Michael Stephenson.
Michael (Stevo) Stephenson, who took over as CEO of ARN Media late last year, has set himself a priority goal of clawing back the sector revenue share the radio company lost over the past 18 months.
The company’s position is that market share was lost over brand safety concerns at the Kyle & Jackie O show and that this means ARN's 25% share of audience has translated to only 19% of revenue.
Clawing that back to equilibrium is a $38.4 million opportunity.
The Kyle & Jackie Oshow was taken off the air earlier this year after Jacqueline Henderson said she couldn't continue to work with Sandilands. Both took legal action against ARN. Sandilands settled. Henderson's is still pending.
ARN Media reported a 14% drop in revenue to $127.9 million for the half year to June, reflecting a reduction in metro radio revenue share over “brand safety concerns” associated with KIIS breakfast.
Analysts at investment bank UBS described the latest result as softer than expected.
“We await for recovery into … (the December half year) supported by metro share gains as talent reset initiatives flow through,” the analysts said.
ARN reported a net loss after tax of $27.6 million, mainly due to a $25 million non-cash impairment charge relating to intangible assets, and $17.2 million which includes $11.6 million settlement costs with Kyle Sandilands’ Quasar Media payable over three years.
“The big challenge, and what I see is a significant opportunity, is to regain the six points of revenue share that we've lost over the last couple of years,” Stephenson told analysts in a briefing on the June half results.
“It was only two years ago that we were a 25 share of revenues, and I have every expectation that that's where we'll return.”
Stephenson said ARN’s share in the current second half of the year is improving from the first half.
“But I can't underestimate the impact that the brand safety issues have had on our business,” he said.
“Whilst that all ended in March, there is a lag in our ability to recover some of that market share that we've lost.
“I say the words lost because that's what I fundamentally believe. With all respect to my traditional competitors, I don't think they've won that share … we've lost it.
“It's our opportunity now to regain that. And I think you'll see that happen increasingly as we progress through the half and into next year.”
Kyle & Jackie O show hadn’t been running full ad breaks because of lower demand.
“The ad breaks that we had weren't full, and the price that we were selling it at was significantly lower,” he said.
“We enter into a new world where the audiences might be lower to start with but I have every expectation that will grow over time but we'll have full-out inventory.”
The company is close to finalising talent agreements with new stars who will join ARN over the coming weeks and months.
A new breakfast show will be launched this year in both Sydney and in Melbourne.
Stephenson said it was a rare opportunity to reset the talent base.
“There's been a lot of demand from a lot of people wanting to join ARN for these very premium roles in our breakfast time slot,” he said.
Stephenson said radio is a growth market.
“The realities are: in the first half of the year, the metro radio market did decline by 6.6%,” he said.
“You strip out the effect of the election through that period, the underlying market is more like 3% and I suspect that probably continues all the way through until the end of the year.
“If metro radio markets declined by two to 3% and digital markets are growing at 12% or 13%, 14%, you get a total audio market that's growing about 1% all the way through the cycle up till 2030.
“The inflection point that we're seen in in radio and audio has happened far quicker than it happened in television. And so I think we should have confidence in the market that we operate in.
“Our strategy and our ability to diversify revenue and earnings by entering into new growth markets means we can also be in video markets and other high-growth digital markets, which is certainly a part of our plan.
“I don't want us only to be leveraged to a traditional marketplace.”
Stephenson said ARN has made strong progress in stabilising the core business, simplifying the portfolio and strengthening the financial position.
Slides from the presentation to analysts:
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