Huntley Medley, Contributing Editor - Business

The recent axing of 32 staff positions at RJR Group may be the last of the people cuts for now. But that does not mean that Gary Allen, the head of the media company is not on the hunt for ways to trim more fat.

For despite a $52 million after-tax profit for third quarter _ to December 2008 - on turnover $423 million, the group's recent performance has been sluggish.

Its net return for first nine months of financial year, after a second quarter loss of $20.5 million, was an anaemic $15 million.

"We are going to have a far more dynamic group in the next several months," Allen said in an interview.

Business logic

That means, in part, following the old and unimpeachable business logic that a dollar saved is one to the bottom line. So, containing cost is important to Allen.

But that's not all Allen, who last year's succeeded Lester Spaulding as chief executive officer of the listed media group, has up his sleeves.

With a stagnating domestic advertising market and rising operating costs, he is accelerating plans to penetrate overseas markets with the group's loss-making cable properties.

And perhaps as a signal of just how serious he is about reshaping the group's operation, Allen unceremoniously pulled the plug on the two-year-old agreement with Cliff Hughes-led Nationwide News Network's that allowed NNN to broadcast on RJR's AM band.

Allen wouldn't say, but it is estimated that NNN owed RJR over $10 million for use of the transmitter, which has since been taken out of service.

It was just too expensive to maintain.

With the immediate matter of the stability of its free-to-air television and radio channels out of the way, Allen is now focusing on how to wring returns from the two cable television outfits in which it acquired controlling stakes in 2006: the all-news channel JNN, and the reggae music station, RETV.

Its 65 per cent of RETV was priced at $26.5 million and the 80 per cent of JNN at $12.5 million, in a payment scheme that included some cash as well as RJR Group shares, but with a proviso for those shares to be withheld if RETV and JNN did not meet profit targets.

They have not, but rather lost money.

"RETV is closer to break-even," Allen said. "JNN is not as close. Our target was profitability in three years."

He said: "We have the rest of this year to get to three years. We are taking the decisions to try and make sure that we stick to that target."

The formula, Allen believes is to use RETV, JNN as well as the group's sports channel to reach audiences outside of Jamaica, via satellite.

"We have a brand like RETV and reggae is a global brand," Allen said. "You can't have that and just look in Jamaica."

"If you have Jamaicans all over the world - and the technologies are now allowing you to provide them with content on demand wherever they are - and you are producing top quality content, then you have to monetise that by finding ways of getting the demand that exists out there ... satisfied," he said.

In fact, RETV is already in 16 Caribbean countries and RJR is scouting for partners in Canada, the United States, the United Kingdom.

Right programming

It has also made a foray in Costa Rica and has it eyes set on elsewhere in Central and South America.

"It (RETV) has the presence. The next level is to convert that, through the marketing, into inflows of dollars. So we have to ensure the programming is right," Allen said.

According to Allen, most of "tidying up" has already been done in the acquisitions, but "we have some more work to do on JNN's programming and we have some more excitement to create on RETV's programming".

With its stable of broadcast entities - TVJ, RJR 94 FM, FAME FM and Hitz FM - Allen said acquisition of the cable channels was a pre-emptive protection of its flank by RJR Group.

At the time the time the government had already signalled its intention to change its policy to allow advertising on cable television.

And the group's analysis suggested that could lead to an immediate 10 to 12 per cent shift in advertising revenue from traditional media to cable.

"We have tried not be on the bleeding edge but (on) the cutting edge," Allen said. "You protect your flank by looking at the niches that are likely to hurt you most if you lose them."

huntley.medley@gleanerjm.com

SOURCE: Financial Gleaner, Thursday, April 9, 2009