we’re performing very strongly, we have a product that is really engaging, we’re distributing that content across whatever platform people want to engage with it, and we’re investing in our sales capability to make sure that we’re delivering on the radio effectiveness, and increasingly bundling with digital audio.

“The real opportunity, I think, is also going to come when the advertiser market catches up with the consumption model of digital audio, so about 75% of the population now tunes into a podcast or live streams radio or music and an app format, yet, it’s only getting about 1% of the ad dollars. So there’s a real gap there that, that over the next few years, we will we will certainly start to close.”

This is just a case of these things taking time, according to Davis.  “Advertisers want the surety of audiences. And you know, it’s been a particular phenomenon over the last, say, three years, the growth of of podcasting, but also people listening to radio on digital devices.”

ARN has made iHeartRadio available on “about 200 different devices”, Davis estimates.

“It’s now a mass medium in terms of podcasting, and advertising dollars will follow, as we all improve our sales capability and trading capability.”

In ARN’s full-year presentation — partly as a response to big-money, long-term contracts with Kyle and Jackie O, as well as GOLD Melbourne Breakfast host Christian O Connell, who has signed on through to 2029 — Davis compared ARN’s ploy to pay big money to secure on-air talent to television’s own scrabble for sporting rights.

“When people get involved with sports rights, they look for surety of audiences and surety of commercial returns,” he tells Mumbrella.

“And Kyle and Jackie O have demonstrated, over the last 20 years, their ability to create audiences. One of the things we looked at, when we were talking to them in contract deals last year, was their ability to regenerate younger audiences coming through.

“People have asked: ‘Is ten years a long time?’ From an audience generation perspective, I absolutely think they will be as relevant today as they will be in five or ten years’ time.”

Davis also points to the “innovative and commercial” construct of the contracts they signed, which incentivises the pair to succeed.

“[It] means that they’re motivated to deliver, yes, audiences, but much more commercial returns,” he adds. “So the concept, I think, has helped solidify where we’re going as a business, because we do believe in the power of great talent to keep radio relevant.

“We have a saying here: What’s between the songs is much more important than the songs themselves.”

He points to their success with Gold 104.3 breakfast host Christian O’Connell, who came from Absolute Radio in UK, and was relatively untested in Australia, save for a handful of Hamish & Andy simulcasts.

“Five years ago, people thought we were mad,” Davis said, “he has been very successful, very quick. He’s also world-class talent and he is equally motivated for the next five years. So, I think the construct is kind of unique, but it is akin to sports rights.” It is also, as Davis says, also a surefire way to ensure that other audio competitors such as Spotify don’t lure ARN stars with even bigger contracts.

There are two big unknowns hanging over ARN. The first: When will Kyle and Jackie O start in Melbourne? Two weeks ago, Kyle said on air they’d be starting in six weeks.

“Did he?” Davis asks, but won’t be pushed on a date.

“We haven’t released the date yet,” he says. “We have started the pre-marketing down there. We have started the on-air promos, we have introduced them, in terms of some of the content that they do.

“It’s sooner rather than later.”

Davis also points to an office move in Sydney as being partly responsible for the delay. “We want to make sure that the technology and the syncing technology from a broadcast perspective is set up.”

But Melbourne is primed. And Kyle and Jackie O both already have a national audience.

“And the show is not geographic-specific,” Davis adds. “It’s very much entertainment-based, it’s very much pop culture. It’s very much about the relationship between Kyle and Jackie, and what they both bring to the show.”

Particularly strong podcast downloads in Victoria also drove the decision to move Kyle and Jackie O into the Melbourne market, according to Davis.

“From that perspective, we believe the time is right to go with it. Equally, you know, the value of the Melbourne market is about $220 million, advertising-wise, which is bigger than Sydney. And we haven’t been able to crack the sort of consistent audience growth, and number one position down there, we’ve been sort of five, six, in a tight market.

“But we do believe that the style of content that they have, the much broader appeal that Kyle has — and, you know, his content is not all shock-jock, there’s an awful lot of elements and sophistication to Kyle –that they will drive the audience and, ultimately, the revenue will follow.”

The obvious question then, is why didn’t this happen earlier?

“Podcasting, in particular, solidified our minds around their national appeal, and the Melbourne appeal,” he confirms.

Around 11% of Kyle and Jackie’s podcast downloads come from Victoria, meaning they’ll be bringing a pre-built audience of around 275,000 listeners.

“Our ability to see that data gives us confidence that they will be successful.”

The next logical step then, is national syndication. After all, Kyle has a very public television advert running a couple of nights a week in prime time, called Australian Idol. And, as Davis noted, the radio show does not rely on geography for its content or charm.

Interestingly, enough it’s “not part of the conversation”. Yet.

Melbourne and Sydney account for 62% of the ad market in commercial dollars, Davis said, making “getting Melbourne and holding Sydney” the current focus.

The second question hanging over ARN’s future is when they will gobble up rival Southern Cross Austereo. The takeover deal was hoped to have happened before Christmas, then radio silence.

According to the latest update, issued in ARN’s financial presentation deck, ARN is waiting on “the receipt of necessary information from SCA” in order to complete due diligence.

It received “partial access to necessary due diligence information” and again reconfirmed the takeover proposal on February 5.

“Subject to the timely receipt of complete information required to finalise due diligence,” ARN is hoping to “execute a binding transaction by late March 2024”.

When pressed for more information, Davis reiterates the value of the deal for all involved, while telling Mumbrella that “obviously, we’re all under NDA”.

“Certainly we feel that that we’re in a position to to provide material value creation opportunity for both SCA and current [ARN] shareholders,” he said.

“In terms of an update, there’s a lot of diligence work has gone on on both sides, which is pleasing to see. And, as I say, you know, we remain committed to delivering the transaction for SCA shareholders.

“We believe it’s eminently executable. And we’d like to move towards that timeline of completion by the end of March.”


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