April revenue a shocker: How are companies dealing with the pandemic? | radioinfo

April revenue a shocker: How are companies dealing with the pandemic?

Thursday 07 May, 2020

This week several radio industry leaders have given updates on how their companies are going during the COVID-19 pandemic. Steve Ahern examines the evolving business situation.

Radio audiences are growing during this pandemic, but revenue is dropping. Hopefully that revenue trend is short term.

Indicators this week show that radio companies are actively managing through the downturn with a view to the longer-term outlook. But nobody is exactly sure how long the 'longer-term' will be.

No one I spoke to for this article is projecting further than September, when the current government JobKeeper arrangements finish. Most are hoping that by then we will be closer to normal business activity than we are now.

When other businesses get back to work and resume their usual advertising schedules, radio will hopefully be in a position to leverage quickly back to revenue growth, based on the decisions companies are making right now.

Reading the tea leaves of indicators from this week, I looked at ARN, Nine Entertainment and SCA for evidence of how radio businesses are going. Then I spoke to some smaller networks, and some advertising agencies to get a 360 degree picture. I promised the people I spoke to that they would not be mentioned by name unless they had already made public statements or unless they gave permission for me to quote them.

This is what I found.

Revenue

Revenue is down almost everywhere. When Australia went into partial lockdown in the second half of March, all media revenue fell quickly. April was very difficult and most companies expect May to be just as bad. After that, sentiment begins to lift, but of course none of us know what lies ahead in terms of more infections and the business impact of the lockdowns.

SCA’s revenue is down by somewhere between 30-50%.  ARN’s quarter 1 revenue is down 7%, but in April it declined by over 40%. Nine Entertainment’s  revenue is down by 30% across all its platforms and it is currently renegotiating football rights deals.

Ciaran Davis told HT&E’s AGM today that revenue was down 17% on a like for like basis with the previous year.

Hugh Marks told a Macquarie Bank conference that quarter 3 broadcast radio revenue was down 9.5% and that April revenue was down 29.8%. He predicts that May revenue for the company’s radio stations will be down even more than April. Like SCA and ARN, Nine Radio has also reduced costs in response to the pandemic. The company reports that digital subscriptions to its newspaper mastheads have increased by 13%, presumably because people are shut in at home and not regularly going out to buy a physical newspaper.

Radio companies that are highly geared towards direct advertisers have felt the impact most. This is true for the big companies (ARN reported today that 30% of its advertisers are direct clients and that segment has been hardest hit) and it is especially true for the small companies. Regional networks I spoke to confirmed the trend. One network, which has a high ratio of local direct clients said revenue is down by over 50%, while another regional group, which has more networked programming bought by agencies is not reporting any significant impact on revenue.

Stemming the decline

Most companies I spoke to acknowledge that April was a shocker, but they are seeing signs that the worst may be over. Ciaran Davis today told his company’s AGM: “The high level of client cancellations experienced in the weeks immediately following the national pandemic lock-down have abated,” but also said May ad bookings are likely to be the same as April, indicating we’re not out of the woods yet.

Some advertising sectors are helping to keep revenue afloat at this time, including financial services, government (the Covid campaign) and supermarkets. The next sectors to emerge will be those allowed to open their doors after the lockdown. The sectors that will be slowest to resume advertising will be restaurants and entertainment venues.

Several companies and ad agencies I spoke to commented on the earlier articles we ran about strategies for client retention (Corona virus sales Part 1, Part 2, Part 3), saying that the advice to change the messaging and to keep a presence when rivals were going dark, were two useful pitches that helped convince clients not to pull their advertising.

Jobkeeper is a god-send for everyone. Every company I spoke to said they would definitely have shed staff (or more staff) if not for the government’s JobKeeper program, which will continue until the end of September. All companies had made some adjustments to working hours, pay levels or leave to balance out the lower revenue by decreasing operating costs. While revenue was down in April, so were costs for most companies and several still managed to break even for that month.

Staff working in the promotions and events sections of every business I spoke to are the worst hit, because there are no external promotions or events happening during this time of social distancing. Some have been redeployed to other tasks while others have had to take leave or shorten their working hours.

Forward looking strategies

Ciaran Davis told today’s AGM: “We spent a large part of 2019 focusing on our core radio business ….. positioning ARN as the leading audio broadcaster with a simple and clear offering From a content perspective … audiences continue to tune into Radio’s - it is still the major source of audio entertainment in this country and has grown 22% over the last 10 years.”

SCA has also been through a period of rationalisation, implementing new technological solutions and rationalising its transmission and tv playout facilities. This has paid off for SCA, although they never would have anticipated it to happen under these circumstances. Our sources at SCA told us that the remote functions of Zetta and GSelector have served the company well, with 80% of employees working from home, many of them doing their live shifts using the new RCS systems. Over 60 of SCA’s 95 breakfast shows are being broadcast from home studios. SCA has also just completed a capital raising, which will give it funds to see it through the pandemic, but more importantly, will put the company in a good position to capitalise on opportunities when it comes out the other end. The company has been reducing its debt over the past few years, which allows it more headroom for initiatives at some point in the future to reward shareholders for their support.

Almost every company I spoke to said they intend to review their office space and the possibility of having some of their workforce do their jobs from home for at least part of every week. Time will tell whether this pandemic changes the nature of work in this and many other industries.

Job losses

ARN was able to tell its shareholders at today’s AGM that it had not made any staff redundant. Executives have taken pay cuts and some staff are working reduced hours.

As previously reported, SCA has reduced staff hours and redeployed some employees to new duties. The company has not initiated any forced redundancies. Grant Broadcasters has had to make a small number of staff redundant, but, thanks to JobKeeper, has been able to retain more than the company initially thought it could. SuperNetwork has not shed any staff, nor has Nine Radio, according to our sources.

No radio companies are hiring new staff at this time, although there is expected to be pent-up demand in a few months time when things ease off. Other expense areas that have been cut to save money and jobs include: marketing, travel, entertainment, bonuses and incentives.

ARN reported in its AGM today that JobKeeper will contribute to the company’s planned $20 million in savings, while JobKeeper is thought to be worth about $35 million in savings to SCA over the six months of the salary subsidy payments.

 
Which media are hardest hit?

Outdoor is worst hit, because people are commuting less.

Radio is probably the next hardest hit media sector. Ironically, radio’s audience is growing, but there was a mistaken perception initially that radio audiences in peak listening times would decrease due to reduced commuting. This has not proven to be the case, so industry bodies and individual networks are now working hard to deliver the message that radio audiences are still there and are listening longer, making radio advertising even better value than usual. Radio has also been the quickest to respond to the changing messaging of the evolving government information campaign about the virus.

Regional television seems to be the next hardest hit.
 

Audiences

News companies across all media (radio, newspapers and tv) reported increases in audience in the first few weeks of the pandemic as people struggled to learn about and understand the threat, but now, some weeks into lockdown and with infections in Australia falling, people feel they know what is happening and are seeking relief from pandemic news by turning back to music and entertainment programming or podcasts.

Given the increase in audiences to radio and the increased availability of inventory, radio advertising is currently a good deal, with prices lower than usual, more inventory available to advertisers, and more people listening.

Podcast and smart speaker audiences have also grown dramatically during this time and radio companies expect these audio consumer segments to continue to grow when things get back to normal. Our sources tell us that live radio listening on smart speakers has grown about 25% and that podcast listening has increased by somewhere up to 50% on last year. Anecdotally, we hear that podcast advertising  has not grown at the same rate, but all indications are that, when things return to normal, there will be a boom in podcast advertising as well as a return to normal levels of radio advertising.

Advertising Agencies

Two agencies I spoke to acknowledged that they initially thought radio listening would decrease during the lockdowns, but they have changed their minds as a result of the information coming out about increased listening at home, more podcast listening and the increase in smart speaker usage, and presentations from companies such as SCA, countering the misinformaton that radio listening must be down.

Another ad agency heavyweight confirmed the trend in a marketing podcast, with Omnicon’s Jo Dick and SCA’s Brian Gallagher agreeing that the ad market “completely missed” the surge in radio listening during this time and are now “in catch up mode” to book more radio spots.

Interestingly, our sources in the retail sector also confirmed that sales of broadcast radio sets, and radio enabled hi fi units have also increased, a trend that began during the bush fires and has continued during this time when more people are at home listening to radio, podcasts and their own audio collections.

Screen Fatigue

One agency commentator made the point in an article for Group M that, with so many people working from home and sitting in front of their screens all day, ‘screen fatigue’ may become an issue, inducing more people to seek audio sources of information and entertainment such as radio, music and podcasts.

No one knows where our radio and audio businesses are heading during this pandemic, but clear thinking and strategic decision making is essential as companies try to navigate the uncertainty of this difficult time. Only when it’s all over will we know which decisions were the right ones.


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About the Author
 

Steve is the founding editor of this website.

He is a former broadcaster, programmer, senior executive and trainer who now runs his own company Ahern Media & Training Pty Ltd.

He is a regular writer and speaker about trends in media.

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