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News August 9, 2016

SOURCES: Southern Cross Austereo fully acquires Authentic Entertainment

Executive Editor, B2B

UPDATE:Contrary to sources familiar with the deal confirming that SCA has indeed acquired Authentic Entertainment, an SCA spokeswoman has told TMN: “We are in discussions with Authentic Entertainment regarding the purchase of their assets. We will make an announcement if and when the transaction is completed.”

TMNsources have confirmed that Southern Cross Austereo (SCA) has fully acquired branded content company Authentic Entertainment for an undisclosed sum, in what industry insiders are calling a “fire sale”.

Best known for producing syndicated national radio programs –Take 40,My GenandPlanet Vevo– Authentic Entertainment will shortly close its Sydney, Melbourne and Auckland offices.

The Veronicas at Take 40

TMNhas learnt that Authentic Entertainment’s total headcount has already reduced to a skeleton staff since the acquisition terms were quietly inked three weeks ago, amid speculation the company was struggling to stay afloat.

According to sources familiar with the deal, a small number of handpicked employees will join SCA at 50 Goulburn Street in Sydney and 257 Clarendon Street in South Melbourne, as early as next week.

TMNunderstands all surviving Authentic Entertainment workers will keep their entitlements, with employment agreements transferring to SCA.

In coming weeks, SCA is also expected to dissolve the Authentic Entertainment brand, and will take production and distribution of its syndicated radio programs in-house. Interestingly, this would see SCA producing and selling the popular My Gen show for its rival, the ARN-owned WSFM, hosted by breakfast duo, Jonesy and Amanda.

So how will ARN react to a major competitor inheriting access to key talent, original content and a share of its My Gen revenue?

One media industry insider toldTMNthat ARN is likely to revoke the distribution rights from SCA; instead syndicating the program directly, as it currently does with Kyle & Jackie O.

But the big win for SCA in this acquisition, said another source, is the licence to represent Vevo in Australia and New Zealand, which will “exponentially expand their [SCA’s] digital video inventory – a product that advertisers can’t seem to get enough of in 2016”.

Authentic Entertainment – which according to its website, have been operating 32 years – has undergone more reinventions than Bowie and Madonna combined, with founder Tony McGinn never too far from the action.

McGinn founded the business in 1983 as MCM Syndication, and in 1995, SCA (formally, Austereo) acquired 50% of the company. Together, they produced and syndicated high-rating radio programming for Australian radio stations.

A decade later, in 2005, SCA sold their shares, with McGinn saying at the time, “Nothing changes at all. Normally when two parties join into one business, whatever they put into it, they can take out once they leave. Under our agreement, everything stays the same.”

He added: “When we went into the agreement, radio broadcasting was a very different industry. Austereo had a domination over other radio players. It was a very powerful thing having a client like that on board – but it’s great being truly independent again.”

In 2007, MCM Entertainment Group – previously home to its three businesses; MCM Media, Movideo and Igloo – successfully listed on the ASX, only to delist five years later, citing a lack of liquidity and no proposals to raise further capital.

MCM Entertainment Group was then consolidated and rebranded to MCM Media in 2008, under then CEO, Simon Joyce, who abruptly left his post in 2013 – with many in the music business tellingTMNthat the departure of Joyce signalled the beginning of the end.

Six years later, under its second CEO, the former Coca-Cola marketing chief, John Wardley, MCM became Authentic Entertainment, as it is known today.

McGinn finally reclaimed his position as CEO in May 2015, with Wardley exiting Authentic Entertainment four months later in September 2015, as the company reported losses of $2.8 million for the 2014 financial year.

Under McGinn, who continued to pocket a salary that one source put at “a ridiculous sum of money, close to $1 million”, the company has struggled to retain key personnel and compete for advertising dollars.

Mushroom Group’s Michael Gudinski was also a major shareholder and director between December 2005 and March 2009 and continued to hold shares in the company until SCA’s acquisition.

With no time to waste, it is believed that SCA is already in discussions with New York-based Vevo to extend the agreement secured by Authentic Entertainment in April 2013, that according to a former employee, is “due to expire in the second-half of 2017”.

Vevo, founded in 2009 as a joint venture between Sony Music Entertainment and Universal Music Group, claims to be the largest premium video publisher in Australia and New Zealand. In 2013, Abu Dhabi Media and Alphabet Inc./Google acquired a 7% stake in the platform, which globally clocks 18 billion monthly views.

Last week Vevo and Warner Music Group announced it had finally licensed its music video content to Vevo, in a deal seven years in the waiting. The agreement brings with it big name artists like Ed Sheeran, Kylie and Coldplay.

The joint Warner/Vevo statement was perfectly timed, as rumours of a paid Vevo subscription product circulate the music industry; a move that could limit SCA’s potential share in pre-roll advertising revenues if successful.

Warner CEO, Steve Cooper, said: “This partnership is the latest in a recent series of deals that are helping us explore ways to unlock the true value of music videos in attracting and engaging vast audiences.”

It is likely, however, that a digital-savvy SCA is best-placed to maximise income from both Vevo and Authentic Entertainment programming – most of which already airs on SCA-owned networks.

Nielsen’s digital ratings last month put SCA as the #1 radio group and #12 publisher in Australia, with a healthy 388,689 average daily unique visitors. And according to an SCA-issued statement to media on 28 July, it is SCA’s highest position to date, showing encouraging growth of 9.2%.

SCA’s head of digital content, Chris McWilliams, said in the statement: “SCA’s digital content strategy has Australian audiences at its heart. We tell stories digitally that Aussies care about, talk about and share.

“These latest results and further growth in our digital audience on the Hit Network and Triple M demonstrates our unique offering as a content company in a digital and social world.”

With the imminent arrival of Vevo under its wings, SCA is now primed to cement itself firmly as a market leader in the digital media space, well ahead of competitors ARN and Nova Entertainment.

Authentic Entertainment and Southern Cross Austereo have been contacted for comment but did not respond by deadline.

Updates to follow.

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