SCA could hit 10 per cent of group revenues from digital audio within 18 months as national advertisers that wouldn’t previously touch radio start to bite. The bulk of that digital revenue, circa 65 per cent, is coming from podcasts and SCA is tasking local creators with hitting their numbers – 20k listeners within six months or get punted – while international partnerships start to move the needle on volume.

The firm is also becoming bolder in driving listeners to sign-up and sign-in – a strategy that is paying off. Last month SCA notched 1 million logged-in users to its uber app, Listnr. While advertisers always want more scale, Blackley thinks it could get to 2m faster than predicted as SCA crimps other digital access points.

The data coming back from those million log-ins is also starting to drive commissioning – and crime pays, per content boss Grant Tothill. The challenge is now to serve content strong enough to convince people to replace the six or seven podcasts on their listening list with one from SCA’s stable.

Money talk

“This year we will produce somewhere between $32m-$35m in [digital audio] revenue from a marketplace that four years ago didn’t exist,” Blackley told Mi3. He said growth rates fluctuate but that SCA digital audio revenues are growing “no less than 30 per cent per quarter”.

Should that run rate hold up, digital audio would become a material item – i.e broken out as a reportable line item by accounting for 10 per cent of total group revenues, currently sitting at circa $600m – within the financial year to June 2024.

It's by no means a given. After writing $15.4m from digital audio in FY2021, SCA said last year it was aiming for 75-100 per cent gains for FY 2022. It ultimately wrote $20.8m, with lockdowns curbing momentum. But Blackley claimed international distribution deals with Stitcher (“scale”) and Wondery (“quality”) are now steepening the curve. Media agency investment bosses also suggested hitting $35m was “reasonable – we are seeing that,” said one.

Podcasts currently account for 25 per cent of digital audio consumption but make up 65 per cent of digital audio revenues. That would equate to $21-$23m podcast revenue by June 2023 per Blackley’s projections, with other digital audio accounting for $11-$12m.

Advertisers moving?

The major radio players face similar challenges in increasing rates from digital inventory that was previously bundled with radio ads. But Blackley said growth is now incremental, with podcasts in particular bringing in a new tranche of big advertisers at higher rates, with the likes of Hamish & Andy commanding up to eight times higher than average radio CPMs.

“We have 670 advertisers on the digital audio platform and they are principally national advertisers … so we have half of the circa 1,300 national advertisers [spending] with us,” said Blackley. “About 20 per cent of them do not spend in radio, for whatever reason. So they are new to the platform and unique to digital audio … and what they spent last year versus what they are spending this year per campaign is substantially higher, no less than 30 per cent.”

Digital audiences currently make up circa 25 per cent of SCA’s total audience. Blackley said that shift is “accelerating and at some point, it will be 100 per cent digital.”

That will take some years yet. COO John Kelly suggested that digital audiences are set to overtake “terrestrial” or linear audiences by 2026, though revenues will take much longer to reach that tipping point, which is borne out by the current digital revenue-audience ratios. “But it always follows,” said Blackley.

Scale or bust

SCA has circa 150 local premium podcasters on its network across five genres (news, sport, factual drama, kids and parenting, entertainment and culture). A handful are what it calls tier one local podcasters – the likes of Hamish & Andy. Its biggest three acts are paid a licence or minimum guarantee – and the rest are on a revenue share.

Having built out that pool, SCA is becoming more clinical in its race for scale – having learned the hard way that signing podcast creators to long-term contracts isn’t always viable.

“The tier twos are harder to grow,” said Kelly. “So they have to fit within those genres and they have to bring something unique to podcasts,” he adds, because “the average podcaster listen to no more than seven podcasts at any given time.”

That means SCA has to convince audiences to listen to something new – and jettison one of their current list.

Hence seeking creators with “some degree of social influence” to create pull through. If they don’t quickly move the needle, SCA will be brutally honest and pull the plug.

“What we now say quite clearly – and we didn't do this at the start – is that we won't commission them for three years. We’re going to give it six months, and if you are not trending towards a minimum of 20,000 uniques at that point in time, then that podcast could be a really good podcast for someone else. But not for us. Take it to Acast and become part of their network,” said Kelly.

“We want audience at scale, but less is more in terms of discovering quality podcasts on our network. So the heads of those five genres… all they are focused on is developing the best original podcasts to work with Totters [content boss Grant Tothill] and grow monetisable audience. That’s the business model in simplicity.”

Data driving content

Via Triton's podcast ranker, Tothill said SCA has always been able to gauge consumption patterns within genres. “News for example, over-indexed through Covid while crime came back, but that has now completely changed,” said Tothill. “Crime is actually one of the fastest growing categories in Australia, while news has come off a bit,” which may explain why News Corp is bidding to enter that market via a subscription podcast.

The difference now is that a million signed in listeners – via SCA’s investment in insights platform SourseAI – gives the firm a better idea of what else those audiences like, meaning it can build audience profiles, serve them more relevant recommendations – and ultimately drive content commissioning accordingly, said Tothill.

But that takes time. Hence striking deals with Wondery and Stitcher to build a slate of circa 500 titles.

“They perfectly fitted some of the deficiencies in our domestic sector," said Blackley. "So it filled out the library and made it more complete, which we couldn't have been able to do by ourselves.”

While investors always question the economics, Blackley said both US partners are “already profitable” for SCA rather than loss leaders.

More tech, dynamic creative

While the likes of Nine have investing in text to audio to drive revenues for its news media – which it also claims are incremental revenues rather than cannibalistic – SCA is heading in the other direction. Its investment in Sonnant, which turns audio into text, is helping to attract different audiences, per Tothill. The machine learning powered tool still requires human intervention, but Tothill rates it. “It’s pretty damn good.”

Meanwhile, another tech investment, in US-based Frequency, enables dynamic creative on the fly. But for all the noise around dynamic creative in recent years, Blackley said that take-up so far has been limited to early adopters like McDonald’s.

“But that comes back to us being an organised seller and packaging [that capability] as part of a collective group of saleable assets. Either way, we have to be very clear that if we're doing something that's uniquely of value – addressable highly targeted advertising – the burden of the seller is to charge a premium,” said Blackley. “The burden of the buyer is to negotiate that down to the place where we will sell.”

Local push

A million signed-in listeners from a standing start is no mean feat. But to stump up an addressable premium, some advertisers want greater scale. SCA is on record as stating it aims to hit 1.75m log-ins by 2024, but Blackley thinks it can get there sooner, “because Wondery wasn’t factored in” to that calculation.

But packaging up niche, local markets is a key plank in driving both addressable audiences and revenue, with SCA’s 65 local market teams ranked on a per capita basis and incentivised to “spruik Listnr”, per Kelly.

“And our growing thesis, is that in a market like Coff's Harbour, where we're dominant in radio, we've got such a big uncluttered footprint that it’s much easier to attract a signup and an active user in that market than in Sydney, which is highly cluttered,” added Kelly. Listnr sign-ups in its top performing regional markets “are already hitting 24 per cent of the population”, claimed Blackley.

Short local bulletins are the next part of the plan – and Kelly sees money in hyperlocal advertising.

“We're actually rolling out what we call ‘my town local shortcuts’, which are less than ten minute chapters around what's happening in sport, what's happening in the local clubs etc. We've currently got eight live in key markets at the moment and we’re going to roll it out an increasingly,” said Kelly.

“If we get that right, that also drives sign ups and activity for Listnr and makes Listnr their own for that town. But in terms of monetisation, it's not a big stretch to think that IGA, with its local strategy, can absolutely buy that out and provide local messages for Coffs Harbour, versus Wagga Wagga versus Bunbury. So I reckon that's the next horizon in terms of really growing Listnr as an Australian property, as opposed to iHeart which is a license model from the States.”

Per Blackley: “We think that localism is the antidote to globalism, because we don't see any of the international peers necessarily adopting that strategy.”

Subscription play?

SCA last month hired a new CFO, Tim Young, from Disney plus. Does that foreshadow a subscription play?

“We don’t rule anything out,” said Blackley. The question is, “what is the product suite that people are willing to pay … and do we have enough product that we're willing to put behind a paywall … If you've got seven or eight podcasts, you've probably got seven or eight streaming services in video and audio. What can you replace it with?

“I think we will experiment in time. But I don’t think that anyone should think that in the next short horizon, this is part of our strategic agenda. It will present itself when we have the scale.”

Buyers: slowly moving

Media buyers see parallels with digitisation of TV, where BVOD was thrown in to linear deals but is now powering growth – and will eventually become king.

“They are starting to monetise digital audio in its own right. If you can see the value of the audience and the data sets behind that, with targeting and attribution – if they can close that loop, that will drive volume,” said one.

Another said the radio industry still has not cracked how to sell its digital streams.

“People understand the podcast [opportunity]. What they have not worked out is how to sell digital radio.”

But they suggested radio-audio players will get there – and said SCA’s investments are recognised. “They have doubled down on Listnr and it now has the scale, one million is a really solid number. They have gone from the back of the pack to the front, and I think it will pay dividends,” said the investment head.

So build it and they will come, eventually?

“That has been the underlying maxim for all channels. BVOD has only just started to scale. Programmatic out of home is not yet firing on all cylinders. Cartology has been talking about going beyond FMCG for 18 months and that hasn’t happened yet. Look at TikTok – it will probably write $120m in revenue locally versus two billion for Facebook,” they said. “Scaling new products takes time and the biggest challenge is education around the new digital ad metrics we are working to. But [digital audio] is growing quickly, and the ad dollars will come.”