Summary
This summary highlights material information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before deciding to invest in our common stock. Before making an investment decision, we urge you to read this entire prospectus carefully, including the risks of investing in our common stock discussed under “Risk Factors,” beginning on page 9 of this prospectus, and our consolidated financial statements and related notes set forth elsewhere in this prospectus.
Global Traffic Network, Inc.
We provide traffic and news information reports to radio and television stations in international markets. We are the largest provider of traffic information reports to radio and television stations in Australia and Canada. We also provide news information reports to radio stations in Canada and we believe that we maintain the largest inventory of commercial advertising embedded in news reports in Australia. We derive substantially all of our revenues from the sale to advertisers of commercial advertising inventory associated with these information reports. We obtain this advertising inventory from radio and television stations in exchange for information reports and/or, for certain broadcasters, cash compensation. We provide broadcasters in international markets a cost-effective alternative to gathering and delivering their own traffic and news information reports and offer advertisers an efficient, broad-reaching alternative to that offered by traditional radio and television.
In Australia, our network affiliates are currently comprised of 69 radio stations and 13 television stations and we expect to add three additional radio stations and one additional television station in July 2007. Including these additional stations, and according to AC Nielsen, our Australian information reports have a weekly reach of approximately 7.6 million radio listeners, which represents over 94% of the commercial radio listeners, and approximately 7.7 million television viewers, which represents over 62% of the commercial television viewers, in the five largest Australian markets.
In Canada, our network affiliates are currently comprised of 69 radio stations and three television stations and we expect to begin providing information reports to two additional television stations shortly. According to BBM Canada, the Canadian industry consortium for audience ratings, our Canadian information reports have a weekly reach of more than 7.5 million radio listeners, which represents over 29% of the commercial radio listeners, and more than 1.7 million television viewers, which represents approximately 7% of the commercial television viewers in Canada.
In addition, we recently started to explore opportunities for expansion into several European markets and have formed a subsidiary in the United Kingdom in anticipation of commencing our United Kingdom operations. To date, we have not contracted to provide services to any radio or television stations in the United Kingdom or any other European market.
Our commercial advertising inventory, which is primarily comprised of ten second advertising spots embedded in information reports that are broadcast on radio or television, is generally sold as advertising packages on a local, regional or national network basis. We market our advertising packages on a percentage-based rotation. Each advertiser receives its pro rata share of our aggregate advertising inventory that airs primarily during prime morning and afternoon drive periods. Because we consolidate our commercial advertising inventory on a network basis, we are able to offer advertisers a cost-effective, broad-based advertising vehicle that reaches mass audiences. Since July 1, 2006, our advertising customers have included nine of the top ten Australian marketers and 16 of the top 20 global marketers, as published by AdvertisingAge.
The international markets for radio and television represent significant opportunities for attracting media audiences and advertising. According to AC Nielsen, the total number of commercial radio listeners and television viewers in Australia is approximately 16.0 million and 20.3 million, respectively. According to BBM Canada, the total number of commercial radio listeners and television viewers in Canada are each approximately 25.7 million. According to fourth quarter 2006 ratings by Radio Joint Audience Research (“RAJAR”), the total audience reach for commercial radio and television stations in the United Kingdom is approximately 45.0 million listeners and approximately 25.0 million households.
End box 1 END LOGICAL PAGE PAGEBREAK BEGIN LOGICAL PAGE Begin box 1Radio and television stations generally attempt to attract listeners and viewers by selecting a style of programming that appeals to a target listening or viewing audience. Although there are many programming formats, broadcasters recognize that traffic and news reports appeal to a wide range of audiences. Because there can be substantial expenses involved in preparing and delivering traffic and news reports, many broadcasters have elected to outsource the preparation and delivery of these reports to third parties that specialize in packaging such information. Outsourcing companies are often able to provide better information in a more cost-effective manner, which allows broadcasters to focus on improving service to their listeners or viewers, reduce costs and improve profitability.
The media advertising market has experienced many changes and innovations in recent years, particularly the introduction and rising popularity of non-traditional media outlets such as the internet and mobile digital media. As a result, broadcasters increasingly compete with these additional media platforms. This trend has resulted in a more mature advertising market in traditional media with limited or no growth, which increases the pressure on broadcasters to manage their operations and expenses in a cost-effective manner.
The fragmentation of media markets also poses a challenge to advertisers. Although innovations in non-traditional media provide advertisers with additional platforms through which they can reach consumers, the rising number of media platforms creates increasingly segmented audiences that make it difficult for advertisers, especially large companies that rely on national or global brand recognition, to reach the broad-based audiences that they desire. Advertisers are increasingly looking for a return on investment for each advertising dollar spent, which is generally measured by the audience reach of their chosen advertising media and the penetration to various demographics within those media.
We believe that our business model addresses the needs of multiple constituencies. Our inventory of network-based advertising allows advertisers to deliver a meaningful message to a broad, demographically diverse audience using the traditional media of radio and television. For broadcasters, we facilitate the delivery of traffic and news information to audiences in a cost-effective manner.
We obtain information through an infrastructure that includes, among other things, helicopters, airplanes, cameras and remote monitoring systems, scanners, station listener lines, cellular phones, remote camera systems positioned on aircraft and external news gathering sources. We process the information and prepare and deliver high-quality reports that enable radio stations to provide listeners with accurate up-to-the-minute information. We also leverage the on-the-scene presence of our helicopters, which are fitted with camera systems to record and compile video footage.
The information reports we provide to radio and television stations are divided into three categories based on the content of the report and the medium in which it is delivered:
We work closely with station program and news directors to customize our information reports to meet content and style requirements of each of our network affiliates so that our reports will appeal to each station’s target audience. Stations regularly participate in the selection of on-air broadcasters to ensure that the broadcaster’s style is appropriate for their stations’ formats. Our broadcasters often become integral “on-air personalities” as a result of their on-air presence and interaction with the stations’ on-air personnel. Because we incur all costs related to the preparation and transmission of our information reports and we provide these reports in exchange for advertising inventory, radio and television stations can eliminate the cash costs involved in providing traffic and news reports to their audiences.
End box 1 END LOGICAL PAGE PAGEBREAK BEGIN LOGICAL PAGE Begin box 1Our services appeal to advertisers because our advertising inventory is sold on a network basis that gives advertisers an opportunity to reach a broad-based, local, regional or national audience through a single purchase of commercial advertising inventory. We believe this type of network-based advertising platform is especially appealing to large companies that market products by leveraging national or global brand recognition. In addition, we position advertisements within the information reports such that advertisers’ messages are broadcast along with regularly scheduled programming. Because the information reports are actively sought out by listeners and viewers, we believe the advertisements embedded in the reports are less likely to be avoided by a listener or viewer changing stations or “tuning out” than traditional advertising message. Examples of our larger and higher profile advertising customers in Australia and Canada include the following companies:
Although many large advertisers utilize our advertising platform, we maintain a broad and diverse customer base. No one advertiser comprises more than 5% of our revenue base and our top ten advertising customers represent only 25% of our overall advertising sales.
We believe that we provide broadcasters in international markets with a cost-effective alternative to gathering and delivering their own traffic and news information reports and offer advertisers an efficient broad-reaching alternative to that offered by traditional radio and television.
End box 1 END LOGICAL PAGE PAGEBREAK BEGIN LOGICAL PAGE Begin box 1 believe our strong relationships with global advertisers will provide us with a significant advantage in cross-selling our advertising inventory as we enter new markets.Our objective is to become the leading aggregator of premium radio and television advertising inventory in the markets we serve. Key elements of our strategy include:
Radio News Reports. We believe that consolidation in the radio industry may increase the demand for our radio news reports as radio station owners are likely to increase their outsourcing of various programming elements in order to lower costs. We plan to focus on increasing the number of radio stations broadcasting our radio news reports within our current markets, which we believe will in turn increase our commercial advertising inventory, expand our audience reach and result in increased revenue from the sale of such inventory.
TV Reports. We have developed an infrastructure of airborne video surveillance and broadcast equipment. In addition, through agreements with various governmental agencies, we have access to over 1,500 and approximately 450 static mounted traffic surveillance cameras in Australia and Canada, respectively. We use this infrastructure to offer traffic and breaking news video to our television broadcasters and currently provide service to 13 television stations in seven Australian markets and three television stations in three Canadian markets. In many of our television markets, we provide TV reports that include proprietary video coverage from our helicopters that can cover news stories and traffic conditions at any time, subject to weather conditions and air traffic control restrictions. In addition, our access to strategically located fixed-position ground-based camera systems offers network affiliates coverage of crucial traffic arteries and allows us to provide panoramic views of the cities in which such cameras are located. We intend to expand our TV reports to additional network affiliates in our Australian and Canadian markets, which would provide us with additional advertising inventory.
End box 1 END LOGICAL PAGE PAGEBREAK BEGIN LOGICAL PAGE Begin box 1Global Traffic Network, Inc. is a Delaware corporation established on May 16, 2005 to be a holding company. We currently have three wholly-owned subsidiaries. Our Australian business operations are conducted through The Australia Traffic Network. Our Canadian business operations are conducted through Global Canada, which was formed on May 20, 2005, and which operates through its wholly-owned subsidiary, Canadian Traffic Network. On October 19, 2006 we formed a wholly-owned subsidiary, UK Traffic Network, to operate our business in the United Kingdom. To date, UK Traffic Network has not contracted to provide services to any radio or television stations.
Our principal executive offices are located at 800 Second Avenue, Fifth Floor, New York, New York 10017 and our telephone number is (212) 896-1255. Our website addresses are www.globaltrafficnetwork.com, www.trafficnet.com.au and www.trafficnet.ca. The information contained on our websites or that can be accessed through our websites does not constitute part of this prospectus.
End box 1 END LOGICAL PAGE PAGEBREAK BEGIN LOGICAL PAGE Begin box 1Unless otherwise indicated, all information in this prospectus assumes no exercise of the underwriters’ over-allotment option to purchase up to 675,000 additional shares of our common stock.
The number of shares of common stock in the table above excludes:
End box 1 END LOGICAL PAGE PAGEBREAK BEGIN LOGICAL PAGE Begin box 1(in thousands except share and per share amounts) The following table sets forth selected consolidated financial data for the periods indicated. You should read the summary financial data below in conjunction with our financial statements and the related notes and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. The consolidated statement of income data for the fiscal years ended June 30, 2006, 2005 and 2004 and the consolidated balance sheet data as of June 30, 2006 and 2005 are derived from our audited financial statements that are included elsewhere in this prospectus. The consolidated statement of income data for the fiscal years ended June 30, 2003 and 2002 are derived from our unaudited financial statements not included in this prospectus and the consolidated statement of income data for the nine months ended March 31, 2007 and 2006 are derived from our unaudited financial statements that are included elsewhere in this prospectus. The consolidated balance sheet data as of June 30, 2004, 2003 and 2002 is derived from our unaudited financial statements not included in this prospectus. The consolidated balance sheet data as of March 31, 2007 is derived from our unaudited financial statements included elsewhere in this prospectus. These operating results are not necessarily indicative of our operating results for any future period.
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