Until now, the SA media sector has been characterised by relatively few players and a restrictive trading environment. Companies are prohibited from owning a variety of media simultaneously.
But this is about to change and consolidation has become the buzzword. Media owners are scrambling to buy into radio broadcasting, the one reliable cash cow in the industry. Though the rules that govern cross-media ownership are still to change (see page 116), media houses are anticipating the frenzy.
New Africa Investment Ltd (Nail) was the first print media house to make a move to achieve critical mass in radio. It tried to buy Kagiso Media, but the deal was thwarted by statutory limitations set out in the Independent Broadcasting Authority Act of 1993.
Kagiso Media's broadcasting interests, including East Coast Radio, Jacaranda 94.2, OFM and RadMark, have all increased revenue by more than 20%, well above the average growth in national advertising spend of 15%. Its radio stations are among the fastest-growing in SA.
Nail then shifted its focus to print and tried to buy Johncom, but could not reach an agreement on price. After this second failure Nail abandoned its media expansion strategy and put its media assets, including the Sowetan and stakes in radio stations East Coast and Kaya, on the market.
Despite the failed deals , radio broadcasting remains the most exciting sector. Relaxed ownership laws will encourage competition in the SABC-dominated industry.
The industry regulator, the Independent Communications Authority of SA (Icasa), looks set to ease ownership restrictions early next year and already, big media groups in the R14bn/year industry are eyeing the few independent radio stations.
Content is becoming key to winning the media game. "In the past," says Johncom CEO Connie Molusi, "media companies needed a mass platform to win more advertising. With fragmentation, content is more and more important. Consumers can now demand specialised content and they expect to be able to access it across all media."
The cost of specialised content is high as substantial investment in intellectual capital is needed to produce, sell and market a product.
"Media owners need to offset these costs across as many media channels as possible. New technology in the form of satellite, cable television and the Internet, has opened up such new channels," Molusi says.
After his failed bids Nail CEO Saki Macozoma, not surprisingly, is outspoken about the need for consolidation in the industry.
"We need to balance the interests of regulators with those of stakeholders to create an economically viable and sustainable radio broadcasting industry," he says.
This is supported by new African Media Entertainment (AME) CEO Stan Katz, who says the radio broadcasting industry has lost its competitive dynamic largely because of "the failure of regulation to keep up with the aspirations of an increasingly competitive SA market".
"Icasa needs to usher in a new era of free competition among commercial players within the regulatory framework that secures public service broadcasting," says Katz.
Icasa chairman Mandla Langa is mindful of the new commercial realities, but stresses the need to promote wider objectives such as black empowerment and media diversity.
Meanwhile, media companies that diversified beyond the industry are going back to basics and focusing on their core business.
Johncom is making senior management appointments in an effort to consolidate its media, entertainment and digital operations and pursue growth outside SA.
Johncom chairman Mashudu Ramano says: "Our strategy is to improve profitability and continue to drive transformation."
Johnnic's decision to integrate its dispersed business units is based on the need to minimise the costs of running different corporate centres and improve efficiency.
Ramano says the three Johncom businesses were interdependent and could be packaged, marketed and sold in one corporate centre.
"Bringing the businesses closer together will make it possible to extract greater efficiencies and save costs," he says.
Primedia and Afrikaans media giant Naspers are also disposing of noncore businesses.
Naspers recently sold its stake in Open TV to Liberty Media Corp of the US and delisted its technology subsidiaries, MIH Holdings and MIH Ltd.
Primedia last year sold its European and Middle Eastern cinema chains.
Independent Newspapers is also rumoured to be looking at selling noncore assets, including its digital business, I-Touch, to repay debt.
The print sector has made some gains in readership and continues to command 44% of total advertising spend.
The latest All Media & Product Survey figures show that about 45% of SA adults (13,2m) now read a newspaper, compared with 42,9% in 2001 and 39,5% in 2000.
Star performers in this sector are once again the weeklies. Readership of weeklies as a proportion of all newspaper readers has grown from 35,7% in 2000 to 39,5% in 2002
Sales growth of newspapers such as Sowetan Sunday World, Die Burger, City Press, Soccer Laduma and Sunday Times has resulted in this sector growing.
The star performer is Sowetan Sunday World, which has consistently grown its share of total weekly readership from 1,6% in 2000 to 3,2% in 2001 and 4% in 2002.
Dailies have been in a downward trend since 2001. Readership has declined in Gauteng particularly.
In radio broadcasting the stations that have posted solid performances are Jacaranda 94.2, East Coast Radio 94.95 fm and Kfm 94.5.
The recent promulgation of the Broadcasting Amendment Act 2002, which requires the public broadcaster to separate its public and commercial operations from each other, has added to the regulatory changes to the industry.
Icasa licensing department senior manager Stan Mamaregane says the new legislation stipulates that the public broadcaster should have separate financial records and accounts for the two divisions so that they are run and audited as independent entities.
So the scene is set for a bit of a scramble, assuming that the new regulations take effect sooner rather than later.
