In recent years it’s been nothing but good news for radio in terms of revenue.
Almost every quarter, revenue rose, year on year.
But, this year, just a couple of weeks ago on the eve of the annual Radio Alive conference, radio was hit with the ‘rigid rod of reality’ as it was forced to announce a massive revenue slump. The September quarter of 2019 showed revenue in the five metro markets down by 10.2 per cent or around $20 million compared to the same quarter last year.
Was this the death knell for radio that naysaying soothsayers have long predicted? Was it time to get a move on with rearranging the deckchairs? Or was it just a short term correction we had to have? After so many ups, there must come a down or two, right?
Who better to ask than the CEOs of Australia’s four biggest metropolitan networks, Ciaran Davis (ARN), Cathy O’Connor (Nova Entertainment), Grant Blackley (SCA) and Adam Lang (now ex-MML). Happily they were all together in one room at the Radio Alive conference held in Brisbane.
Ciaran Davis: Overall, the advertising sector is having a tough time of it. It’s not just radio.
I think that the economy, from royal commission resulted in a credit squeeze from the banks which is leading to housing stock not coming onto the market which is leading to people not spending in the auto category, finance category, they’re not taking on personal loans for consumer electronics, retail. So, it’s the broader economy that’s in a bit of a difficult situation at the moment. And that has a knock-on effect on consumer confidence. And if consumer confidence goes, we know the first thing to go is consumer advertising.
What needs to happen is the banks are to start to lessen the squeeze, people will start borrowing more which hopefully then leads to some more confidence around and that will then flow back into radio. I’m a hundred per cent confident that our sector will bounce back – no problem.
Cathy O’Connor: I think it’s going to be tough for the rest of the year. It’s very easy to look at 2019 and say, OMG, what’s changed? Is this the new world? And I think there’s also a danger in being too dismissive of that.
There’s also far less data to support something ‘structural’ happening to radio because the long term performance of radio, if you take the five years before 2019, is up 17 percent. The audience is still in very strong growth. And now we have all these new opportunities in digitisation. I would say strategically, Radio has the smarts.
Radio is having a little bit of pain at the moment but I can see that other media are suffering more than radio. Up until Christmas… I think we always think in radio that it will rain money October to December… and I think it’s loosening up a little bit for us. But that’s certainly not to the extent that we’d like it to.
Grant Blackley: I had the privilege cum obligation to put out a trading release this week and that happens in a public company environment where anything that’s material which is about a eight per cent movement you have to inform your shareholders.
Some of the questions I got (from shareholders) were, how long will this occur? Is this structural? Is it cyclic? And, by the way, we’re not necessarily shocked with respect to the performance of SCA. We’re actually a bit concerned about the drop in radio overall which permeated across all of our businesses.
And my response to that very quickly and confidently is that this is a cyclic downturn. We have seen substantial declines in the market in the overarching market. The top five sectors of government, banks, food, auto are all down about 80 million dollars in three months, July through September, purely on that measure. And everyone’s taken a bit of pain. We’re seeing newspapers and magazines down between 22 and 27 per cent. We’re seeing television down and it’s down in every sector. And I think the digital market’s lost lazy 65 million in that three months. We’re not seeing that reported.
What we’re hearing about at this point is that radio is the resilient medium. And we are the resilient medium and I do confidently feel that in the future that there will be a resurrection to normal buying patterns. But we’ve all enjoyed a pretty good time. This time last year we cycled over some relatively good times and we actually performed much better than a lot of other sectors. So, I don’t think it’s going to stop raining money.
I concur with Cathy that it’s going to be relatively tough for the next three months. But you have to look at the macro-economic overtures of market. We are seeing extremely low interest rates. We are seeing housing data. We’re seeing jobs start. We’re seeing all sorts of data sitting with some of the other drivers. The the car market’s back 9 percent. And here’s the market back effectively in radio by 10 percent. So I think there’s a correlation between the two.
But to get to finish that story, one of our largest investors who I was on the phone to yesterday said, “Grant, I’m not surprised at the end of the day I believe we’re in a technical recession. He said I’ve seen two before in my career. He said we’re in a technical recession on the east coast of Australia. And to that end I’m not surprised. Just tell me when it’s going to get better.”
So we will continue to invest. We will reorganise our assets as best we can to shape ourselves for what’s arguably pretty tough times but nevertheless if we stop looking and changing and investing we will probably go backwards. We can’t afford to do that.
In relation to TV, I’ve got a feeling television will come out of this earlier than what radio will, If you’ve seen the cycles over about the last 30 year,s you will find that TV can lead us out of down turns. And I saw some data from cinema in September which suggested that were starting to flatten out in September and will possibly see some growth. I think radio is hot on those heels at this point. And that augers well for the long term.
Adam Lang: I’m Incredibly optimistic.
Two broad points to make. Radio is seven to eight percent of the media pie, that means there’s still 92 percent that should be spending much more on radio.
You look at the statistics on audio and we’re in a fantastic space – the golden age of audio! Like if you were in any other industry you’d been trying to get into this one. It’s growing. we’ve got growing content consumption by new audiences. We’ve got growing radio audience and we’re working very, very hard to do that. But there’s 92 percent of money that’s probably not showing enough favour to that three hours a day that’s being consumed in audio already.
Blessed are the Salespeople for they shall find manna in times of want.
Secondly, we might be in a very subdued economy but there’s always great growth stories about people (in businesses) who are prepared to have a go and back themselves. And they’re the ones we chase and want to help. And we keep proving with radio advertising and evolving our business that radio works.
Ciaran: I think radio sales people are probably the most ferocious, ambitious and determined of any media sales people.
Adam: God bless them!
Cathy: I agree with that!
Adam: I do think they’re very good at uncovering the next wave category. You know we’re ahead of the curve in terms of TV or newspaper out or outdoor in terms of what’s next. And that’s the challenge for us all and everybody else in sales here today. Well where will the next growth category come from?