Opinion from Brad Smart

With Macquarie Media set to extend its Talking Lifestyle brand beyond 2UE, to Brisbane and Melbourne, Brad Smart analyses the possibilities for success.

I haven’t figured out yet whether Macquarie Media management are true visionaries or if they really just don’t get it!
 
Their latest programming move to introduce 2UE’s Lifestyle into the current Magic music stations in Melbourne and Brisbane, as of 27 February, to my mind, falls way short of ‘a stroke of programming genius’.
 
In a country where the road to interstate talk programming has been littered with nothing but corpses for decades, I would have thought that replacing music programming with a Sydney-centric lifestyle talk format would have to be regarded as ‘extremely courageous’, in the full ‘Yes, Minister’ sense.
 
You’d simply have to believe that Macquarie’s decision to network this 2UE Lifestyle program has only been taken after exhaustive audience research in both those southern and northern markets.
 
Not to do so, to my mind, would be reckless.
 
Macquarie’s directors should rightly be nervous.
 
They will, no doubt, have relied on this detailed research to satisfy themselves that their management team has made the right commercial decision.
 
Surely, these directors will have demanded to know in advance that this radical programming change has a better than average probability of being a ratings success, and, that the risks involved will not be so great as to endanger the public company’s profitability or further depress its share price.
 
Bold though this programming initiative is, my practical concern is this.
 
You have two Magic stations that have both been playing their respective versions of an oldies music format for around ten years.
 
That’s what their audiences have tuned in to listen to; consistency, predictability and stability being the life-blood of commercial radio.
 
On-air talent may have come and gone, but that base audience has stayed with those stations, despite the turmoil of the past two years, purely because of the type of music that’s played.
 
They are a music audience.
 
Experienced programmers know that incremental changes within a single format are easily absorbed; it’s done all the time.
 
You can reduce the percentage of sixties here and increase the number of eighties in the rotation there, and you don’t really impact on your existing audience, because you’re just tinkering with changes whose effects are subtle enough to be imperceptible to the listener.
 
However, lurking in the shadows is the big danger that, when you introduce a ‘quantum-leap’ format change, such as music to talk, a percentage of your existing audience will immediately start to desert you.
 
The reason is that your new format, no matter how well it may be executed, no longer meets some of those listeners’ desires, and, the new audience you’re trying to attract will take an unpredictable amount of time to build.
 
How many listeners will you lose? Well, nobody ever knows for sure. That’s why it’s a gamble.
 
The implementation process follows a J-curve, and inevitably, it becomes a race against time.
 
Always, the $64-thousand question hovering over every major radio format change is ‘will we run out of money before we can attract a large enough audience to start to generate worthwhile revenues again?’
 
The former Macquarie Radio’s track record in this respect isn’t that good, especially when you consider the publicly reported losses from Melbourne Talk Radio.
 
Superficially, their original venture into Melbourne bears a striking similarity with what’s proposed for the Magic stations.
 
With MTR, they lost the music audience from 3MP, but failed to build a big enough share of the city’s talk audience to become profitable within a reasonable timeframe.
 
You shouldn’t think that this is an unduly pessimistic analysis …. it is what actually happens when major programming changes are imposed on an entrenched audience, that loved the previous format.
 
Fundamental format changes are always high-risk.
 
If your existing audience deserts you far faster than a new audience can be built, then, that J-curve can be very steep and very deep.
 
To hold the course, you need ‘nerves of steel’.
 
The depth of that J-curve is directly related to how significant the change of format is, and, whether or not the new format is perceived by the existing audience as having relevance to them.
 
At 2UE, it could well be argued that the recent changes from news/talk to a lifestyle format were really only ‘incremental’; one form of talk was substituted for another and both were targeted at almost the same audience demographic.
 
This may help explain why the impact on the base audience was not highly significant, and, it may have also boosted Macquarie Media executives’ belief in the format.
 
With the Magic music stations in Melbourne and Brisbane, this may not be so.
 
The changes are clearly not going to be simply a tweak to the existing music format; they are as extreme as changing a bridal shop into an auto service centre.
 
While the new format will still be targeting an older demographic, I suspect that many of their ‘brides’ (the music lovers) are going to disappear and with them are likely to go many of their long-term advertisers.
 
So, the real ‘elephant in the room’ question that the MRN directors should be asking their executive team right now is ‘how much of our current advertising are you going to lose as our audience figures dive towards that minimal level in the J-curve, and, how long is it going to take to get that revenue back?’
 
It is a real commercial quandary.
 
It’s entirely possible that before the J-curve bottoms out, the current Magic stations could end up with little more than an asterisk in the ratings books over the short to medium term, if the existing audience, en masse, perceives the new format is of little relevance to them and decides to go elsewhere.
 
Even if you’re the world’s smartest programmer and have predictions and theoretical models from highly reputable research companies, the truth is that nobody really knows where the bottom of that J-curve will end up in practice.
 
Actual audiences are unpredictable.
 
Some industry pundits have suggested that extending the 2UE Lifestyle programming into Melbourne and Brisbane is simply a way to cut staff numbers and amortise the production costs of the Sydney-based talk format; in short, another cost-cutting exercise.
 
Personally, I think that is an overly cynical assessment.
 
It could be that Macquarie executives are banking on a lot of existing advertisers being happy to pay a substantial premium on their 2UE Lifestyle buy to gain access to all three major markets with a single booking, and, that the current costs associated with operating the two Magic stations locally will be reduced significantly enough to ensure a worthwhile profit.
 
That is possible, but personally, I wouldn’t want to be betting the farm on it!
 
What really concerns me, as to whether the format will ultimately be successful, is that, unfortunately, there is a rather arrogant belief amongst many Sydney-based programmers, in both radio and television, that everyone living outside of the harbor city is just waiting for their latest offering and to know what’s going on there.
 
It seems to be an almost obsessive belief that Sydney-originated programs are the only way things should be done, and, they don’t need to be modified for other markets.
 
Both Alan Jones and Ray Hadley appear to be big believers in their programs being syndicated widely, but in pushing to further their coverage in the past, neither appears to have made more than minimal concessions in their content to appeal to a broader, non-Sydney audience.
 
Regular references to ‘Our State’ and ‘Our Premier’, various Sydney suburbs and the broadcast of Sydney traffic reports into non-NSW stations are not endearing at all to local audiences.
 
If Macquarie Media maintains this same policy with its 2UE format and simply networks the Sydney-focussed lifestyle programming into Melbourne and Brisbane, without substantially broad-basing its appeal, then, I believe, coming out of that inevitable J-curve, outside of Sydney, is likely to be exceedingly difficult for them.
 
On the other hand, I suspect if they do substantially broaden the Lifestyle program for multi-city appeal, they may lose a large slice of their current 2UE audience, as the program may no longer be Sydney-centric enough.
 
It’s a real dichotomy for them.
 
Whatever the outcome, I can certainly see this shaping up as a career-changing move for whoever signed off on this ‘courageous’ decision.
 
Exposing the network to an incredibly high risk to its existing revenues, and, relatively little upside in terms of obvious cost-savings, will require a management team with tenacity and an unswerving belief in their research to stay the course.
 
Clearly, I can only conclude that Macquarie’s senior executives must indeed be true visionaries with abilities that far exceed the expectations of mere mortal men.
 
I guess that’s why they get the big bucks!