Strategic business options for 2GB, 2UE and 2CH | radioinfo

Strategic business options for 2GB, 2UE and 2CH

Monday 05 January, 2015

What are the business options for 2GB, 2UE and 2CH now that the merger is complete?
 
radioinfo runs the numbers on the newly merged company.

From a programming point of view the options for the merged Fairfax/MRN stations in Sydney seems simple: sell 2CH to someone who will change the format and move 2UE to the Magic music format.
 
But there's a few other considerations beyond programming that will be exercising the minds of the people running the newly merged business entity as they plan their next moves.
 
From a business point of view, there may be better options than at first seem obvious.
 
Consider the numbers:

A top rating talk station in Sydney, such as 2GB, should make about $35-40 million in annual revenue.
 
A lesser rating talk station such as 2UE should make about $10-12 million in revenue. The Sydney commercial talk market is collectively worth around $50 million.
 
A Sydney AM music station such as 2CH could make up to $5 million in annual revenue, with higher revenue when attached to a station like 2GB, but less if operated as a standalone station.

 
Of course costs are much higher in talk formats than music formats, but the merged business should be able to shave off a bundle of costs by closing one newsroom, one sales department and halving administrative back office costs. Neither station is delivering the level of EBIT they were a few years ago and the merger now should be beneficial for both parties.
 
So, from a purely budget-driven point of view, there could be more money in owning two talk stations that one talk and one music station.
 
In the back office, senior management costs are already trimmed. There is no general manager at MRN (Rob Loewenthal left last year) and there is no Program Director (David Kidd left recently and is currently holidaying in America).
 
The merged business must have done the numbers too, because they have already signaled that it will sell 2CH not 2UE.
 
If you accept that it makes more business sense to keep 2UE as a talk station, then what kind of talk station would it be?
 
In Melbourne, Fairfax's cash cow 3AW is dominant, but is the only game in town if you want to put your ads on a commercial news talk station. In Sydney however the commercial news talk market is split between 2GB and 2UE. Those stations compete against the big ABC news/talk stations 702 and 774, but you can't buy ads on those stations.
 
It would not make sense for 2GB and 2UE to compete in the news/talk segment, so 2UE would have to do something else.
 
What talk format variations are there to choose from?
 
Soft personality talk with a female skew is one option. 2UE has already gone part of the way down this road in the past 12 months in some of its shifts, such as afternoons with Angela Cattterns.
 
Rolling news, business, traffic and weather is another option. With a combined newsroom and the national news resources of Fairfax, 2UE could take on ABC NewsRadio in this genre. Such info-talk formats do well in big cities and revenue is strong where the market is large enough, such as in New York. Time spent listening is low for these formats, but cume is high and the audience is generally up-market with high disposable income.
 
Then there's sport. In Melbourne, SEN has proven that there is a market for sports talk radio which combines live calls with personality talk presenters. In Britain, TalkSport London is another highly successful example of such a format.
 
MRN owns the rights to Rugby League calls in Sydney - perhaps that's why the 'managing business entity' is MRN not Fairfax. With the rugby league rights, combined with a range of other popular sports, 2UE could replicate the success of SEN or TalkSport and take part of the sport listener market currently held by Triple M and 2KY. Live calls are essential for sport stations, because 'event listening' is what drives audience to this kind of format.
 
Alan Jones, Ray Hadley and Russell Tate are programming 2GB successfully at the moment, so no one would want to tamper with the format while the talk titans are locked into long contracts and delivering the goods. It is a safe bet that the programmers in Fairfax Radio will leave 2GB alone for now and concentrate on their format options for 2UE.
 
That just leaves 2CH.

The merged entity will be looking for a friendly company that would like to keep it as a music format, retain the services of the iconic Bob Rogers and perhaps even be open to licensing the use of the Magic imaging and/or branding so that it can be sold to agencies as a 'network buy' along with Magic stations in Melbourne and Brisbane. Maybe 6IX might also come on board to help extend the brand across the country.
 
Radio industry people with long memories may remember that the Magic brand failed in Sydney decades ago when 2UW rebranded and was quickly dubbed 'Tragic11,' but the audience is unlikely to remember or care about such a detail if the format is executed well and retains, or even builds, from the current base.
 
It's a safe bet that the Fairfax radio leadership team will be thinking long and hard on these questions as they emerge from their new year's break. Whatever they decide to do will make for an interesting year on the Sydney AM dial in 2015, a year when 2UE celebrates its 90th birthday.
 
The big question will be, can they make it work in order to achieve the maximum benefits?
 
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