Broadcasting Overview
Introduction
The Broadcasting segment comprises Kagiso Media's radio stations, radio sales house and websites.
Jacaranda FM and East Coast Radio are majority owned, while Kagiso Media has minority stakes in OFM (Free State), iGagasi 99.5 (Durban) and Heart 104.9 (Cape Town) and an economic stake in Kaya FM (Johannesburg).
The segment also houses RadMark a leading South African radio sales house.
Value proposition
Broadcasting's vision is to enrich the lives of its audience through entertainment and information, across all media types, be they traditional or new media platforms. In support of the group's maxim of Building Communities for Good, the Broadcasting segment touched 4,4 million people in 2010 on a cumulative basis through its owned radio audience, events and online properties and visitors to the associated online offerings.
The performance of Broadcasting's assets is driven by its audiences which the radio station pursues to secure a relationship with advertisers. The choice of platforms and devices available to radio audiences is continuously increasing. Broadcasting has developed a media convergence team focused on managing content across disparate devices and platforms in order to enhance the users' experience and to leverage the advertisers' return on investment.
From a commercial perspective, radio stations offer advertisers and their brands an additional point of engagement with consumers. The audience of the radio station websites are growing and these are profitable in their own right. It is anticipated that in time the websites will become indispensable to radio audience's appreciation of their favourite media and therefore become valuable to advertisers.
Strategy
Broadcasting's strategy is to ‘grow beyond FM'. In addition to securing digital media opportunities, the Kagiso Media Convergence segment drives the internal strategy for the online content of the radio stations. The benefits are already evident as www.jacarandafm.com and www.ecr.co.za were ranked among the top three radio websites in South Africa according to the Online Publishers' Association (OPA) in a July 2010 survey.
Because Broadcasting's radio stations are regional, the radio businesses create a range of on-air, online and on-ground events in their regions, which have the potential to increase their share of regional advertising spend.
Business environment
Globally, radio has been under pressure from the proliferation of media substitutes enabled by technological innovation. The primary impact in developed economies has been a decline in the amount of time spent listening (TSL). Although South Africa has not been immune to declining TSL, the local trend has been driven by the take up of television where consumers have an increasing range of choices.
Radio stations around the world and in South Africa have adopted the internet as a complementary interface with audience.
The advertising industry has been under pressure due to the economic recession and depressed consumer spending. Radio advertising spend grew by 2,4% year-on-year compared to 8,4% media industry growth. Radio's share of the advertising pie contracted from 13,1% to 12,4%.
Television was the biggest beneficiary of 2010 FIFA World CupTM advertising, primarily the SABC and to a lesser degree, DSTV's Supersport channels. In line with expectations, radio benefited from ‘overflow' spending in the months leading up to the event.
Performance
The Broadcasting segment showed a marginal improvement in revenue to R472,4m in 2010 (2009: R469,9m). During the year, the New Media segment was established to house Gloo Digital Design and Acceleration Media, allowing for greater focus on these businesses as independent commercial entities. Accordingly, the Broadcasting segment's reported revenue for 2009 has been adjusted.
In the fourth quarter of Kagiso Media's financial year, the associate stations grew at twice the industry rate while East Coast Radio matched the industry growth and Jacaranda was slightly off the pace.
Despite the challenging environment, operating profit of R235,6m was in line with 2009. The operating margin remains within the target range of some 50%. The Broadcasting segment recognised early on in the financial year that the tight economic environment would persist well into 2010. Accordingly, it implemented wide-ranging cost management initiatives across all radio assets.
The Broadcasting segment's radio stations performed well in a tough market with East Coast Radio growing its core target market audience by 13% year-on-year. Kaya FM's overall listenership over seven days increased, while Ofm showed a marginal improvement.
Jacaranda maintained market category audiences, and despite a declining nationwide TSL trend, Jacaranda's weekly TSL grew by 10% among overall audience and 9% for market category listeners.
