In the face of significant digital competition, FM radio in Australia is proving remarkably resilient.
Despite the entry of over fifteen digital music services – from Spotify to Pandora, Songl to Guvera, Deezer to Google Play – listeners and advertisers appear to be increasing their relationship with the format.
APN’s full year results showed their ARN division up 6 per cent year-on-year revenue-wise, and 14 per cent up in terms of EBITDA. Southern Cross Austereo told a similarly positive story in the half yearly results the same day with 2.2 per cent growth within their radio division. And all reports are that the unlisted DMG Radio is seeing solid uplifts in revenue and profit off the back of a rejuvenated Nova and rapidly growing SmoothFM.
FM radio is demonstrating current growth rates that are in line with digital advertising growth if search, video and classifieds are excluded. Digital display advertising – i.e. banners – on the whole is growing at around 5-6 per cent and for some mid to large players revenue has effectively flattened over the last 12 months. Radio is proving to be a formidable competitor.
The story these results seem to tell is that the digital services don’t appear to be taking advertising revenue from the FM broadcasters. If anything, the digital services are most likely taking revenue from other digital formats such as display advertising.
What it also demonstrates is that for users on-demand services and broadcast radio are not considered the same service, and it’s most likely the same for advertisers. Advertising via a company like DMG is, in reality, a completely different product to advertising via a company like Spotify.
It’s the strength of radio that has compelled APN News and Media to take full control over the future destiny of their Australian Radio Network radio division and New Zealand-based The Radio Network. Australian Radio Network and The Radio Network were a 50/50 venture between APN and the debt laden US goliath Clear Channel until APN announced it would acquire Clear Channel’s share.
In a side move, as part of the deal ARN will hold the licence to Clear Channel’s ‘IHeartRadio’ brand in Australia and New Zealand for the next 10 years at a total cost of $3 million annually across this period. IHeartRadio is a brand with tremendous potential within this market, and despite its infancy is APN’s current strongest digital asset in Australia as it fits so nicely with the current assets and infrastructure of ARN – namely its existing sales, programming/content and operations structure.
The future direction for APN appears to be driven by ARN as well as its small to mid-format out-of-home provider AdShel. The similarities between ARN and AdShel are striking – both are seeing strong growth despite digital competition, both have the ability to adapt to a more digital based delivery format (ARN via apps, IHeartRadio, digital radio; AdShel via digital panels, targeting, interactive elements) and until a few days ago both were co-owned by Clear Channel. Given APN has bought out Clear Channel’s share in ARN, one has to wonder when, not if, it will do the same with AdShel.
Why? AdShel has strong growth prospects as outdoor continues to evolve as much more addressable medium. The next decade will see significant developments in outdoor advertising as technology enables digital interaction to enhance a medium that continues to offer advertisers strong impact. Out-of-home will see over the next five years changes in creative formats, customer interaction, programmatic trading and targeting at a similar level to what has been seen within internet based advertising over a similar period.
For APN, its newspaper assets might be the current dominant revenue contributor but they are not its future. Its future isn’t in hurriedly acquiring digital assets like it has in the past either – both Inc Media and BrandsExclusive have proved challenging. Its future is in successfully evolving its radio and outdoor assets into the digital era. Its recent moves – selling BrandsExclusive, investment in AdShel infrastructure, paying down debt and acquiring the remaining 50 per cent of ARN – suggest its up for the challenge.