This Kyle and Jackie O story is a freaking important lesson for investors, so read on if you plan to make money out of stocks.
I love radio. A big part of my career has been around some of the most successful radio shows in Australian history. A big proportion of the population couldn’t live without it, especially those in their cars having to cope with the morning ‘car parks’ that workers are told are motorways!
In my career I’ve worked with John Laws, Doug Mulray, Melbourne’s Degeneration, Mike Carlton, Alan Jones, Clive Robertson, the ABC great, James Valentine and now Sydney’s number one breakfast host Ben Fordham.
Yep, I know this beat. While my colleagues have always seen their radio relationship about entertaining the listeners and ratings, I’ve also had the added professional interest in the performance of the underlying businesses’ profits and share prices.
However, as the tumbling share price of ARN Media (A1N), the listed company that owned the radio show hosted by Kyle Sandilands and Jackie ‘O’ Henderson, shows that it’s hard business to make consistent profits.
The board decided it was a good business idea to lock the pair into an unbelievable $200 million contract over 10 years. No one who has experience in radio saw this as a smart business idea money-wise. It really looked dumb when a group called Mad Fucking Witches (MFW) decided that Sandilands was preaching “violent misogyny” and targeted key advertisers for running ads on the show.
This lobby group was created by an advocacy group, whose name came after former Liberal leader Peter Dutton text The Australian about a journalist and used the term “mad fucking witch”.
MFW’s first target was Alan Jones, which led to an exodus of advertisers and consequently made his huge contract difficult to justify for the board of Nine Entertainment.
Listeners see radio stations as sources of entertainment, education and information about the weather, traffic problems and sporting results. But shareholders want them to be profit-makers, ratings winners and stock price risers. While there was a time when ARN delivered to its listeners because Kyle and Jackie O were good ratings winners in their long running breakfast show, it has crushed the hopes of its shareholders, as the chart above shows.
While those owners of the company (i.e. shareholders) can only blame ARN management and its board of directors for this shocking stock price smashing, they were helped by a pressure group that was a part of the demise of Alan Jones’ reign on 2GB.
With Jones out of the radio spotlight, MFW went after Kyle and Jackie, which didn’t help ARN’s plan to syndicate the show into Melbourne, which was undoubtedly the reasoning why they thought a $200 million contract was a good business idea.
The Daily Telegraph’s John Moran has captured the company’s and their shareholders current shocking situation with the following: “The market value dipped to its lowest ever of $98.5 million, represented by a share price of 28.5 cents. By the end of the day, it recovered slightly to 29 cents, or a market value of $98.6 million. A year ago, the market value sat at $188 million.”
The company could easily lose Sandilands court claim for $85 million compensation, arguing the company wanted him to behave badly because it rated. That might be an easy argument to win, considering the shock jock has behaved badly for a long time and it hasn’t hurt his ratings.
Another point in his favour was the fact that the show was subject to a 30-second delay to allow censors to monitor content.
As an ARN shareholder, you’d have to be worried that the company could lose the court case and have to fork out the promised $85 million to Sandilands. And inevitably, Jackie O will be looking for compensation. The company will have to find a replacement show and then attract an audience.
It’s my experience that suits on boards have a history of not playing media businesses effectively. Hoyts, which once owned Triple M, tried make its Brisbane radio station change its name to Triple M. And it changed the newsroom staff to save money, so its rival station B105 hired the people and started telling everyone that the station was being run by Sydney!
Triple M went from number one to number two in the rating and B105 zoomed to the top. That was a bad suits decision.
Years later, Austereo took over Triple M and tried to syndicate Melbourne’s number one breakfast show starring Richard Stubbs into Sydney. It failed because Melbourne people want to hear about AFL and things Melbourne, while Sydney listeners care more about rugby league and things Sydney.
Suits failed again at ARN. The board not learning from how MFW hurt Jones’ career and 2GB’s ad revenue was corporate immaturity. Paying Kyle and Jackie O a grand sum of $200 million for 10 years is a good reason why shareholders should sack the board and the knuckleheads in management who supported the plan.
So, what’s the lesson for investors? Avoid media companies, unless you want to buy ARN at 28 cents and gamble that they can find a great act to replace the Kyle and Jackie O Show and get ratings up without inciting a pressure group with a cause called Mad Fucking Witches.
