Southern Cross boss banks on podcast power to steady the ship
Southern Cross Austereo is banking on its digital audio strategy to make money in the future. The company’s newly-appointed Chief Executive Officer, John Kelly, perseveres in recovering one of Australia’s most well-known media companies.
Kelly was awash in a baptism of fire when he hosted his first earnings conference on the CEO’s job last week and announced subpar year results and reduced dividends. The market erased 10 percent off the price of shares due to the numbers.
The ASX listed Southern Cross, which houses such networks as Triple M and The Hit Network. It has experienced the most turbulence during Kelly’s tenure as the company’s former chief executive, Grant Blackley. Yet, Kelly has been an integral element of the management team for the past seven years, serving as the chief operating officer of Blackley.
“I’ve been here and helped design the strategy,” the man said. “So I believe in the strategy; that’s the first thing.”
“It’s early days, but my take on the landscape is to be highly accountable to our shareholders and trying to improve outcomes for them.”
Revenue for FY23 was down 3.7 percent up to $505.6 million, which is the fifth consecutive year of decline, and net income after tax also sagging 20.1 percent in the range of $21.9 Million, Kelly pointed to the expansion of the LiSTNR application as a bright spot.
LiSTNR, Southern Cross’ digital podcasting app and network, saw a 36.2 percent increase in revenue for the year to $21.3 million and registrations pegged at 1.5 million users by June 30.
Kelly anticipates LiSTNR to reach a point of breaking even by the end of the fiscal calendar year. This is “a year ahead” of its prior outlook.
The figures for digital audio advertising that were revealed in February totaled $221.2 million in the 2022 calendar year as per the IAB Australia Online Advertising Expenditure Report produced by PwC.
“I don’t think any part of the market has appreciated that digital audio, and what we’re seeing in the digital audio consumption trends and now monetization trends is our BVOD [broadcast video on demand] moment,” Kelly added.
The LiSTNR’s network of podcasts listeners has grown between 3.3 to 8.1 million during FY23. That, Kelly states, shows that people would like to listen anytime, anywhere, and, most importantly, in any location: the benefit this sector enjoys over its streaming and TV counterparts.
It’s the only positive aspect of the firm in a “challenging market,” a term likely to be used in the coming weeks and months, with radio advertising revenue falling 1.2 percent to $372.8 million and profits falling 11.2 percent in the range of $92.2 million.
The same applies to the television industry, whose broadcast advertising market declines yearly. Although BVOD revenues and viewing minutes are growing, it’s not at a pace that is fast enough for investors.
Finding a solution to Southern Cross’ regional television assets remains an uphill task, with revenue falling 14.5 percent to $107.8 million and profits up 37.2 percent in the range of $18.7 million. Southern Cross announced a six-month extension of its affiliate contract with Network Ten last month.
“That was really to give us enough time to try and reorganize ourselves, particularly relating to how we sell across the national footprint to agencies and national advertisers.”
Kelly says she is “unapologetic” about the heavy investment in LiSTNR over the last three years. In addition, the bulk of significant capital expenditure that includes content, technology stack, talent, and other expenditures is currently in the right place.
Kelly admits radio is Southern Cross’ primary revenue source despite the positive sentiment regarding LiSTNR. “I don’t want to place all my attention on LiSTNR disproportionately,” Kelly declared.
Despite a relatively weak commercial radio market for broadcasting, which increased by 0.6 percent in metropolitan cities, Southern Cross increased its revenue share to 27.2 percent. However, regional losses of 4.6 percent ($7.8 million) indicated a slowdown.
Audio isn’t plagued by the same consumption problems that other mediums face, Kelly said, which continues to grow. And unlike those in the TV sector, he believes a unifying approach to the industry will ultimately benefit the audio industry.
“We all want to get as many people into the stadium of audio as possible, and then we’ll fight like hell on the field,” said the man.
“I know that Ciaran Davis, ARN CEO] believes the same thing, and I’m sure Peter Charlton [NOVA CEO] agrees. We’ve got a very cooperative industry board. We believe that all audio is healthy, and we think everyone deserves a bigger part of the revenue pie; therefore, we’ll work together to get there.”