Q&A with Grant Blackley: Have SCA’s fortunes finally turned around?
On the surface, Southern Cross Austereo (SCA) appears to have turned around its financial fortunes – but at what cost? Here, CEO Grant Blackley reveals to Vivienne Kelly why he rejects the notion the broadcaster should give back the JobKeeper funding it received, what its new corporate strategy actually means, and why he believes LiSTNR has no rival.
VK: Percentage wise, it looks like some really good growth in terms of profitability and whatnot. Are these actually standalone good results, or are these huge percentages just because last year and COVID was so dire?
GB: Yea, I think there’s a combination of both to be honest.
Firstly, I think we’ve seen a very strong recovery in the market to such a point that you’ve got nine out of 10 major [advertising] categories all in double-digit growth now, recovering from the depths of COVID last year, and the market is just responding to that and obviously we’re getting the benefit of that.
And the other half of this as well is that we have spent the best part of 18 months reimagining the network, reimagining the contribution by each of the segments within our business at SCA, and how we can create a more effective and efficient operating model, coupled with an investment with our digital audio segment that as we’ve seen today, revenues have grown by 40% and we expect that they will grow by a further 75 to 100% over the course of the next year.
So I think it’s a combination of both.
VK: And look you did benefit from JobKeeper and the PING program. JobKeeper’s not around this time, but we’re still in lockdown, so how are you going without that Government assistance when we’re still facing uncertainty?
GB: Yea I think COVID in its first phase or first iteration did create a sharp drop in revenues, which the Government responded to accordingly with some assistance for the business community. And this time around it’s very different.
So this time around we are seeing far more considered and moderated approaches to the lockdowns that are occurring. And it’s not business as usual, but it’s certainly a more calm and measured approach on the way through. So we still see continued recovery.
We’ve posted today that July and August revenues will be up 20% over the prior year. And certainly July and August last year was far better than what we saw at the depths of March, April, May last year, so we were in recovery, albeit the early stages of recovery.
You would argue now that we are at the latter stage of recovery, and in some cases fully recovered. So I think there are just a few segments of the market, particularly in retail and some of what we described as the restricted categories, like live events, international travel and related that obviously are still suspended or not in a full state of recovery at this point.
So we only had JobKeeper for the first six months. We delivered $51 million of earnings in the second six months. So to that end, we lived without JobKeeper exceptionally well as the market improved and as our share of market improved on the way through. So that resilience now has obviously set us up to obviously deal with this current lockdown at this point in time.
SCA’s financial results revealed the impact of JobKeeper
VK: And there’s been some focus in the media about companies which got JobKeeper and then recorded profits. You’ve recorded a really strong profit today. What would be your response to people who say you should give JobKeeper back?
GB: We would say that through no fault of our own, nor the Government, we had a health crisis. The Government responded accordingly for all businesses to support those businesses, and the media sector was hit very hard because we do operate on consumer and business confidence. And when borders are shut by the Government, restrictions are put in place and confidence falls, naturally the Government wanted to ensure that we, for the most part, kept operating and kept our people employed for the most part throughout the course of the period.
So JobKeeper in its own right did the job that it served.
Over the course of that, one must remember that we pay substantial taxes back to the Government, well in excess of JobKeeper. Our shareholders lived through a capital raising and the suspension of dividends. So our shareholders, the company and the Government have all acted I guess in unison to try and create a very balanced outcome. So, you know, I think JobKeeper did its job on the way through.
We do see PING as completely different. There is always interaction between industry and Government in relation to certain grants and awards to industry – whether that’s the reduction of license fees or the awarding [of grants such as PING]. And it just happened to present itself in the middle of COVID, but it’s something that the industry’s been talking about for a long time. It’s something the Government recognises as a vital tool for both national and local communities. So PING was just another installment in a set of measures over a very long time, pre-COVID and during COVID, that presented itself to the market.
VK: Now I saw somewhere in the 99-page full-year report on the ASX that there’s a new corporate strategy which is to “Entertain, inform and inspire Australians. Anytime. Anywhere”. What does this actually change for you?
GB: Well, one, I’m glad you’ve read that document.
SCA also unveiled its new corporate strategy
I would say that coming into COVID, and we have an annual review of our entire strategy and the purpose of the business, we review that every six months. We have an off-site strategy day with our Board. We invite experts into that room from outside the company. And that new statement means a lot for the company because it goes to our digital posture, where we will place a dollar of investment tomorrow and today, and effectively what we’ve been doing over the last couple of years, is effectively continuing to spend and support our linear assets, but at the same time, build a stronger digital posture. And that digital posture comes through a stronger digital audio arm. It started off with streaming our stations through our apps. It moved through to PodcastOne and the identifying, curating, promoting and monetising 92 premium original podcasts. And it went all the way through to what was a multifaceted development by 19 offices over three years with about 190 people involved to the creation of LiSTNR, which actually houses those four key content pillars.
So, today we have a very different business and tomorrow we’ll have an improving business with a stronger digital posture. It’s a high-value segment. It’s a growing marketplace. It’s accelerating in terms of consumer consumption as much as it is meeting the demand of advertisers for more data and insights at a very granular level.
So we’re playing to both consumer appeal as much to the advertiser demand, and therefore, that’s why we’re confident in saying the growth that we’ve already achieved will go up by a further 75 to 100% over the course of the next 12 months, which is starting to become quite material to the business, and that’s our strategy and our responsibility in fact to our shareholders and to the Board and we take that all very seriously.
So think of this as a digital-first audio strategy that has to be ingrained across 65 offices, a couple of thousand people and enacted day-in, day-out as an operating mantra that we adopt. And that is very different than the one-to-many linear model that has served the company extremely well in the past.
VK: And speaking of digital audio first, LiSTNR launched on the 18th of February, which I think makes it six months old…
GB: It was six months yesterday. It launched on the 17th. So yes, our new baby was six months yesterday. We were very proud.
Blackley touts LiSTNR as an overwhelming success
VK: So how is that tracking to expectation? Is it crawling? Is it running? What’s your baby doing?
GB: It’s doing all of those things. It’s certainly maturing very quickly. We couldn’t be more delighted with LiSTNR on a range of levels. The first thing I’d say is the principle priority was to ensure we had a technology platform and posture that fundamentally delivered what we needed.
The second thing would be, we have delivered on the 17th of February a very stable platform, which, on a week-by-week basis, we are fundamentally improving and developing to ensure that we actually meet the response and feedback from our consumers as much as we do from the innovation that we’d like to see.
The consumption is going up dramatically. We started off with effectively a podcast-led consumer interaction, and now what we’re seeing is they’re moving into the house of LiSTNR, and fundamentally they’re spending as much time on our radio product and our linear product one would argue as they do within our podcast environment.
And in the house of LiSTNR, of course, we’ve brought music stations with playlists, we’ve brought more news and more information, led from Steve Price on Australia Today through all of our news products.
So that is an ever-growing delivery of new content, which we’re enormously proud of. And as we scale that, what we’re going to see is the gravitas of that and the momentum it will deliver. I think it will put us well in front of the marketplace, on what is a product that we can’t find a direct equal to – probably in the absence of BBC Sounds, to be fair, in the UK.
So it was a product that we envisioned, we nurtured, we’ve built, the baby’s up and running around at six months, and we’re hopeful that it starts to run even harder moving forward.
And I think our investment over the past six months into AI technology platforms – being Sourse and Sonnant, that we took an equity stake in – their AI recommendations and ability to improve the offering to consumers will accelerate that position.
But we’re no longer worried about the technology platform. It’s now down to content, marketing for customer acquisition and monetisation.