McIntyre Rants: Has Lachlan Murdoch blown it at Nova?

24 February 2011

He’s riding in as one of the white knights for the Ten Network but does Lachlan Murdoch really have form? The numbers at his Nova radio network are hardly pretty and haven’t been for more than a year.

The latest radio ratings out today show a continuing slump in audiences for Nova – in Sydney it posted another audience share decline of 1.6 points to a 6.3 share, way off its high point of 9.2 in 2007.  

But the story is much bigger than today’s stats.

Advertising revenues in 2010 from media buyers were down 3% at Nova while the metro radio ad market actually lifted 6%. Media agencies pumped an extra $18 million into metro radio last year to top $336 million (SMI) - Nova picked up $67.9 million of that but its tally was actually down on 2009 figures. $2 million down.

It looks even worse breaking out the December 2010 half. DMG’s total radio ad revenues dropped 5.9% to $38.2 million while the metro radio ad market jumped 9.1% to $257.1 million.

Even News Ltd’s newspapers would have to acknowledge it’s not a good look for their man. It’s true that a higher ratio of the radio market’s revenues come from direct sales than say TV, where media agencies dominate. But SMI data reflects sentiment at the big end of town and they don’t like Lachlan’s numbers.

It’s just not about revenues either. Audiences were also on a long term slide across the Nova radio network in 2010 – according to Credit Suisse analysis, Nova’s share of commercial radio listeners in 2010 dropped 10% in Sydney, down 9% in Melbourne and down another 12% in Brisbane. Contrast that to Austereo’s Triple M – in Sydney alone its commercial audience share was up 40% last year.

So there’s a striking parallel right now for Murdoch’s two big Australian media investments in radio and TV. Both are struggling in the ratings and both are in a revenue slump. Perhaps the only difference is that Lachlan’s been at DMG’s wheel – owner of the Nova and Classic Rock networks – for more than a year now and we’re still to see any turnaround.

There’s no question Murdoch got his 50% stake in DMG in November 2009 for a steal – he paid $110 million for an investment that cost DMG’s British owners $400 million in license fees alone.

But DMG ain’t singing for its supper in the slightest, even with Murdoch as chairman. Soon after Murdoch’s arrival at DMG, he backed Nova’s dumping of its key point of difference in the radio market – less ads. The two-ads-in-a-row strategy, which was refreshing for listeners and gave advertisers a less cluttered opportunity to flog their messages, was sidelined in a bid to sell cheaper radio spots and more of them to the market. So far it has not worked.

The defenders of Murdoch and Nova say the troubles are more to do with audience and programming than the abandoned low clutter ad strategy but it doesn’t hide the fact that 15 months on, DMG is still struggling under Murdoch.

And that leads to the real question for his new investment in Ten: what happens if the big name shareholders - Murdoch, Packer, WIN’s Bruce Gordon and mining big wig Gina Rinehart - face the same slow crawl out of the revenue and audience slump that has hit Murdoch at DMG?

Will Ten’s institutional investors stay patient with the big guns? And for how long?

paulmcintyre@yaffa.com.au

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