Kylenomics
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Welcome to a midweek update from Unmade.
Today: we examine whether the Kyle & Jackie O Show is worth $200m for the right media company, and the Unmade Index resumes its downwards march.
Time’s running out to enter Unmade’s REmade retail media awards. Entries close tomorrow; late entries, with an additional fee, will be accepted until next week.
Are Kyle & Jackie O worth $200m? Maybe - if you think of their show as a media asset, not a salary
Tim Burrowes writes:
It might be the audio industry’s biggest deal.
If reporting from over the weekend is accurate, Kyle Sandilands and Jackie Henderson are offering the networks a ten year commitment. Over the decade, the deal would be worth $200m - or $10m a year each.
Before we get into that, a quick caveat. With negotiations afoot, it would certainly suit the duo for the headline to help set a price point. And having as many potential bidders as possible is what drives competitive tension. So treat the number with a little scepticism. But just a little.
Only in the world of entertainment could the boss be paid significantly less than the staff. Ciaran Davis, CEO of ARN Media, the current home of The Kyle & Jackie O Show, earned $2,004,345 in 2022. His counterpart at Southern Cross Austereo, the since departed Grant Blackley, pulled in $2,432,688 in the last financial year.
Nonetheless, the stratospheric numbers may make sense. Here’s why.
The first factor is to adjust how one thinks about a star salary. What Sandilands and Henderson are not selling is their time. They’re selling the ability of The Kyle & Jackie O Show to attract and retain audiences and advertisers. It’s a commodity.
The framework is closer to that of a sport rights negotiation. Seven and Foxtel are paying $4.5bn over seven years for the AFL rights (assuming it doesn’t send them broke in the process). That’s the equivalent of $40,000 per live minute.
By contrast, $20m a year would amount to perhaps $500 per minute of live content for The Kyle & Jackie O Show.
So the question becomes the simpler one of whether the winning network can sell enough advertising to make a deal worthwhile.
Fortunately, there’s some relevant history. At the end of November, it will be ten years since Sandilands and Henderson did their final show on SCA’s 2DayFM in Sydney, and announced they were off to ARN to launch Kiis FM on the frequency previously occupied by Mix.
In the first survey in 2014 they turned a 3.3% share of the breakfast audience into 9.3%. The weekly cumulative audience for the timeslot doubled from 256,000 to 532,000.
While they poured the champagne in Macquarie Park, their old colleagues at World Square saw 2Day’s audience collapse from a 10.4% share to 3.8%.
Allowing the show to move across town was one of the great radio blunders. As SCA’s then CEO Rhys Holleran told me in my book Media Unmade (yours for the bargain price of $24.95): “It was the flagship show of the company and we were thoroughly and completely humiliated in every survey that year.”
The business effect was almost as quantifiable. The advertising dollars followed immediately. Just in that first year, revenues to ARN’s parent company rose by more than $30m.
A decade on, the Kyle & Jackie O Show has cemented its FM lead - in the most recent numbers it pulled in a 13.9% share of the Sydney breakfast audience. By contrast, 2Day FM’s Dave Hughes, Ed Kavalee and Erin Molan hit a 4.6% share last time round.
While The Kyle & Jackie O Show never deposed Alan Jones from top slot on 2GB, over on AM, they’ve overhauled his successor Ben Fordham four times. The two shows now run almost neck and neck for average audience, with Fordham averaging 119,000 to Sandilands and Henderson’s 113,000.
The Kyle & Jackie O Show is also easily the top show for weekly cumulative audience, currently hitting a cume of 755,000 just in Sydney.
Speaking of Alan Jones, he was the only other radio personality who could claim to have come close to as big a deal as the one being sought by Sandilands and Henderson.
In 2002, Jones moved from 2UE to 2GB, which was then the upstart, owned by former adman John Singleton.
Jones was given a signing fee which was reportedly $4-5m, along with an annual salary of $3-5m. But he also got a slice of action from the company’s performance on the sharemarket - 20% of whatever growth there was in the value of company shares. When the company floated three years later, that was a profit of $14m for Jones. Factor in inflation and Jones’s deal may yet be bigger than the one currently on the table.
Incidentally, a share based deal is what would make most sense around the Kyle & Jackie O Show negotiations.
Both ARN Media and SCA - the two most obvious homes for the show - are listed on the ASX. That gives both companies a relatively straightforward way of funding a deal via the issue of either shares, or options to buy shares.
Sandilands and Henderson would then both be directly incentivised to help grow the company share price (and to resist the temptation to complain about the management on air).
That’s not to mention that both companies are currently paying shareholders halfway decent dividends relative to their depressed market capitalisations. Based on current payouts, the owner of $10m of ARN shares would get about $1.1m a year in dividends. SCA would be worth about $910,000 per year.
But there are also other potential options. With SCA and ARN currently so cheap, private equity must be sniffing around both companies. They could well do a deal to lock in the duo, then take the target company off the ASX for a few years before relisting for a bigger payday down the track. For example Quadrant, current owner of outdoor player QMS, has previously said publicly that it likes the combination of radio and outdoor.
And then there’s Spotify. In 2020, the company licensed The Joe Rogan Experience podcast for something like US$200m, the equivalent of about AU$310m. That deal doesn’t seem to have gone particularly well for Spotify but if it wanted to become a bigger local player in podcasts and maybe live streaming, this would be the option. Making the show exclusive to Spotify would undoubtedly drive subscriptions.
However, it feels like the existing audio players of ARN Media and SCA would be better placed to squeeze the most out of any deal.
Through iHeart and Listnr, ARN and SCA are heavily committed to growing their streaming numbers.
The Kyle & Jackie O Show podcast, which is a cutdown of the live version, is currently iHeart’s biggest podcast out of the ARN stable. In August it was the sixth biggest podcast by monthly listeners (550,308) on the Triton Australian Podcast Ranker. But, thanks to the frequency of the content, it was also the second biggest podcast for monthly downloads with 2,189,042, just behind Listnr’s Hamish & Andy.
Returning to radio, there’s already a huge secondary audience. Hour of Power, featuring content from the breakfast show, already runs in the evenings across the national Kiis network.
And the national network is the key question.
Sandilands has said on a number of occasions that he wants to take the live show national.
That goes against Australia’s established wisdom that commercial breakfast shows need to be tailored to their own cities. Plenty of radio people claim that the brash, often tacky, show would never work in Melbourne, let alone sleepier parts of Australia.
That’s the main dilemma facing ARN in particular. To take the show national, on FM, would put all the network’s eggs in one basket.
If the often controversial Sandilands blows up after the show goes national, it would take years for the network to recover.
But ARN boss Davis has taken big risks before. He was the key player in engineering the defection from SCA. And his company made a similar big move in bringing Christian O’Connell over from the UK to join Gold in Melbourne.
And the prize could be big. Only Sandilands and Henderson (and both are essential parts of the recipe despite Kyle’s bigger profile) have the talent and skill to make a live national show work. That would be a huge attraction for sponsors, even with the sometimes risky advertising environment the show offers.
In reality, this is an auction with - for now - just one bidder. There’s still one more year left to run on Sandilands and Henderson’s existing contracts. So ARN has an opportunity to lock in the duo for the long term while there’s still a degree of exclusivity.
Which is riskier? Letting them go back to Southern Cross Austereo in a year and undergo the ratings humiliation experienced by SCA last time round? Or getting into a ten year, three-legged race alongside Sandilands?
Tricky.
Unmade Index dips again
Seja Al Zaidi writes:
The Unmade Index, which measures the performance of ASX-listed media and marketing stocks, tipped downwards yesterday. It dropped 0.94% to land at 620 points.
Seven West Media experienced the biggest drop of the larger media stocks falling 3.12%, while IVE Group followed with a 2.11% fall. Ooh Media also dropped 1.81%.
Only Enero Group managed to see some positive action, rising 0.31% while smaller stock Motio climbed 13.33%.
Time to leave you to your Wednesday.
We’ll be back with more tomorrow.
Have a great day.
Toodlepip
Tim Burrowes
Publisher - Unmade
Kylenomics
The "Key Person Insurance" salespeople must be watching this one with bated breath.
Thanks Anthony!