Why the company behind Alan Jones’ radio show can’t afford another disaster

Sponsors are jumping ship from Alan Jones’ radio show and the fallout could not come at a worse time for the beleaguered Macquarie Radio Network.

The controversial talkback king told a Young Liberals function that Prime Minister Julia Gillard’s 82-year-old father John “died of shame”, triggering an immediate reaction from radio 2GB’s advertisers.

Freedom Furniture, Mercedes-Benz, Challenger and Woolworths all moved quickly this morning to dump 2GB.

“From time to time we have had advertising during this program, however, this morning we have made a decision to suspend this advertising,” Woolworths said in its Facebook statement.

“Woolworths in no way supports the comments made at that function. We thank you all for your feedback.”

Macquarie desperately needs these advertisers after its shares fell 36% in the last 12 months from $1 to 64 cents.

The business only owns two major radio stations after Melbourne’s MTR station was placed in administration, making 2GB and Jones crucial to its success.

MTR proved to be a significant drain on Macquarie’s resources as it was forced to assume operating costs and losses of $5.5 million in the 2011-12 financial year, dragging net profit down from $5.9 million to $2.3 million.

The audience and advertiser backlash against Jones’ comments is particularly dangerous for Macquarie as the business has few other revenue levers to pull.

The sponsors’ actions will also hurt Jones’ own hip pocket as his company Hadiac was issued with 1.3 million shares on September 12, making him the fourth biggest shareholder in Macquarie.

However Bob Peters, of Global Media Analysis, told SmartCompany he did not think the crisis would prove to have any more impact than “a short-term blip”.

“It’s a controversial right wing comment and that panders exactly to Alan Jones’ audience and to the 2GB listeners,” Peters says.

“The bulk of the audience are over 55 and more sympathetic to right wing views; if you are left wing and over 55 you listen to the ABC.”

Although earnings before tax from Macquarie’s two Sydney stations was $15.2m in 2011-12, down 12% from last year, it was still the second best result ever and Peters expects profits to improve this year.

“This year should be a year of recovery for them as they are a very high rating station. I don’t have a magic crystal ball but I think the most likely outcome is that the Sydney radio market will experience single digit growth and Macquarie should get its fair share of that and profits should go up,” says Peters.

Earnings before tax for 2012-13 for Macquarie has been forecast by its executive chairman at $15 million, which would give it a net profit of around $8.5 million.

This means revenue would have to fall at least 30% and costs remain steady to threaten Macquarie’s profitability.

Peters is also unconcerned at the advertisers deserting 2GB.

“Look at what happened with Kyle Sandilands and Austereo network, there was very little damage,” he says.

“It won’t stick.”