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Mediaworks focuses on integrated offering as radio dominates sales

Thursday 2nd June 2016

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MediaWorks Investments, the free-to-air broadcaster, is pitching its ability to offer advertisers access to a stable of television and radio stations, and plans to build an integrated inventory management system to make it easier for customers. 

The Auckland-based company has been sending a single sales representative to clients rather than its previous individual approaches for TV, radio, and digital, something acting chief executive David Chalmers says has been well-received. The media group will take that further with capital expenditure planned for 2016 to build an integrated inventory management system, which Chalmers says will make it easier to deliver its services as a single business. 

"I don't think about the business in terms of TV, radio and digital, I think about it as news and entertainment," Chalmers told BusinessDesk. The new inventory management system "is going to be a really important part of the passage as we get to that point about being a single business." 

Mediaworks announced its 2015 earnings at a briefing in Auckland yesterday, posting trading earnings before interest, tax, depreciation and amortisation of $33.5 million in the 15 months ended Dec. 31, 2015. It has changed its balance date since US private equity firm Oaktree Capital took full ownership last year. The previous earnings period spanned Nov. 8, 2013, to Sept. 30, 2014, when Mediaworks posted trading ebitda of $41.8 million. 

Radio revenue of $177.9 million accounted for 51 percent of the company's total sales of $347.9 million, compared to 49 percent in the previous period, while TV revenue of $157 million made up 45 percent of sales, down from 48 percent. Digital revenue of $13 million was 3.7 percent of total sales compared to 3.6 percent. 

Through the 2015 period, Mediaworks spent $20.2 million on capex, a level Chalmers indicated it would repeat in 2016 with Oaktree continuing to support plans to invest in building long-term value. That investment was slated for the inventory management system, growing the digital business, and developing more local content. 

"From our point of view it's more relevant engaging local content, it's our competitive advantage because the streaming guys so far haven't shown an inclination to get in that space, and not just in entertainment," Chalmers said. "It becomes an even more important part of the story."

The broadcaster, whose stable includes TV3 and radio stations such as the Rock, the Edge, MoreFM and RadioLive, has been in the spotlight in recent weeks, with chief executive Mark Weldon stepping down last month following the resignation of long-running newsreader Hilary Barry. Weldon cited the "personal cost" of continuing in the role. 

The company's cost of content and production increased to $153.2 million, or 49 percent of total costs of $314.4 million in 2015, compared to $96.1 million, or 47 percent in the prior period. 

Mediaworks describes the television market as challenging, with soft advertising demand and lower returns than anticipated from the investment in content. Advertising revenue fell by $10.6 million or 1.7 percent. 

Radio performed strongly, and Mediaworks invested $6.4 million in spectrum frequency in Wellington, Waikato, and Dunedin, and said audiences for George FM and Mai had increased significantly. The radio market is described as showing "resilience" relative to other markets, particularly through the targeting of regional audiences. 

Long-term debt was little changed at $98 million as at Dec. 31 from $98.7 million as at Sept. 30, 2014.

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