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This article is from the Australian Financial Review. Click here for the original article.
Nine Entertainment will pivot from radio and regional television towards digital advertising in the most significant change to its business since its 2018 merger with Fairfax Media after striking an $850 million deal to buy outdoor advertising group QMS Media.
Australia’s largest media company announced the acquisition at the same time as it said it would sell a network of high-profile radio stations to the billionaire Laundy family and a collection of regional television assets to WIN Corporation, owned by major shareholder Bruce Gordon.
Nine chief executive Matt Stanton said the deals would create a more efficient, “digitally powered” company.
He said he was confident buying an advertising-reliant business because it was more immune to the rise of artificial intelligence and would allow Nine to compete for dollars against big technology platforms.
“Whichever way we triangulate this with agencies or industry experts, they see the market to continue to grow by about 6 per cent to 8 per cent going forward,” he said. “We think a QMS will take share because of the digital nature of the business. It is easier to go up against the big global tech players because it’s harder for them to disrupt and it’s harder for AI to disrupt. Physical assets are difficult to replace versus the digital world.”
Nine is the publisher of The Australian Financial Review, The Sydney Morning Herald and The Age, and operates the Nine Network. The company is also the owner of Stan, a popular streaming platform. The three transactions announced on Friday mean digital businesses will account for more than 60 per cent of its revenue in the next financial year.
QMS, which has been owned by Quadrant Private Equity since 2020, has several lucrative advertising contracts, including with the City of Sydney, where it runs billboards, bus stops and kiosks. Nine said it had identified about $20 million of annual costs that could be cut by 2029.
Nine’s former chief executive, Mike Sneesby, had attempted to buy QMS, but the deal was rejected by the board under then chairman Peter Costello, according to multiple people familiar with the matter who requested anonymity to speak freely. Stanton also ran a close eye over Southern Cross Austereo, which announced a merger with Seven West Media late last year.
The main appeal of QMS is the several long-term contracts it has in place with councils, and a $300 million investment Quadrant has already made in refurbishing the company’s assets.
The three transactions come after the sale of Nine’s controlling interest in Domain, the country’s second-largest real estate classified platform, to Nasdaq-listed CoStar for $1.4 billion in August.
“It’s better now than it would have been a year ago before the Domain sale,” Stanton said. “That does give you sort of the opportunity to do it. I was very pleased with the backing I got from a board to allow us to do this.”
The purchase of QMS comes at the same time as the sale of the radio and regional television assets, and is indicative of a broader shift in strategy from traditional broadcasting to subscription and advertising-backed digital assets. Like other media companies, Nine has been hurt by weak economic conditions, along with a broader shift in advertising spending to major tech giants such as Google, the owner of YouTube, and Facebook.
Stanton said the decision to sell the radio business was to do with the offer put on the table, but also the amount of capital required to keep it running.
“There’s investment to go into the business, which I know the Laundys will do, that would have been capital that we would have wanted to probably put elsewhere,” he said. “We would have only sold it if we got the right number for it. It wasn’t a slam dunk. People thought it was. It wasn’t at all.”
The Laundy family’s purchase of Nine Radio, which operates 2GB Sydney, 3AW Melbourne and 4BC Brisbane, was first flagged by the Financial Review’s Street Talk column on Thursday. The deal to sell to the billionaire publican family values the radio business at around $56 million.
Once known as Macquarie Radio, Nine inherited a 54.5 per cent stake in the business when it merged with Fairfax in 2018. It acquired the rest of the business from others, including advertising veteran John Singleton, for $113.9 million in a deal that valued the entire network at $275.4 million.
Nine said the Laundy family – publicans with a fortune of $1.75 billion, according to the Financial Review Rich List – would use its journalists on radio and sports programming on Stan at their hotels across the country. The family and its patriarch, Arthur Laundy, have also committed to increasing advertising across Nine’s other assets over a three-year deal.
“We see strong similarities between hotels and talkback radio,” Arthur Laundy and his son, former Liberal MP Craig Laundy, said in a note to Nine Radio staff. “We see our customers as your listeners. It’s this mindset we hope will allow us to work with you for years to come.”
The sale of Nine Radio and the regional NBN television business is expected to create a tax loss of $170 million, which will offset a $254 million tax bill from the sale of Domain.
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