Southern Cross Austereo expects earnings to be down 10 per cent on last year, blames struggling Ten and 2DayFM ratings

Southern Cross Austereo logoSouthern Cross Austereo (SCA) has said it expects its earnings to be 10 per cent down on last year’s,  blaming poor TV ratings for Network Ten and a slump in the Today network’s listenership following the departure of Kyle Sandilands and Jackie ‘O’ Henderson for Kiis FM at the end of last year.

The company issued an earnings guidance statement on the Australian Securities Exchange (ASX) today which warned its earning would be “substantially under” last year’s $96.1m. It warned earnings would be ten per cent below the like-for-like earnings of $89m following the sale of the Sunshine Coast business.

It adds: “The revised outlook takes into account additional share loss predominately as a result of the challenging Channel 10 television product and metropolitan radio ratings which has led to lower revenue performance combined with a softer advertising market and increased investment in marketing and promotional activities across the metropolitan radio network.”

SCA is the  regional affiliate broadcaster for Network Ten, and owns the Today and TripleM radio networks.

In Sydney 2DayFM has struggled to rate this year following Kyle and Jackie O’s departure for KiisFM. The controversial duo announced their departure from the station in November last year, with the Australian Radio Network (ARN) announcing the team would be joining MixFM in the breakfast timeslot with the station rebranding to KiisFM.

The first ratings period saw the duo’s new Kiis 1065 breakfast show tie with fellow ARN pairing Jonesy and Amanda’s WSFM for the number one spot among FM commercial stations, sitting on an audience share of 9.3 per cent while 2DayFM’s breakfast show, fronted by Merrick Watts, Sophie Monk, Jules Lund and Mel B, plummeted to last place with a 3.8 per cent share.  2DayFM’s breakfast with the stars, fronted by Kyle and Jackie O, in its last outing had a share of 10.4 per cent.

In the second ratings period, the Kyle & Jackie O Show claimed the number one FM breakfast show in Sydney outright with an audience share of 10.9 per cent while 2DayFM’s breakfast team continued to struggle with a share of 4.1 per cent.

Melbourne’s Today Network station FoxFM initially held up well in the first ratings period retaining its leadership in the FM market there, but tumbled in the last survey behind ARN’s Gold, dropping 1.2 share points.

The Today Network has also been embroiled in a court case with the Australian Communications and Media Authority (ACMA) regarding a report the watchdog complied on the royal nurse prank call which found the broadcaster performed a criminal act by broadcasting the prank call by hosts Mel Greig and Michael ‘MC’ Christian.

While Today won an appeal in front of the full bench of the Federal Court to suppress the reports, ACMA has indicated it will seek leave to appeal to the High Court.

SCA, in its trading update, said: “Year to date, metropolitan radio revenues are flat on last year and we expect them to finish slightly down on last year, with declines in the Today network being partially offset by gains on the Triple M network.

“We expect some further slippage in overall share resulting from the regeneration of the Today network over the remainder of the calendar year, but we expect some recovery in share in H2 FY2015.”

Ten, which consists of around 70 per cent of SCA’s television revenues, has struggled with shows including The Biggest Loser, Secrets and Lies and So You Think You Can Dance struggling to rate in the first half of the year, failing to build on the audiences built in the non-official ratings period with the Big Bash League. It also failed to attract large audiences for coverage of the Sochi Winter Olympics as the official ratings period began and it came up against Nine’s powerhouse The Block and Seven’s My Kitchen Rules.

In its launch the T20 Big Bash League averaged over 800,000 metro viewers while Ten’s first coverage from the Winter Olympics which included a preview of the Big Bash League final between the Hobart Hurricanes and Perth Scorchers and coverage of qualifiers for the first event on Ten, called Sochi’s Big Bash, averaged 305,000 viewers.

The debut of Ten’s ninth season of The Biggest Loser drew in 753,000 viewers, down on the eighth season’s launch to 814,000 metro viewers.

It continued to shed viewers, struggling against Seven’s My Kitchen Rules, falling as low as 322,000 metro viewers.

The trading update stated SCA’s “year to date revenue share (from Ten is) flat on the prior year including these events.”

In April, figures from Standard Media Index (SMI) showed Network Ten’s revenue had fallen from February highs, amid declining audience shares.

According to the March figures Ten had a revenue share of just 21.24 per cent, down from 25.1 per cent this time last year with revenue of just $37.4m compared with $42.5m, a 13.2 per cent fall. Last month on the back of the Sochi Winter Olympics the network was trumpeting a 24.2 per cent revenue share.

Yesterday, Ten lost a legal bid to prevent programmer John Stephens from working for two years for rival Seven Network after it alleged he breached a contract with Ten.

Following a two-day court case, in which it was revealed Ten CEO and chairman Hamish McLennan had been prepared to pay Stephens his full salary for two years not to work for anyone, alongside a series of embarrassing revelations which included McLennan not being able to name all of the programming directors for free-to-air TV networks in Australia, Justice James Stephenson ruled the Ten agreement remains “on foot”, however dismissed its claim for relief including preventing Stephens from working for Ten’s rivals for the next two years.

In July last year, Ten and Southern Cross also signed a new affiliation deal (paywall) which meant SCA would pay Ten a base fee of 32 per cent of its TV ad revenue which would rise to 35 per cent for special events like the 2014 Glasgow Commonwealth Games and the Sochi 2014 Winter Olympics.

The announcement has made little impact on SCA’s share price which closed today at $1.095 per share, the same as yesterday, putting the company’s market valuation at just under $800m.

Miranda Ward


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