The on-air disaster that saw an emotional Tova O’Brien and Duncan Garner lower the curtain on Today FM can be traced back to its owners – fund managers and private equity firms from the US and Australia.
A few years ago, things were looking better for Oaktree (US) and Quadrant (Aust). The shareholders in MediaWorks had managed to flog off their troublesome TV arm to Discovery, sold the clunker of a building that housed TV3 in Auckland’s Eden Terrace and moved the profitable radio operation to new state-of-the-art studios in nearby College Hill.
A new CEO, ex-Air New Zealand executive Cam Wallace, was hired and incentivised to sell the remaining business (which included a significant billboard operation as well as the radio stations) for as much as he could.
The MediaWorks investment has been a poor one for Oaktree. The US hedge fund bought $125 million of MediaWorks debt, at a highly discounted rate in 2012. It converted this to equity a year later and gradually built up its shareholding in the struggling broadcaster by buying out the other debt holders Rabobank, Westpac, and Royal Bank of Scotland.
Oaktree looked to diversify the company by acquiring the New Zealand billboard business of Australian outfit QMS Media. QMS ended up with a 40 percent shareholding in MediaWorks. It was later taken over by Quadrant in a A$571 million deal.
Wallace’s best chance of realising some more cash for the owners, and a big bonus for himself, appeared to be a public float and listing on the NZX. But if the company was going to be attractive to new investors it needed a growth story. Its music brands are mostly mature operations close to their maximum market share.
The talk radio market, dominated by Newstalk ZB is worth roughly $40 million and Wallace wanted a chunk of it, or at least the perception that he could tap into a new revenue source and lift the company’s overall value.
Previous attempts to play in this space had made little impact on Newstalk ZB. Radio Live (2005 to 2019) looked promising initially but eventually petered out.
Wallace and the MediaWorks’ board decided to go big. They hired former Newstalk ZB boss Dallas Gurney and gave him the cheque book. Gurney lined up some big names – Tova O’Brien, Rachel Smalley, Duncan Garner, Lloyd Burr, Carol Hirschfeld – and put plenty of marketing money behind the launch of Today FM.
What went wrong? Today FM was not a “lean mean challenger” that could hang in for years waiting for Newstalk ZB to make a mistake or gradually decline over time. It was a Rolls Royce with expensive running costs.
Wallace and Gurney preached a message of patience and perseverance. Gurney often talked about 5-year time frame but in reality, it needed to make some sort of immediate dent on Newstalk, and it didn’t.
After a year on-air Today FM had a 1.4 percent share of the market compared to Newstalk’s 15.3. The station’s cumulative audience (number of listeners tuning in each week) was about 100,000 compared to Newstalk’s 700,000.
The most important timeslot on commercial radio is breakfast and the prevailing wisdom in radio is that if you can’t break through in breakfast the rest of the station doesn’t have a chance.
In the big Auckland market Tova O’Brien was being thumped by Mike Hosking, O’Brien’s show attracting 16,300 listeners versus Hosking’s 174,000.
The former Newshub political editor tried hard, very hard, and most of the marketing money was spent promoting her, but she couldn’t make an impact on Hosking. Neither could she take any listeners from RNZ’s Morning Report. Today FM was going nowhere without O’Brien getting some traction.
Lurking in the background was a deteriorating advertising market. Most media companies started to notice a drop off in December. Radio stations have a lot of retailers and small businesses on their client lists and falling consumer confidence would have seen many of these companies back off their advertising spends. MediaWorks is still carrying a significant amount of debt, so the lower revenue and cashflow will be really squeezing it.
Given that an economic downturn of some sort was likely to happen before Today FM could make a serious impact on its competitor it seems fair to question the board’s decision to start up a talk station if it couldn’t go the distance.
Radio hosts who take the big money are probably naïve if they think there will be endless runway without a performance uptick. But if O’Brien is right that the board and management made promises of long-term support before the axing, then MediaWorks will suffer some brand damage. Her colourful line, “they fucked us” will hang around the company for some time.
The Australian board members have been back and forward to Auckland in the past couple of weeks, but it was left to interim CEO Wendy Palmer, who arrived at the company three weeks ago, to shut the station.
Cam Wallace departed MediaWorks two weeks ago to take a job at Qantas and Dallas Gurney is serving out his notice after resigning nearly two months ago. Would it have made a difference if these two architects of Today FM had decided to stay? The answer is no.
The board didn’t need Palmer to tell them that occupying the middle ground between Newstalk ZB and RNZ is not a place you can make money. MediaWorks underwent a culture change with Wallace at the helm. It might have been more in-sync with enlightened corporate attitudes, but it didn’t suit the provocative style that successful talkback stations mostly embrace.
There is a good chance MediaWorks’ music brands can retain nearly all of the revenue generated by Today FM due to the personal relationships its sales teams have with advertisers. The cost of Today FM, thought to be in the order of $6 million, will be saved giving the company’s bottom line a serious boost. And that is what the owners want to see.