Murdoch Drilling for Radio’s Digital Reserves

For DMG Radio Australia, the culmination of new formats, a change in program personalities and news that Lachlan Murdoch’s private investment vehicle, Illyria, has taken a 50 percent stake in the group, seems analogous to someone hitting a massive reset button to re-boot the broadcaster. 

For a company reporting annual revenues of A$100m, and earnings of around A$7m, each matter by itself is significant, but to see so much structural change occur within literally weeks must have management heads in Saunders St swooning with challenges and opportunities.

The material impact of these changes on the Australian radio market cannot be underestimated. It’s also tempting to consider the media fallout beyond the commercial radio market, with ripples spreading into online advertising and publishing relationships, but equally, this can be overstated. 

Murdoch remains a non-executive board member of News Corp, and his personal relationship with local News Limited management is tight. As a former CEO of the publishing group, Murdoch was instrumental in the group’s investment in online media in the early to mid-1990s. His affinity with digital media is strong, and it is more than likely Murdoch will set a challenge for local DMG management to have online revenues equal the group’s broadcasting revenues within two to three years.

For DMG’s competitors, the doomsday scenario is to see the Nova and Vega networks develop some level of commercial collaboration with News Limited mastheads in each capital city. The possibility of a Nova-MySpace joint initiative shouldn’t be dismissed either. From Fairfax Media’s perspective, the Illyria-DMG Radio Australia deal will be problematic for both its print and radio businesses.

While Australia’s largest commercial radio network, Austereo, maintains a very strong lead on DMG across all audiences, the shake-up and revitalisation of DMG is an opportunity to recalibrate a number of factors, two of which include its management structure, following CEO Michael Anderson’s resignation this year, and the group’s priorities with regards to digital media.

In terms of online audiences for radio, Austereo is a clear number one, driven obviously by larger radio audiences, but equally by first-mover tactics to produce new digital brands like the highly recognisable RADAR station, and the soon-to-be released, Hot30 Jelly, which introduces near real-time listener programming.

Averaging close to 1m unique browsers a month, Austereo’s digital business captures an audience almost three times the size of DMG’s online channels. Yet with youth brands, particularly FMCG and restaurant groups, hungry (excuse the pun) for credible digital media options targeting a sub-18 market,  this is not a situation DMG can afford to tolerate for much longer, certainly not under Murdoch’s watch.

Once the hand shaking and back-slapping are over, Murdoch will be busy pitching the new DMG and its vision to media buyers as a near perfect hybrid of mainstream and digital media reaching millions of young Australians, even when very few have no intention of purchasing a digital radio!

Illyria may have taken its time to lock down a substantial media asset, but given the growth potential for commercial radio overall, even Austereo would agree the purchase was astute.

MySpace To Go Supernova

There is something elegant about the theory that a digital entity, especially one based on networks and their associated dynamics, will obey, or at the very least, be susceptible to, the natural laws of science. Ergo, collapse under a dead weight, with nothing pressurising against external forces like costs, development and competition. In the case of Myspace, that “nothing” isn’t exactly true. There are still millions of accounts, the issue however is a growing percentage of dead profiles, not to mention the ever present issue of inaccurate account profile data that has made targeted advertising next to useless. As the ‘bounce rate’ indicates a site’s usefulness under certain search conditions, so the ‘echo rate’ predicates the social network’s usefulness and demise; a vast repository of accounts with no one home. A little preemptive? Well, that’s the point of social networks. They rise quickly, and collapse just as fast. This momentum affect of networks works to both its advantage and disadvantage. At the moment, the Myspace phenomenon is only sustained by lazy and unimaginative media buying groups. Once buyers run out of excuses in trying to explain the poor results of their $1m Myspace buy, the thing will commercially implode.

Curiously, the above estimates (source: Quantcast) of site traffic for Facebook (blue) and Myspace (green) suggest a type of zero-sum game, so that by April 2009 when the two networks crossed paths, they were set on on two divergent trajectories. The collapse of Myspace audience traffic (relatively speaking) is well documented, but what’s more interesting is the impending convergence of Facebook traffic growth with the steady decline in Yahoo.com site traffic (red). Based on this trend, the two sites are likely to converge around February 2010. Once ‘hit’ by the Facebook missile, is Yahoo.com likely follow the same downward spiral experienced by Myspace? There are clear differences in between two properties, but the one difference which clearly gave Yahoo its edge (i.e. 3x  the site traffic of Facebook) is no longer sustainable. But we digress. Right now, brands need to clear the planet because Myspace is about to go Supernova.