Are Kyle & Jackie-O worth $200 million?

Sascha: [00:00:02] Welcome to the Dive, the podcast that asks who said business news needs to be all business. I'm your host, Sascha Kelly. Controversy sells. We learned that last week when we saw reports that Kyle and Jackie-O signed a ten year contract extension with Australian Radio Network. Controversy sells. We learned that when it was reported that the ten year extension was worth $200 million, meaning if these reports are correct, Kyle and Jackie-O are will be pocketing 10 million a year each for ten years. Nice work if you can get it. So probably the question you're mulling over right now and it was certainly the one that was voiced in our office last week, is what are the numbers behind this contract? If they're getting paid $200 million, just how much are they bringing in? Not as what we've set out to answer. It's Monday, the 4th of December. And today I want to know are Kyle and Jackie-O worth $200 million? And if they are, why do I get a job in breakfast Right here to talk about this today. I'm joined by my colleague and the co-founder here at Equity Mates, it is Alec Renehan. Alec, welcome to the dive. 

Alec: [00:01:12] It's so good to be here. I often lament that podcasting isn't quite as lucrative as radio, but none more so than in this episode. 

Sascha: [00:01:21] Would you wake up a forum if you were paid $200 million to do so? Yes.

Alec: [00:01:27] Find me someone who says they wouldn't and I'll find you someone who's lying. 

Sascha: [00:01:32] Yeah, well, I was going to say, I've done a breakfast writers tent, and I was paid a lot less than that. So, yeah, there's definitely people who would do it, but it would have been nicer if I'd, like, made millions. So for those who don't know who Kyle and Jackie-O are, I mean, if you're overseas, you might be thinking, who on earth are we talking about? They're a real Sydney phenomenon, aren't they? 

Alec: [00:01:53] Yeah. So they are the king and queen of breakfast radio. And I know I say that with my Sydneysider hat on, but I think the numbers speak for themselves. Like they've basically built another radio station out of thin air just on the power of their show. We'll get to that. They first started as a radio duo in the morning back in 2005 on Today FM, and they were a hit. They brought in massive ratings for the station. But then in 2014, they shocked audiences. They shocked the media world with their decision to move to mix 106.5, which was a second tier radio station in Sydney. That station got rebranded as Kiss FM, and over the next few years, Kiss FM has jumped up easily into the first tier and they now dominate the radio ratings. And it's largely because of Kyle and Jackie-O. So whatever you think about them and where they rank in the radio hierarchy. No one else has built a radio station on the back of that show. Not even Hamish and Andy can claim that. 

Sascha: [00:02:58] Yeah. And also the breakfast pairing is so important because whoever you turn the dial to when you wake up in the morning, it's, you know, if it's listenable, then you're not going to reach for it as much during the day. 

Alec: [00:03:08] Yeah, they talk about the breakfast radio halo effect that lasts throughout the rest of the day. But Sascha, I hope most people listening to this podcast would be turning to their podcast app and not their radio 100%.

Sascha: [00:03:19] And so they might be king and queen, but they're not without their controversies as well. 

Alec: [00:03:24] Yeah, they're incredibly controversial. There's a long list of controversies you can jump on Wikipedia and go through them all. We figured there wasn't much use in relieving them. I think the most famous and most notorious 1 in 2009, a mum rang up and got Kyle and Jackie-O O to put her 14 year old daughter through a lie detector test to determine her experience with drugs and sex. And you can imagine how poorly that went. Kyle in particular has been suspended from his show a number of times, and he's also been found guilty of breaching the Broadcasting Act by the Australian Communications and Media Authority, including at least twice this year, one for comments about the Paralympics and one for comments about monkeypox. So yeah, they're controversial and I think as they get bigger and more powerful, Kyle in particular leans into that controversy. 

Sascha: [00:04:21] Yeah, because it's hard to kind of take action on that controversy when the radio bosses don't seem to be too worried about it because they get ratings. 

Alec: [00:04:31] Yeah. So in the latest radio rankings, Kyle and Jackie-O O had the top rated show in Sydney with a 16.3% share of all listeners in the breakfast slot. And that essentially equated for an audience just shy of 900,000 listeners. So they're bigger than all the other hosts. I think now that bigger than all the Am hosts as well, the Tube hosts and the like. So yeah, they're big and powerful because of it. 

Sascha: [00:04:57] Mm hmm. But I like this is a fascinating thing. Well, this is what I find fascinating about it, is that their best known in Sydney today. But currently they don't broadcast anywhere else in the country. But part of this deal is that they are going to be expanding into the Melbourne radio scene.

Alec: [00:05:14] Yeah, if you're going to pay your stars $200 million, you're going to find a way to get them in front of more and that's what our Australian radio network have done here. So the deal keeps them on air until 2034 and they're going to now broadcast into Sydney and Melbourne. From a business perspective, it makes sense for air in if they think it will save them approximately $2 to $3 million a year in costs. And then also they hope it will grow their listenership in Melbourne. 

Sascha: [00:05:43] And the way that they responded to these reports really kind of says everything it needs to about both their personalities, right? 

Alec: [00:05:51] Yeah. Well, upon the news of their show being broadcast into Melbourne, Jackie-O says she's very grateful for the opportunity. Kyle says, quote, I don't know why everyone has to pretend to be so grateful. That's not the word expecting long overdue. These are the words that come to mind. 

Sascha: [00:06:09] Oh, my God.

Alec: [00:06:11] So, as I said, such a controversy sells and you can't argue with the numbers they're putting out. 

Sascha: [00:06:15] Well, hey, at least he's backing himself. And don't they say that you have to believe in yourself if you're getting these big opportunities? But the news of the day, Alec, is this new deal, $200 million. What else do we need to know about them? 

Alec: [00:06:28] Reporting is that their previous salaries were about $5 million a year, maybe a little bit higher. But they've essentially doubled their annual salary. And the reports are they'll now be taking home $10 million a year. It makes them easily the highest paid radio talent in Australia. The reports are it's also the longest deal in Australian radio history. No one's been locked up for ten years before, so it's big dollar amounts per year and a long term deal makes it easily the biggest deal in Australian radio history.

Sascha: [00:07:00] But there's more than that. Isn't that Alec? 

Alec: [00:07:02] Well, yeah. When you've got this much negotiating leverage, you can put whatever you want in the contract. Look, reports were that the owner of Today FM, Southern Cross Austereo, were trying to get them back. And because they were trying to get them back, Erin actually went and bought a stake in SCA on the share market. And people thought it was because of a takeover that they were potentially trying to do. But reports are now that they were just worried they were going to lose. Collins Jacqui, like these hosts move, you know, moved companies. So like it's their big and because they're big, some of the other clauses that they've put in the contract, reportedly they can now broadcast from anywhere on earth at the drop of a hat. Basically, wherever they are, wherever they want to be, Ayorinde has to facilitate their recording in that location. 

Sascha: [00:07:51] Like a studio managers nightmare. Yeah, it'd. 

Alec: [00:07:54] Be pretty easily pretty stoked if you're the young producer who's working on this show and guess who's not travelling with? 

Sascha: [00:08:00] I don't think you would. I think you'd be doing some kind of, like, online studio thing. It would be so annoying.

Alec: [00:08:05] Yeah. Okay. Okay. Well, anyway, so that's one clause it's been reported. The other one is that to secure the talent, Aaron has also given them a number of shares. The reports are between Kyle Jacko and another host that they've locked up for the long term. Christian O'Connell, who's based down in Melbourne. Between the three of them, they're going to get $7 million worth of shares and those shares will vest at the end of their contract. So I think Christian's five years, Colin. Jacqui Over ten years. But to keep them engaged, to keep them motivated and flying the hour and flag, they're going to get millions of dollars worth of shares that will vest, which means that they have access to them at the end of the contract. 

Sascha: [00:08:46] Yeah, And the broader context here is interesting because reports I mean, you just need to look around you, really. But that radio is slowly fading out of view. It's not as relevant as it used to be. So it's really surprising to see these two get such a massive pay rise after the break. Let's think our teeth into the big question then. Are radio hosts even worth it? 

Audio Clip: [00:09:10] This is a special announcement we've read signed here in case of famine, a landmark deal that will see us both remain on air doing this show for ten more years. When you're married, you never even thought we'd go to India. 

Sascha: [00:09:24] Welcome back to the dive. Today we're talking about Kyle and Jackie-O's ten year contract, which is worth a reported $200 million. I keep saying it, but it's such a massive figure. Before we ask the big question, which is, are they worth it? There's one more thing that I want to get my head around. And this industry. All Kyle and Jackie-O are outliers. Is this usual? 

Alec: [00:09:47] They are certainly outliers. They're not the first millionaire radio host, though, to give you some context. Now, this is according to a few different reports that we've come across to Jay Base. Ray Hadley makes about $4 million a year. 

Audio Clip: [00:10:01] Are we really gone that woke? Have we gone that woke? 

Alec: [00:10:04] Hamish and Andy? So they retired from radio in 2013 and then they were enticed back in 2015. Reportedly, they were paid $4 million a year each to return in 2015. For the people that are about to tune in and just statistically. 

Audio Clip: [00:10:20] A bit of someone's flaked off. No one thought, you know, I was like, I don't want to put it in people's head because I don't know about the flipping thing. But if someone's plate.

Alec: [00:10:28] Fitzy is with our two big radio hosts at Nova reportedly make $2 million a year. So there's good money in radio, but the no one's making Kyle and Jackie-O.

Sascha: [00:10:45] Yeah. So are they worth it?

Alec: [00:10:47] Yeah. This is the big question, Sascha. Once we saw this headline break and once we started talking about it in the office, we did the back of the envelope maths to figure out. I mean, this is a high level, This is just a few assumptions. So we got to be clear on that. But here's the maths. So let's say every hour of radio you get ten minutes of ads. Now that's probably underestimating it, I reckon is probably more than ten minutes of ads in an hour. But let's say ten minutes of ads in an hour. That's the 30s. An ad that's 20 ads per hour. Mm hmm. Now, calling Jackie-O, I believe, is a three hour show. So 20 hours per hour, you've got 60 ads per show. That's how you got to make your money. Now, all media is priced CPM, that's the acronym in the industry. And that's essentially the cost per thousand impressions. And for radio, you're looking at about a $5 CPM. Now it's rough for a lot of big advertisers to get discounts. Some smaller advertisers will pay more. Let's call it $5 CPM, for example. So for every thousand impressions an advertiser gets, they pay five bucks. Colin Jack, your 800,000 listeners. So that means an advertiser paying $4,000 an ad? Mm hmm. Now, we said earlier 60 ads per show. So that's about just shy of a quarter of $1 million of ad revenue a show. Now, 260 working days in the year. I don't know if they're doing all 260, but I can say that they are.

Sascha: [00:12:19] Probably get a few weeks holiday and then.

Alec: [00:12:22] But say so 260 working days a year just shy of a quarter of $1 million in ad revenue. A show works out to be about $60 million in ad revenue a year. 

Sascha: [00:12:35] Yeah. Okay. 

Alec: [00:12:36] So pretty meaningful and a lot of money. Now, you can't say that Kyle and Jackie-O are worth that full 60 million. You have to say they're worth the difference between what the old breakfast show was and what they are now. Now, I don't know what the mix one of 6.5 breakfast radio show was doing before Kyle and Jackie-O O came over and rebranded, but I'm confident it wasn't doing nearly the numbers are doing now. So let's say they were doing half. Let's say they're doing 450,000 listeners rather than 900,000. So that would mean simple maths. $30 million in ad revenue a year from the breakfast show has moved to $60 million. And so if Kyle and Jackie-O are bringing in an extra 30 million bucks for the radio station, it starts to make sense why they're paid $10 million a year. 

Sascha: [00:13:26] Yeah, absolutely. And those numbers seem to align with Kyle and Jackie-O are leaving SCA as well. 

Alec: [00:13:32] Yeah, that's right. So we wanted to sense check those numbers and we had a little look at the reporting around the time of them leaving SCA in December 2013, early 2014. Australian media veteran Barry O'Brian was reported in the Sydney Morning Herald saying that SCA lost an estimated $20 million of ad revenue. He also said it's fair to say today FM never recovered. So again, just a reminder of how powerful these two are. And then Lorraine Woods, another media expert who was reported in Mumbrella, had similar numbers. She estimated a loss of between 15 and 20. Million dollars in ad revenue per year with Colin Giacchino leaving today. A. So, you know, that was ten years ago. Bit of inflation, a bit of growth in their listenership. And that sort of gets us to a roundabout where we have it. Yeah, that sort of $30 million increment. But they bring in about $60 million a year. So Sascha, I guess I'll put the question to you. Are they worth it? 

Sascha: [00:14:31] Well, yeah, I think are. I don't really go a week without seeing Kyle or Jackie-O or mentioned in a Daily Mail article, some press thing. And so I think even with the numbers to the side, you know, there's probably having them at the station stops advertisers walking across the street to advertise to someone else. It's pretty good for free publicity and marketing. I think that as much as I hate to say it, because they're not necessarily my cup of tea, I think they do definitely on their money. 

Alec: [00:15:00] The most concerning thing out of that is that you don't go awake without looking at the Daily Mail. 

Sascha: [00:15:05] No, I realised as I said it, but I don't check the Daily Mail that often. But you know, like publicity works. It's like the Daily Mail picks it up and then all the podcasts like put their $0.02 on it and suddenly you end up in a spiral. It's a whole thing. 

Alec: [00:15:20] Well, stay tuned. 2024 we might have Sascha is Pop Culture and Gossip podcast. So watch this space. 

Sascha: [00:15:25] Oh, no, you'd never get me off the mark. Well, let's leave it there for today. Alec will be back on Wednesday with another episode of The Dive. This is the final week of episodes for us for this year for 2023. So please get in touch with us by thinking about the format for next year. Contact@equitymates.com is the best way to get in touch with us and let us know what you like and what you'd like to hear more of. But let's leave it there for today and we'll talk to you on Wednesday.