EconomyFinancialRadio Centro seeks to get out of its sea...

Radio Centro seeks to get out of its sea of debts and will bet on these new formats

Radio Centro sees podcasts and streaming as a table to navigate the sea of debts it has faced since 2015, when it had to resort to bank loans to pay the penalty of 415 million pesos for withdrawing at the last minute from the bidding for frequencies. to create an open digital television network with national coverage.

The company began a restructuring process in 2019 to reduce its financial liabilities, after a failed attempt to have its television network led the company to become one of those to terminate several contracts of its employees and sell its corporate building.

In that year he also had to sell stations, such as KXOS-FM 93.9, in Los Angeles, to Grupo Meruelo Media, for 35 million dollars. It ended its strategic alliance with Grupo Siete to give it back the 92.1 FM frequency and franchised its AM stations to increase its income.

Despite the fact that the company got rid of “several non-strategic assets” during 2019, the company could not return to black numbers in the following two years: in 2020 the losses amounted to 14.9 million pesos and in 2021 a net loss of 920.7 million pesos.

In June of this year, the rating agency S&P gave Radio Centro the status of “Special Review with negative implications” for considering “a weak liquidity position of the company that continues to deteriorate given a slow operating recovery.” According to the rating agency, this status reflects that the current cash deficit compromises the payment of other debt obligations in the short term, in the absence of an acceleration of collection, or of making new sales of assets and receiving the corresponding resources.

Days after S&P changed the status to “Special Review with negative implications” and downgraded Grupo Radio Centro’s credit rating, the company announced that it would sell its 8.1 television channel, La Octava , to El Heraldo Media Group, which had started operations in October 2019 with the Carmen Aristegui newscast. In April of this year its informative program went off the air and from June 13 of this year the new owner began to broadcast its programming.

Months earlier, in February, the company appointed Jacinto Marina Cortés as the new CEO, while Juan Aguirre Abdo became a director on the company’s Board of Directors.

“The stage that Juan Aguirre Abdo had to face was making strategic and difficult decisions. He had to get rid of assets that were practically a family legacy to improve his financial statements and one of the last and most recent was the sale of television”, says Jorge Fernando Negrete, president of Digital Policy Law.

In the first quarter of 2022, the last period in which Juan Aguirre was in charge of the company, the company reported revenues of 148.1 million pesos, an increase of 34.2% thanks to more advertising. While it obtained an improvement in its operating flow, which went from a negative EBITDA of 8.8 million pesos in the first quarter of 2021 to an EBITDA of 22.8 million pesos in the same period but in 2022.

“I think all the changes have been for the better. And now it’s up to him to institutionalize the company, that’s why he appointed a new person to manage the company,” adds Negrete.

Podcast and streaming, the lifeline?

One of the strategies that Juan Aguirre Abdo undertook was to bet on digital formats such as podcasts, with which they seek to reach new listeners and insert new advertising.

Last year, Grupo Radio Centro launched Audio Centro, its new podcast production division, with which it will cover a wide range of content: news, sports, culture, technology and miscellaneous. In addition, it will remaster the contents of classic programs, from radio soap operas to famous programs, such as the 200 episodes of the comedy program La Tremendo Corte with its Tres Patines and Tremendo Juez characters.

When the company launched this new segment, it commented that the NotiCentro podcast already had four million monthly downloads, remaining in first place in its category, while El Shot , its La Octava sports podcast, had 1.6 million downloads per month.

According to PwC’s Global Entertainment & Media Outlook 2022-2026 report, podcasts had a boost in the pandemic and this trend will continue to increase until reaching an audience of 50 million people in 2026, where the most interesting topics for Mexicans , within these programs are: humor, shows and personal development.

Also, in terms of advertising, PwC projects that this format can generate advertising revenue of 28 million dollars and by 2026 of 44 million dollars. As for radio and music, together with podcasts, both formats are expected to reach combined revenues of 942 million dollars this year.

Jacinto Marina Cortés has also sought to enter the world of streaming, through a strategic alliance with Olympusat, a content firm. The FreeTv video platform will have more than 8,000 hours of series and movies for all ages.

Analysts consulted consider that Radio Centro’s decision to enter the world of streaming, added to the fact that its podcast segment is already operating, “is a great success” because it will be able to reach new audiences, especially the younger ones, and will allow it to reduce expenses financial.

The video on demand segment will have sustained growth for the next five years. Only this year this sector will generate revenues of 1,257 million dollars and will reach a volume of 1,899 million dollars in 2026.

“The strategies (of Radio Centro) that it is directing towards the digital world will definitely help it in advertising because now it is more focused on this segment, while entering the world of streaming (video and audio) will help it reach young audiences. something that classic broadcasters do not achieve. In addition, digital platforms will allow you to have more information about what your users want to see and hear, which will translate into lower expenses because you will only focus on producing content that audiences are looking for”, details Sandra Rodríguez, telecommunications analyst.

Jorge Fernando Negrete believes that the future of radio lies in digitization. “Radio must expand into that digital world, and not the other way around.”

As of the second quarter of this year, the company’s transmission revenues totaled 188.9 million pesos, which represented an increase of 10.2%, compared to the 171.4 million pesos registered in the same quarter of last year and whose increase is mainly due to more advertising.

But there are still challenges ahead: the Aguirre family company has the worst rating according to S&P. After it requested a 60-day extension for a bond payment, the New York-based rating agency downgraded the rating from ‘mxCC’ to ‘mxCCC+’, or from seventh to ninth place on the local speculative scale, by consider that “the probability that Radio Centro complies with its debt obligations within the originally promised conditions is limited”.

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