Yesterday SCA confirmed it is still in talks with ARN regarding a potential takeover bid. SCA CEO John Kelly speaks to B&T about the status of the deal and the “challenging” market which led to a profit slump in yesterday’s interim results.
ARN Takeover Bid
ARN Media and SCA have been locked into merger talks since October 2023, with the former launching a takeover bid for its radio rival.
SCA boss John Kelly told B&T there are “two factors” influencing discussions around the deal.
“There’s the ever-expanding growth of LiSTNR, which we don’t believe is being factored into the argument that was made in October, this is new news”.
The second factor was around the structure of a successful deal.
“We’re working collaboratively with the consortium and their advisors to try and assess ARN NewCo, which would be a brand new company with Kiss Network, Triple M Network and digital JB,” Kelly said. “That takes time because it’s a brand new structure and we need to work out the assumptions for that model and the earnings for that model. We need to compare that to the standalone offering of SCA”.
PROFIT HIT By Govt Slow down
One of the factors that led to a profit slump in the first half of the current financial year was a decrease in government spending, Kelly said.
“In terms of just broadcast radio, we’ve been impacted particularly by the lack of government spending in this half as well, which I think has led to a reduction in revenues,” he added. “And we expect there’ll be some sort of moderation of that moving forward”.
Positive Future In Digital
Kelly said a ‘challenging’ ad market and wider structural shifts had led SCA to sharpen its focus on its digital audio offering.
“The headline result in terms of revenue was that we finally completed our digital audio ecosystem, which allows us to compete with the other global players,” he said.
“Now we’ve completed that we’re getting much higher rates of growth. The growth we are getting for Q3 [in terms of digital audio] is 50 per cent, which is almost double the 27 per cent we achieved in the first half”.
“To me, the big headline is that we can compete head-to-head with the global media players, unlike some of our other digital audio peers. So we’re excited about the continued growth of digital audio and audio more generally”.
Audio Is ‘Very Different’ To TV
Kelly said that domestic radio broadcasters have an advantage over their TV contemporaries in the transition to digital streaming.
“I think audio is very different to TV. TV and video streaming – that’s massive. We’ve only got a couple of significant competitors in the audio streaming category, which is Spotify and Apple, but Spotify and Apple are global providers, they’re not producing local content.
“The differentiation we have here is that we have local stations across 50 offices and radio stations producing local content every day in those markets or those local communities. That’s a very different thing from where TV is got to”.
Kelly’s comments have been echoed by other media executives speaking to B&T this week. Senior media buyers and Nine’s radio boss Ashley Earnshaw have also talked up digital audio and the opportunities presented by Gen AI and podcasts.
