Radio has found its route to a single streaming player; can free-to-air TV do the same?

Welcome to a Tuesday update from Unmade.

Today, we ask whether there is a path to a single, successful free to air TV network. And on the Unmade Index, Seven West Media now appears to be days away from being overtaken for the first time by ARN Media for size.

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The audio industry is en route a single major streaming player; could the free TV networks do the same?

One of the most elegant aspects of ARN Media’s takeover bid for Southern Cross Austereo is that it offers a means of creating a single major audio streaming player locally, without breaking the existing media ownership regulations.

The focus has been on the immediate spoils of the deal: a new, stronger ARN Media with two five-city metro networks Kiis and Triple M; a second radio company made up of the remains of Gold plus the Hit Network; and the unloved regional TV licences held by SCA as an orphan asset.

But the most underestimated aspect is the single, jointly owned company that will stream all of that audio content from both companies.

One day – maybe in five years but more likely ten or even 20 – this will become the commercial audio industry’s main local player. There will be a point when the transmitters are finally switched off.

That thinking around the deal is elegant because it manages the short term challenge of any radio company being limited by law to two radio licences in any broadcast area. But it creates a route to consolidating all that audio content over time when it is no longer regulated by the broadcast licences.

The biggest hurdle has been balancing the interests of two sets of shareholders. They appears to be almost there.

The model presents a much bigger question: Could the same be done for the local television market?

There’s nothing new in this thinking by the way.

More than a decade ago, before the local players became serious about ad-supported streaming, the US-based Hulu, jointly owned by the US networks, held talks locally about creating a BVOD (broadcast video on demand) offering for Australia.

Then along came Stan. The subscription service launched as a joint venture owned by Nine and Fairfax Media which eventually became the seeds of their merger.

But Plan A was for Stan to be jointly owned by Nine and Seven. Ahead of launch, boss Mike Sneesby even worked from the Jones Bay offices of Seven. But SWM Kerry Stokes decided to stay close to the Murdoch family and instead chose the short lived Presto as a joint venture with Foxtel.

And almost exactly five years ago Ben Shepherd, then with PwC, now boss of Schwartz Media, proposed a single unified BVOD service.

The idea still stacks up.

Indeed, although it’s gone quiet, the networks are still looking to their currency OzTAM to create a single point of BVOD trading where marketers would be able to plan and buy campaigns across networks, in both linear broadcast TV and streaming.

But the bigger prize would be to create a single major streaming destination for free local content, with a joint ownership.

To begin with, it might be just two of the three major players. With Paramount’s ownership in flux – Apollo is mounting a bid for parts of the business – Ten could go back on the market. Folding its streaming operation 10 Play into something jointly owned with either Seven or Nine might be a first step.

The TV licences could then be separately held (maybe by whoever ends up holding the SCA licences?) to overcome the ownership laws.

Bringing the two big players of Seven to Nine together even just on the streaming side would be a bigger ask. Although much diminished, they still hold market power, particularly around sports rights. The Australian Competition and Consumer Commission would likely show an interest.

But there are precedents. In the UK, ITV, which was created out of the merging of a series of local licences about 20 years ago, has become a thriving, but not market-distorting player. Instead it provides a counterbalance to the global platforms and local telcos.

Instead, the key factor will be egos and ownership

There might be a logic to combining forces, but the ongoing festival of hatred between Seven and Nine makes it a big ask.

ARN closes in as SWM slumps

Seven West Media will be overtaken by ARN Media for company size in the next few days unless there is a change in trajectory.

Yesterday SWM saw its market capitalisation shrink another 2.7% to $270m. That means ARN Media, worth $263m, is now just $7m smaller, than its TV rival.

The fall would see SWM relegated to merely seventh biggest media and marketing business listed on the ASX after being overtaken by IVE Group last month.

A further milestone is that Seven’s market capitalisation is likely to shortly be smaller than its net debt, which was $257m at the end of the last half.

Meanwhile the best performer among the large stocks yesterday was Ooh Media, which was up by 1.73%.

The Unmade Index fell by 0.29% to 574.2 points

Time to leave you to your Tuesday. I’ll be back with more tomorrow.

Thanks as always for supporting Unmade.

Toodlepip,

Tim Burrowes

Publisher – Unmade

tim@unmade.media

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