Comment from Peter Saxon –
Over the weekend, at a dinner party hosted by a charming couple we’ve known for some years, where neither they, nor any of the other guests, were remotely connected to the broadcasting industry, they were aware of Kyle and Jackie O having landed a deal for $20 million per year over 10 years. It’s worth noting that of the 10 seated at the table, only two were K & J fans. The others had mixed feelings about Sydney’s number one Breakfast duo. All of which augers well for any Breakfast show that would be thrilled to nail a 20 percent share of a major market.
Having established that my line of work dealt with such appraisals, the diners asked if I thought they were worth that much.
I explained, that to estimate their value, one first must ask how much it would cost KIIS106.5 if they defected to a rival station? As evidenced by the last time they were ‘traded,’ from 2DayFM to KIIS (then MIX106.5) a decade ago, the cost of losing most of your audience to a competitor would far outweigh the cost of keeping them.
In direct value, a station might earn around 20-25 per cent of its entire income form the Breakfast shift, Monday-Friday, not counting the fact that a strong Breakfast show will likely help lift the audience for every other day-part. On top of that, there are numerous opportunities for ARN to further monetise their talent through networking and podcasting.
Apart from the direct revenue that having the top talent on the top station can bring, the ‘intangibles’ that come with it, can help to significantly inflate the overall value.
For example, in 1973, the Whitlam government gave approval for the National Gallery in Canberra to purchase a painting called Blue Poles by American artist Jackson Pollack for the (then) astonishing sum of $1.3 million. Roundly criticised at the time as a waste of tax payer money, the painting is now valued in excess of half a billion dollars. But that’s not the point. After all, neither the National Gallery nor the Australian Government is in the business of buying and selling art for profit.
The aim was to add a layer to the culture and soul of our nation beyond koalas and kangaroos and thus help put us on the world map as an arts and creative destination as well. While that may sound a bit wishy washy to some, it counts as an “intangible” value to others, worth its weight in gold. Likewise, the Sydney Opera House which represents much more than a just place to stage musical performances. It has become an instantly recognisable symbol of Sydney, Australia in the way that the Eifel Tower is to Paris France. Like any great brand, it’s an intangible, yet can have great value, that can’t readily be calculated in the same way that sales revenue can.
Owning the number one station in a market is more than the fact that advertisers will put your station first on their schedule and be prepared to pay the highest price – although that’s not a bad start. Some say it’s about “bragging rights,” but what does that mean in real terms? It means a lot of things are automatically stacked your way because people tend to want to deal with the best, not second best or last. It can mean that…
- Promoters of all the biggest international touring acts will come to you first to partner with them.
- You’ll get first dibs on celebrity interviews.
- You can demand bigger and better prizes for giveaways.
- Top talent with big celebrity status will be more in-demand for television and other media appearances as well as create more socials thus helping to elevate your station’s profile
- Everyone that works at your station will be more energised by being associated with #1. They ‘ll be more popular at parties.
The owner of the number one station in the nation’s biggest market is generally perceived to be the strongest network, almost regardless of individual station performances in the other areas – much in the way that the boat that gets “line honours” is widely considered the winner of the Sydney to Hobart yacht race, not the handicap winner. In radio, line honours is great for bragging rights – even better for the share price.
Perter Saxon – Managing Editor
The market is prepared to pay a total of $200 million over a 10 year period.
It implies that the business entity will make much more than $200 million.
Are they overpaid? If they were paid $600 thousand over 10 years that would be exploitation.
Similarly, it would not be fair to pay a pittance to sporting stars when clubs and media organisations collect millions from advertisers and gate revenue.
Think about the billion dollar deals to broadcast a particular football or cricket code and stars being paid a pittance?
That's exploitation.
Remember that $200 million is for a capital city market. A rural market would not have the capacity to pay for contracts of that magnitude.
The assumption that the duo is able to sustain a large audience over a 10 year period does not take into account of newer entrants who may take a share of the duo's audience.
Thank you
Anthony, Strathfield South in the land of the Drug and Wangal Peoples of the Eora Nation
I think we're missing the point here ...
The question should be: 200 mil - to who?
I don't think they're worth a dime to the hundreds of regional radio staff who are going to lose their jobs when ARN buys SCA and roll out K&J all over regional Australia.
That's the only way management can see to break even after handing these already overpriced on-air clowns the cash they're asking for.
They've painted themselves into a corner, so regional staff and listeners are going to pay the price, thanks to atypically uncreative management approach ... "if ya can't beat 'em - buy 'em." And then sack everyone else.
K&J are certainly not worth 200 mil to regional listeners who want localism, community and a personal shout out - none of which they're going to get from cap-city talent who are too busy trying to get an interview with the latest Kardashian.
The regions also can't rely on the ABC - especially in a crisis - when Aunty takes an increasingly national approach. Regional listeners under threat from fire or flood, wanting immediate, up-to-date info, tune in to ABC to find hours of coverage from the other side of the country.
Emergency personnel will only speak to the ABC, and the ABC refuses to share information - so even as it is, local media have difficulty getting urgent call outs to locals. Regional commercial radio used to take up some of this slack ... but if everything is networked out of Sydney or Melbourne (and it will be given the need to monetize expensive cap-city egos), who is serving regional Australia? The internet? Not when the power goes out, and the mobile phone towers go down.
Regional radio is an absolute necessity, but it seems K&J are determined to play their part in killing it off. Management is happy to be their enabler. Can't wait for the press conference, guys.
The problem with networking programming content into a rural licence area is that rural licence holders must broadcast local content by broadcasting locally between 0500 and 0800.
Furthermore they must broadcast local content in regards to weather, news and emergency services.
The ACMA elucidates this at
https://www.acma.gov.au/local-content-regional-commercial-radio
A few years ago, The SuperRadioNetwork was in trouble for broadcasting Grant Goldman's (RIP) breakfast program from 2SM's Sydney Studio to regional stations.
https://www.abc.net.au/mediawatch/episodes/regional-dis-content/9974746
Therefore it is doubtful that. K and J will take over a regional station's 0500-0800 timeslot violating the law.
The proposed amalgamation of SCA and ARN will result in a divestiture of stations where the combined entity cannot not have more than two stations in a particular licence area, section 54 Broadcast Services Act.
Ultimately it is a management decision to pay $200 million over a ten year period.
It is a risk given possible changes in audience dynamics especially when and how audiences consume their media.
One cannot assume that K and J will attract an audience in a year, or even five years.
You are only as good as your last survey.
To apply the disclaimer used in advertising investment products that past performance is not an indicator of future performance.
I agree with the Secret Fuz that regional listeners want to listen to local content.
However in the recent stories on the Illawarra and Campbelltown markets, Illawarra listeners were listening to local content overwhelmingly over Sydney content while listeners in the Campbelltown area preferred Sydney's KIIS 106.5 over Campbelltown's C91.3.
It is a lesson that just because what works in one market does not necessarily apply to another market.
The pattern is repeated in the ratings for 4BH being high while 2UE's and Magic 1278 are low.
That is the risk management are taking if K and J are networked to capital and regional networks and sustaining it over a 10 year period.
Should management's decision work then that $200m is low compared to the incoming revenue.
Consequently, if the $200 million expenditure has been at the expense of people losing their jobs in other parts of the regional networks in order to pay for the $200 million payment, it says a lot about the tastes of the marketplace and it's the market which supports K and J at the expense of the rural program content.
Again look at the audience for KIIS 106.5 versus C91.3 as an example.
Thank you
Anthony, of exciting Strathfield South, in the land pf the Wangal and Darug Peoples of the Eora Nation.