Bombshell letter that could backfire for ARN in their $80m fight against Kyle Sandilands

A previously unseen letter sent by the Australian Radio Network to media watchdog ACMA could now create problems for the company in its compensation dispute with Kyle Sandilands.

The document, obtained by radio commentator James Cridland and published by Mumbrella, shows ARN strongly defending The Kyle and Jackie O Show over its sexual content.

At the time, ACMA had proposed new licence rules for KIIS FM that would have banned references to sexual activity and sexually suggestive material on air following repeated findings the program had aired 'vulgar, sexually explicit and deeply offensive' content.

The restrictions were much tougher than existing rules and would have included innuendo, 'double entendres' and even sound effects that listeners could interpret as sexual.

ARN's lawyers argued against the proposal, saying the show's audience already expected blunt and sexually charged content from Kyle Sandilands and Jackie 'O' Henderson.

The network claimed sexual references had become 'part of the accepted language of the program' and argued listeners would 'reasonably expect' that type of content from the breakfast show.

The submission also stated listeners were 'not captive audiences' and could simply switch stations if they were offended by the material.

ARN further warned the proposed licence conditions would have a 'significant chilling effect' on broadcasts and create 'considerable uncertainty' for radio stations trying to interpret the rules.

The lawyers argued the restrictions were so broad they could even apply to 'fleeting or isolated references' and said a single comment could potentially place the station in breach.

The document also pointed to the show's popularity, describing The Kyle and Jackie O Show as 'Australia's most listened-to radio show' with a 'huge and loyal audience base'.

ARN argued the proposed rules would unfairly single out KIIS FM and said they risked preventing presenters from speaking in a 'natural and authentic way'.

Now, the December submission could become important in the new $80million compensation proceedings involving Sandilands.

ARN is understood to be arguing that Sandilands engaged in serious misconduct and breached his contract through his behaviour towards co-host Jackie 'O' Henderson, including during their on-air argument on February 20.

But the newly surfaced document may complicate that argument because it appears to show the network previously defended and accepted the shock-jock style that made the breakfast show famous.

Sandilands is expected to argue that his controversial on-air persona was not only tolerated by the network, but was central to the success of the program ARN had backed and profited from for years.

The matter is scheduled to head to a two-week Federal Court trial beginning on October 12.

It comes after Sandilands confirmed he was personally looking after several former staff members from the Kyle & Jackie O show after they were made redundant by ARN in a shock round of cuts.

On Monday, ARN confirmed the redundancies of content assistant Alfie Laguzza, audio producer Dean Royston, who is better known to listeners as 'Hulk', and producer Eliza Brown.

Speaking to news.com.au, Sandilands confirmed he has already stepped in to support the affected staffers by hiring them to work at his media company King Kyle. 

'They've all just moved to my office down the road and seem happier,' he said. 

'What people don't seem to get is if you pull a thread and just keep tugging it, the entire structure collapses and you're left with a pile of thread and not much else.' 

'I take care of my people, and I've got their backs,' he added.