After having a major contract with Nine Entertainment not be renewed, Southern Cross Media (ASX: SXL) has bounced back to land Network 10 for a regional affiliate deal that will offer the network a boost in advertising revenue.
The 2-year deal with Network 10 comes after three months of negotiations which will see Southern Cross broadcast channels 10, 10 Bold, 10 Peach and 10 Shake in the three aggregated markets of regional Queensland, Southern NSW and regional Victoria from 1 July 2021 onwards. Core to the deal is that Southern Cross will head sales initiatives to source advertising for the network with a sales team that has had strong success in the regions when affiliated with Nine.
In five years representing Nine in those regions, Southern Cross improved its sales power ratio (converting ratings to revenue) by nine percentage points from 1.03 in 1H FY17 to 1.12 in 1H FY21.
Like many players in the broadcasting industry that have been tackling the war against Video on Demand (VOD) providers, aka streaming services, Network 10 has undergone its own transformation in recent years.
This included its sale to US-based media giant ViacomCBS in 2017 and a shift towards targeting younger audiences. Flagship shows on the network now include MasterChef Australia, Australian Survivor, The Bachelor Australia, The Masked Singer, The Project and live A-League.
Media advertising was one area that took a major hit during the pandemic, especially in regional areas where the local economies were devastated by the lack of domestic tourism. For Southern Cross, this resulted in a 15.9% decline in revenue of $259.2 million for the Half-Year ended 31 December 2020. However, the time was also used to slash expenses and improve their balance sheet to reduce net debt by 49.5% from $131.6m to $66.4m – historic lows.
The majority of revenue still comes from their media production where they own 99 radio stations across Australia while utilising their infrastructure to also broadcast 92 free-to-air TV signals. Adapting to the transition towards VOD, the Company owns the radio-equivalent LISTNR platform which offers radio, podcasts, music and news.
Since 2016, the number of Australians accessing digital audio has doubled, and is projected to reach 80% of Australians by 2024.