Limited options force Capital Radio to explore new channels

Leicester Square Tube station in London is to be “branded” by Capital Radio, in a six-figure, five-year deal, which will see much of the station’s wall-space and many of the poster sites plastered with Capital 95.8 FM’s logo.

Tens of millions of people a year pass through the station, and though many of those are tourists and many more are really the same people on their twice-daily trips to and from work, Capital is promised considerable exposure as the first company to sponsor a London Underground station.

The sponsorship starts with Capital’s move from its present studios in Euston Road to new premises above a Capital café in Leicester Square itself.

I learnt this at last week’s Promax UK conference, a gathering of television and radio promotions and marketing folk which has blossomed from small beginnings to its present enormous size in the space of only a few years.

It’s a sign of the times that Promax can attract 600 people to its conference dinner. Ten years ago you would have been hard-pressed to find more than a couple of hundred in the whole of broadcasting who would admit to being involved in promotions.

Now, with the explosion in the number of television channels and radio stations, and the greater awareness among broadcasters of the value of their own airtime for promoting their programmes (with all the inevitable on-air clutter), the profession is bursting at the seams.

Ironically, Capital itself is laying off half the 14 staff in its promotions and events department. It’s one of a number of measures taken in the wake of a slowdown in revenue growth, and because Capital believes the Tube station branding, plus the promotional impact of its new location in the heart of London’s entertainment zone, renders unnecessary many of the local promotional events the station used to mount.

Capital is also about to become a big-time restaurateur. The Sunday newspapers were reporting, in advance of the group’s annual results this week, that the company is on the brink of signing a 50m deal to take over My Kinda Town (the people who own Chicago Pizza Pie Factory). It already has a deal with MKT to run its new café in Leicester Square.

Capital has tried diversifying out of radio before – and never greatly cared for it. At one time it owned both the Duke of York’s

Theatre in the West End and a television facility in Wandsworth. Neither of these diversifications was as bizarre as some of those attempted by the old ITV companies (which went into businesses as diverse as diary publishing and executive recruitment) but they were undertaken for the same reasons.

Expansion within their own sectors for commercial radio or television companies was frowned on by the regulators or forbidden by law; yet they had to find some way to plough the profits of monopoly (or near-monopoly) licences into added value for shareholders.

Now the rules have changed with the new Broadcasting Act (many of whose provisions came into force on November 1). In ITV it is widely expected that Granada will soon bid for Yorkshire-Tyne Tees, while United News & Media – which controls Express Newspapers, Anglia and Meridian – has recently bought a large stake in HTV and is reportedly negotiating to buy Westcountry.

Capital could try to acquire more radio stations. Unlike the other two big radio groups, GWR and EMAP, it still has some way to go before reaching the new maximum for the number of licences one company can control.

But the prices of existing stations – like those of ITV companies – have been driven up by widespread expectations of a takeover frenzy. The result, of course, has been to make such a frenzy less likely.

Meanwhile, bidding for new licences is a lottery – and Capital has, in any case, made it less likely that it will win by announcing in its applications for the East Midlands regional licence and the last London-wide licence that it wants to transfer an existing AM service in those areas to FM.

Richard Park, Capital’s group director of programmes, asks what point there is in changing the rules to allow one company to own two FM licences in a single area if all applications are rejected.

But making it possible doesn’t oblige the Radio Authority to ensure it happens. The Authority, charged by law with increasing listener choice, has already rejected one of Capital’s bids, for Gem AM in the Midlands, and must be odds-on to reject the other, to transfer Capital Gold to FM.

Expanding into commercial radio overseas is another option, of course – but that is fraught with difficulties thanks to distance, different regulatory environments and commercial circumstances, and the difficulty of ensuring good local management.

So Capital is testing an Internet shopping service and buying a restaurant chain. Its directors, sitting on a 30m cash pile and profit margins of 16 per cent, would be failing in their duty to shareholders if they weren’t doing something of the sort.

And with a would-be broadcaster like Associated Newspapers openly saying it wants to build up a major presence in commercial radio, it’s as well to take another company over… before someone tries to take over Capital.