This is part 2 of a two-part guest post by media maven Marcia Forbes who used to be General Manager of TVJ (Television Jamaica) many years ago. Jamaica was shaken last week by news of a merger between its two largest media entities, RJR and the Gleaner. TVJ is the the crown jewel of RJR (Radio Jamaica), the broadcast media conglomerate which has just merged with print media giant The Gleaner. The merger has had the effect of a small earthquake with journalists worrying about layoffs and others concerned about the birth of a media monopoly. Mergers, acquisitions and buyouts are changes which have been happening all over the world, the fallout of the digital revolution, and should have been anticipated, but it seems to have caught everyone here by surprise. Watching the pre-emptive moves that Google is making with the creation of Alphabet, the temporary subsidiary set to flip into the primary entity, one can’t help note the opposite scenario at play here…that is, two local media giants who waited till their stocks had declined before taking action. But hey, c’est la vie in the Tropics.
For all those wondering what’s in store for us, Marcia Forbes’s analysis should help. Read on.
As promised, here is another look at the proposed RJR/Gleaner merger. This announcement comes against the backdrop of a media landscape that is constantly evolving globally, regionally and locally. Media changes are being driven not only by technologies such as high speed broadband, the Internet in general and smartphones, but also via mergers and acquisitions accompanied by media convergence and consolidation. Let me focus on Jamaica and start with radio. The merged RJR/Gleaner entity will have five FM radio stations.
Radio Stations’ Revenues
From as far back as 2002 the then General Manager of TVJ, the decline of local radio was evident. It has continued a steady fall-off. In terms of radio’s potential market, while this stood at 719,000 in 2000, in 2014 it had declined by about 25 percent (Source: All Media Survey published 2015 with data collected in 2014). Over this period radio sets have been reduced in number by about 35 percent. The number of radio stations has, however, increased, with Jamaica now in a very crowded radio market of about 30 commercial stations for its less than three million people.
The status of radio revenues is not easy to come by. Market leader for the past several years, Irie FM, has always been reluctant to reveal its revenues. Coupled with its sister station Zip103FM which started mid-2003, these privately owned stations control almost 30 percent of the radio market. Although publicly traded, RJR and Gleaner do not disaggregate their revenues. This makes it difficult to determine the financial performance of their radio stations. Arriving at the advertising revenues of radio in Jamaica is therefore a game of guesstimate.
Having five radio stations in the merged RJR/Gleaner Group may not redound to greater revenues. The demise of FAME from the RJR Group and Music 99 from Gleaner’s Group would not therefore be unexpected, given their meagre market share and likely paltry revenues. Then too, with Hotel Mogul Butch Stewart’s FYAH 105 FM performing creditably, he may want to acquire one of the smaller stations and niche market specifically to the tourist industry. This could complement his Jamaica Observer and FYAH FM media holding.
Then there is Cliff Hughes and his Nationwide Radio which for many reasons has never been able to sustain itself financially. Hughes, as outstanding journalist with a ‘Rottweiler’ type station, arguably Jamaica’s leading investigative news station, recently made a business arrangement with Gleaner’s Power106 FM where he anchors a critical day-part. That arrangement, along with the housing of Nationwide at the former Power106 premises, may now be under review. Mergers/acquisitions, or at the very least some shakeup in the radio market therefore look highly likely as one outcome of the RJR/Gleaner merger.
Radio in the USA v/s Jamaica
The radio scenario in Jamaica does not appear to mirror that of the USA where only days ago Nielsen, that country’s leading media monitor, reported upward trends in radio listenership with record highs over the past two years, driven by Hispanics and Blacks. One acknowledges that perhaps Jamaica’s media monitor may be missing out by failing to count listeners who tune in to radio via cell phones.
The Promise to Advertisers & Shareholders
In a previous article, the strong market positions of The Gleaner (77.3% share of readership on Sundays) and Television Jamaica (72.5% market share for free-to-air TV) were outlined. The much less impressive, but still noteworthy, performance of the RJR radio brands, with almost 20 percent share of listenership, was also highlighted.
The merged RJR/Gleaner is therefore a great promise to advertisers. Whether it actually delivers, assuming the merger is approved, will remain to be seen. Can The Gleaner’s online platform and its print paper be sufficiently leveraged to justify additional revenues to the merger group? Both Gleaner’s and RJR’s financial performance may give us a clue.
Can a RJR/Gleaner Merger Drive Greater Profits?
The Gleaner’s revenues have been pretty flat for a number of years. A review of Group turnover reveals decline over the five years of 2009 to 2013, falling from $3,274,179 Billion to $3,188,709 Billion. The Gleaner Company, that part of the Gleaner that is proposed to be merged, has also delivered pretty flat revenues over the past four years, $2.7 Billion in 2011 and $2.8 Billion in 2014. So despite its strong market position, The Gleaner has not been able to use this to drive real revenue growth.
The state of RJR Group’s revenues has been similarly tepid in growth, $1.9 Billion in 2011 and $2.0 Billion at close of its most recent financial year, March 2015. Without the benefit of disaggregated data, one can only assume that it is TVJ that is keeping RJR afloat. So perhaps, RJR is doing a good job at leveraging that brand and using the radio brands simply to ‘sweeten the pot’ to advertisers.
In tandem with its promise to advertisers, the merger entity must deliver dividends to shareholders. Over 2009 to 2013, The Gleaner Group’s profit attributable to shareholders took a nosedive, from $224,000,000 in 2009 down to only $85,842,000 in 2013. Net profits for The Gleaner Company (the portion to be merger) have declined from $70 million in 2011 to only $37.7 million in 2014.
Like The Gleaner’s, RJR’s profits have made massive swings over the past five years. However, its 2014 and 2015 net profits outstrip those of The Gleaner Company for 2013 and 2014. Note that these entities have different financial years. The Gleaner’s runs with the calendar year and ends in December.
In this tight economic climate, even with it commanding a lion-share of the print market, The Gleaner has been unable to leverage this into revenues. RJR too, despite its combo packages of radio and TVJ to advertisers, has also been unable to grow revenues. Admittedly, they have both been able to continue to generate net profits every year and this counts for a great deal. Additionally, both have cash or other assets stashed away for rainy days like Digital Switchover that is now facing RJR.
Herein lies a part of the rub of this merger, however – To effect efficiencies, cost-savings and shareholder value, there will have to be job cuts across the merged RJR/Gleaner media entity. Job losses never go down well with Governments, staff, unions and other stakeholders. While this merger is being pondered, I repeat my advice to all journalists – get trained in digital media and explore new ways to boost your marketability and earning power.
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Here is the second part of Dr. Marcia Forbes’ analysis of the RJR/Gleaner merger.