Flaws in business plan caused World Audio’s woes – network switched off

The Radio Two network was effectively switched off ceasing transmission to all of its transmitters and the online internet stream at 2.20pm Friday afternoon.

However some transmitters which are not able to be remotely shut down, including Sydney and Brisbane, are on air but are carrying music out of Satellite Music Australia in the interim.

These transmitters will be shut down manually next week.

World Audio is in administration, waiting for another investor to come up with yet more funds for a rescue plan. Former CEO Andrew Thompson is now out, pushed or jumped, depending on which side of the fence it is viewed from. The administrators have again deferred a creditors meeting, hoping funds can be found to help the company continue under another name and business plan.

But will the company ever be viable?

World Audio licences for the transmission of the Radio 2 format are mostly off-band stations, which are limited in their coverage area by ACMA’s licencing requirements. Other outlets for the “national commercial network” included an audio feed channel on pay tv and a website with live streaming.

Despite its limited coverage ability, World Audio marketed Radio 2 using figures based on potential, not actual, listeners across geographic coverage areas that could not be justified by the transmission signal. The only real survey numbers eventually came from research by McNair Ingenuity, which found 3% of the sampled audience (2,197 people) listened to the station at least once a week. World Audio extrapolated that figure to claim a national weekly 18+ cumulative audience figure of 319,000 weekly listeners.

CEO Andrew Thompson told radioinfo in October 2005, before the McNair Survey: “If our econometric modelling is correct and our audience figures turn out to be anywhere between 80 and 100,000 quarter hour listeners nationally, not only will we be the largest commercial broadcaster by coverage, a potential 12.2 million in Australia, we’ll also be the largest commercial broadcaster by audience.”

That claim turned out to be unfounded.

radioinfo has learned that the company’s business plan was further flawed by serious technical difficulties with some of Radio 2’s regional transmitter sites. At least some of the sites, known to radioinfo, appear not to have been connected properly, resulting in poor or non-existent transmission signals.

radioinfo has also learned that the company’s sales strategy was exaggerated, with at least one sales person being asked to sign statements to reassure board members that sales were likely to increase. Annual reports show that sales did not increase by any significant level.

No dividends were ever paid to investors, and the share price fell from its initial opening price of 20 cents down to 2 cents when trading was halted in March this year.

The company’s business plan also lacked a realistic analysis of the aggressive marketing and lobbying that was being conducted by the commercial radio industry against it. Ironically, World Audio’s business strategy was a significant factor in uniting the commercial radio industry in fast-tracking the advent of digital radio.

Now that the company has failed, World Audio is still causing problems for other commercial radio companies, who feel that the bad publicity coming from discussion of the company’s woes might erode client confidence in the radio industry.

Since Andrew Thompson’s departure, the number of people on the board of directors has fallen below the acceptable limit for public companies, which will create further difficulties for the administrators and more bad publicity for the company.

Unrealistic hype, poor business planning and undeliverable claims were at the heart of World Audio’s failure.

The company’s administrators believe there may be another investor willing to sink further money into the revival of the company. If that happens World Audio will need to drastically revise its business plan to have any hope of trading out of its difficulties and continuing into the future.