Shock boss discusses Regency "rescue package"

04 August 2010

by Lars Brandle

Shock and its famous name will live on, but it was a close call. In the space of just two months, the once-mighty independent music group has pared down its empire and its remaining assets bought out. The alternative would have been much less kind.

With a statement issued early Monday, the 22-year-old entertainment group declared it was now the property of Regency Media, the country’s largest independent manufacturer and distributor of CDs and DVDs. The new arrangement creates what both businesses describe as Australia’s biggest independent entertainment conglomerate.

Regency Media Managing Director Fiona Horman admits her company had played the “white knight” role, swooping in for a firm it knows well and has done business with for many years. David Williams, Shock’s longtime chairman, unequivocally describes Regency’s manoeuvre as a “rescue package.”

Financial terms of the deal were not disclosed, but the full sum is estimated at $5 million - $10 million.

"It's business as usual," Williams tells TMN. "This gives us the opportunity to continue on with the business we set up all those years ago. With Regency’s strength in the market, the future is now a bright one.”

Founded in 1988 as an import business, Shock came to symbolise innovation in the independent music scene. In the years that followed, Shock built up a ranging portfolio of interests which included Shock Music Publishing, One Stop Entertainment, Shock Records, Shock DVD and the Ragged Company touring division. At its peak, group revenue rose upwards of $100 million.

Business is now seriously tough out there, and Shock’s model has been exposed on multiple fronts. The space for shifting CDs and DVDs is already a volatile one without the complications of the global financial crisis. And the Australian market is unusually well-stocked for independent distributors, where Shock jostles for position with the likes of MGM, Inertia and Stomp.

Its finances strained, Williams and his fellow directors took the tough decision in early June to pull the plug on Shock Music Publishing, Shock Exports.com and holding company One Stop Entertainment, which had accrued a loss of $7.6 million for the year to June 2008.

It wasn't enough. Shock’s bank baulked and pulled funding; the clock was well-and-truly ticking.

Following the acquisition, Shock’s longtime chairman David Williams becomes CEO, while his co-founder Frank Falvo – until recently vice chairman -- continues in a consultancy position.

The changes won’t finish there. Shock’s warehouse facility in Melbourne will be repositioned in Sydney, and the company’s workers have been offered six-month contracts. It’s expected the move could affect approximately 40 jobs.

There will be redundancies among Shock’s 90 staffers, but the tally is yet to be known as the companies’ leaders identify where the synergies lie now that both groups will slot together.

An element of mystery still surrounds the downfall of Shock Music Publishing which, although it dragged the group’s bottom line, was strong on creative. Even after its decline, the publishing business managed to generate a handful of victories at the June 21 APRA Awards in Sydney.

Shock joins the fold of Regency Media, whose activities include DVD and CD replication, packaging, design and distribution logistics. Back in 2007, Regency forged a joint venture with Saregama India, giving it a foothold to press CDs, video CDs and DVDs for the Indian market.

The new pairing, Williams explains, should give local artists an “even greater opportunity to sell their talents as we will have the complete supply chain from studio, manufacturing, distribution and marketing.”

Regency’s buyout marks “a sad closing of a chapter,” Williams admits. “But it’s one which presents some great opportunities.”