What would a Fairfax and Macquarie Radio merger actually look like? Is your job at risk?
There are strong rumours circulating around the radio industry that finally Fairfax radio and Macquarie radio will merge, with speculation that a deal will be done by Christmas and completed in the New Year.
The Fairfax owned Financial Review has reported that the merger will take place.
Assuming that this time it does proceed, this will mean there will be one national commercial talk radio network consisting of 2GB, 3AW, 4BC and 6PR.
Of course, there is already that footprint in place, however the monster ratings of 2GB have meant that 2UE’s influence has, certainly in recent times, been limited. The combination of 2GB under the same ownership as 3AW in particular is an attractive proposition.
The Fin reports that Russell Tate will be Exec Chairman with current Fairfax CEO Adam Lang in a senior role, and the next in line for the top job.
A key question is what would happen to 2UE? It doesn’t make sense to have 2 talk stations in Sydney, so 2UE could be rebranded as Magic giving the new group “Magic” formats in Sydney, Melbourne and Brisbane making it a viable national AM music network.
A further key question is what happens to 96FM in Perth. Whilst the new group would be keen to keep its earnings, which are substantial – in fact 96FM is believed to be second only to 3AW in earnings, it makes sense to sell the station.
The Fin Review reports that ARN are interested in acquiring the Perth station, which would give them a fully owned station in that market, 96FM, as well as their 50/50 joint venture with Nova Entertainment, Nova 93.7. Nova in Perth, while jointly owned, is managed by Nova Entertainment.
The Fin reports that a proposed deal is said to be on the table and under consideration by ARN.
96FM would fit well with ARNs Pure Gold network which currently includes WSFM, GOLD, 4KQ and Cruise. 96 would complete a national Pure Gold network across the five metro markets. Given the strong current earnings of 96FM it is highly unlikely that they would risk moving it to the KIIS brand.
But back to Sydney. So what happens to 2CH? Regulations restrict ownership of more than 2 stations per market currently.
Rumour has it that it will be divested, or quite possibly retained by Mr John Singleton, major shareholder of Macquarie. This all assumes that the speculation is correct and the merger will see 2UE, in whatever form, retained by the new entity.
And finally, what about the missing link; Adelaide?
Whilst Fairfax Radio sell on to Adelaide’s 5aa, the station is currently owned by Lachlan Murdoch’s Nova Entertainment, and it always has been an unusual station in the mix. 5aa was the first station acquired by Paul Thompson when he built DMG, and has remained with the business since.
Would Nova Entertainment sell 5aa to the merged Fairfax Macquarie Group, giving them all five capital cities? Even without Adelaide, the new group would have a virtual truly national Talk radio network, but it would be a neat and tidy way to wrap up the country.
A truly national commercial talk network, notwithstanding some ratings challenges in Brisbane and Perth, would be very attractive to national advertisers wanting to target 55+ talk listeners and will open up national advertiser opportunities.
The combined group should have earnings of $24.5 million ebitda, valuing it at nearly $200 million on a nominal 8x multiple.
The superstar key talent like Ray Hadley, Neil Mitchell, Ross & John, Ben Fordham, Tom Elliot, and in particular Alan Jones are a critical part of this deal.
Talk radio is dependant on its Talk stars, just as FM radio’s success largely depends on its breakfast shows. Talk back ‘ king ‘ Jones is an interesting part of the puzzle, because of his age. He’s 73 years old, has just signed a new contract to 2017 and whist going stronger than ever, the question has to be asked, how long will he continue in the critical breakfast show. That said, there is a ready-made replacement in Hadley, which of course leaves a hole in the key Mornings slot. Hadley is currently contracted until 2020.
There is no doubt the new group would look for operating synergies, which is often ‘management speak’ for some employees losing their jobs.
Depending on what happens to 2UE, were it to change to Magic, you would expect significant cutbacks at that station; and certainly Sydney irrespective of format change, would see significant staffing changes.
Hopefully some roles would be absorbed into the larger group or elsewhere in the radio industry.
The sales opportunities are exciting. Selling a national, successful, talk format would be a very attractive proposition and the Magic network would also become a more attractive option for advertisers.
It’s understood that Fairfax would hold a controlling interest in the new group, and given their size compared to Macquarie, it’s hard to see them doing a deal without majority control. Fairfax has the upper hand in this negotiation, however Macquarie have a ‘prize’ that Fairfax want – 2GB. Almost all of the value of 2GB lying with its key talent Jones and Hadley.
One thing for certain is that the combined 2GB with 12.1% ratings share, and AW with 12.8% ratings share, makes an extremely powerful combination. It all makes a lot of sense, the fallout is unfortunately a likely loss of jobs, but there will be improved offerings for advertisers and potentially greater benefits for listeners.
This sort of consolidation in the radio industry is important for the future of radio and for the medium for it to remain relevant with advertisers.
And the end game?
Should cross media ownership be changed as flagged by Malcolm Turnbull earlier this year, it’s quite possible the new larger national Fairfax Radio group could end up being merged with a Television network. Were it to merge with the Seven Network, it would deliver not only increased earnings but also strategically provide a stronger news presence and cross promotion opportunities. The new Fairfax news network could be both a good demographic fit with Seven, and deliver strong synergies. The news position being all important to TV networks. The nightly news on television is as critical to TV as breakfast shows are to radio.
There will be a lot of anxious staff at both Fairfax and Macquarie radio stations waiting to see the outcome of the negotiations and then a nervous wait to see who has jobs in the New Year.
The positive thing is that the great employees, the great contributors, will be fine and will have a role to play in the new group.
Brad March is a Director of Radio Today, is a former CEO of Austereo and has been named Media Executive of the Year. He’s Director of Marchmedia and Pacific Retail Management.