Radio network Nova FM laughs off streaming ‘threat’

CLAIMS radio companies are under threat from structural challenges such as music streaming have been dismissed by the Nova Entertainment chief executive.

Nova’s Lachlan Murdoch and Cathy O'Connor. Picture: James Croucher

CLAIMS radio companies are under serious threat from structural challenges such as music streaming have been roundly dismissed by the chief executive of Nova Entertainment, who has declared the sector in rude health.

Nova chief Cathy O’Connor also offered a rare glimpse into the privately owned company’s financial performance, revealing operating earnings have surged 28 per cent for the calendar year, and the company is “budgeting for at least 20 per cent next year”.

The operator of the No 1 FM network Nova FM and easy listening brand smoothfm will deliver earnings before interest, taxes, depreciation, and amortisation in the vicinity of $52 million, driven by strong organic growth and income from a concerted push into non-broadcast services. Last year, Nova posted EBITDA of $40.6m.

Nova’s earnings have surged 225 per cent in five years, from $16m, showing a sharp upward trajectory in the group’s performance since Lachlan Murdoch’s private investment firm Illyria acquired a 50 per cent stake in 2009, before taking full control of the business 2½ years ago.

“Our numbers speak to the health of the sector,” Ms O’Connor told The Australian. “We’re not seeing disruption to broadcast revenue by streaming services at this point. Radio is in a very strong place and I think strategically it is demonstrating its place in the new landscape.”

Amid commentary about the decline of traditional media companies, strong audience statistics and robust advertising revenues highlight radio’s resilience in the digital era. Advertising revenues for the sector gained 9 per cent in recent months, outpacing the total ad market. PricewaterhouseCoopers is forecasting growth of 2.5 per cent next year.

The change is in digital technology opening new avenues between radio companies and audiences. Commercial networks remain relevant because they have transformed themselves from broadcasters of radio into “integrated multi-platform operators”, Ms O’Connor argued.

To reflect a new, diversified business model, the company ­rebranded as Nova in February before unveiling new brand ­extensions including a global tour for live music brand Red Room, and the smooth Festival of Chocolate.

“These are two examples of playing a bigger game beyond your broadcast licences,” she said. “Those ideas are easier to deploy and more prevalent in radio than other mediums because of the abundance of content and the fact that we create them ourselves.”

Ms O’Connor also said rather than being an acquisition target, Nova is on the acquisition trail. She revealed that the company is “open to looking at digital acquisitions”.

“There are a lot of digital content businesses out there that need scale,” she said. “We bring that and I would like to think in the next 12 months the right opportunities will come.”

In a year when the big talent moves grabbed the attention, particularly KIIS1065’s Kyle and Jackie O, Nova quietly reaped the benefits of a consistent audience trend line.

Nova had its big line-up changes in September 2011, and remains home to the number one FM shows in drive and night time.

“Our audience goals have been achieved and then some,” Ms O’Connor said. “There’s great value and consistency and you can see that in our revenue line. With change and disruption comes risk, as we saw that pay off in Sydney with KIIS. But equally our experience is that agencies like to see trends before they will commit wholesale dollars to a new product or brand.”

Despite having two fewer, metro stations than Southern Cross Austereo, Nova was No 1 in revenue for advertising bookings in October, and remains the number one five capital city network with a record audience of 3.3 million listeners. SCA continues to reel from the departure of Kyle and Jackie O to rival Australian Radio Network, operator of KIIS, and has brought back ­comedy duo Hamish and Andy to bolster drive.

While Ms O’Connor would not make any audience predictions, she said: “What I will say is that Nova and ARN are both strong businesses with good ­people on and off air.

“The competition has lifted since the height of the Hamish and Andy era ... the competition is good for all of us.”