Can Capital save struggling Xfm?

Capital Radio chief executive David Mansfield may have been the man who negotiated the deal to buy London Indie music radio station Xfm for 12.6m, but it is up to Capital’s director of programming Richard Park to make it work. At least that’s the industry’s view.

Jonathan Gillespie, head of radio at BMP DDB, sums up the position. “I’m surprised by the move,” he says, “because the station’s music policy is very different to what Capital is used to. However, Capital is an expert music programmer, which is how it has achieved market dominance for so long, so if anybody can make that station a success, it can.

“But this is a new area for Capital, the other stations it has bought have had similar music playlists. Xfm does not, and the jury is out on whether it can make it work,” says Gillespie.

In the deal, which was announced last week, Capital Radio acquired 90.1 per cent of the station which is valued at 15.9m. Chris Parry, Xfm’s managing director, keeps his position, and retains the remaining shares.

The acquisition by Capital Radio, which made group profits of 33.1m, was its first successful venture into the market since it bought Southern Radio in 1994 and, more pointedly, since the Chris Evans-headed consortium snatched Virgin Radio away from it in December 1997.

Capital was prepared to pay 87m for Virgin, but the Department of Trade & Industry decided to investigate and later blocked the deal.

Capital Radio managing director, Sally Oldham, says: “This (Xfm) is not a panic buy. We bought this station because we feel there is potential for growth. This is also a statement about our commitment to radio, it is very important to our portfolio.”

Oldham says: “We can only improve the station’s share of audience and weekly reach.”

Xfm could hardly have had a more inauspicious start. The station launched on September 1, the day after Diana, Princess of Wales, died.

The station had a target of 500,000 listeners a week. However, its first quarterly set of Radio Joint Audience Research (Rajar) figures showed it only reached 234,000 people, which represented a 0.7 per cent share of the London radio audience. In Rajar figures for the first quarter of this year, its weekly reach slipped to 219,000, a 0.6 per cent share of audience. Xfm posted a 1.7m loss last year.

Parry says that because of the transitory nature of its young audience, Rajar – which tracks listening by getting its test group to fill in a diary – does not pick them up. He claims his audience is “close to 400,000” on the basis of his own research.

A byproduct of the Capital deal is that it makes EMAP’s purchase of Melody Radio for 25m earlier this year look good business. At the time, critics thought it was overpriced. Melody reaches over 1 million people a week, and enjoys a 4.9 per cent market share.

Industry observers are very clear on the reasons for Xfm’s lacklustre performance. The problems lie with its – at times obscure – playlist, and poor station formatting.

Deborah Goodman, head of radio implementation at media buyer CIA, says: “What the station is trying to do is laudable. But when you turn on, you never know what you will hear. It is very loosely formatted – it needs to be tightened. Potentially Xfm could have a strong brand image.”

Rick Blasky, managing director of music agency the Music & Media Partnership, adds: “New talent is the lifeblood of the industry. But the reality seems to be that the station is too cutting edge for the public. Capital will have to broaden the playlist and play bands like Oasis and Pulp that people have heard of.”

Blasky says that a good model is Radio 2, which over the past two years has begun to play newer bands in terms of its audience like Simply Red, Céline Dion and Michael Bolton. “The station has turned itself into Radio 1-and-a-half and it is very successful,” he says.

Radio 2 has a weekly reach of 8.9 million and a 13.2 per cent share of the national audience, which is bigger than any other national station.

Oldham says of the playlist issue at Xfm: “We will have to strike a balance between the idiosyncrasies as well as broadening its appeal for audiences and advertisers.”

Parry says that Capital will bring its marketing and programming expertise to the station. He comments: “Richard Park is a very experienced professional. I hope he will give us his time, but the day-to-day programming will remain with my team. Being part of the Capital group will also allow us to market and stage events. We will be able to create more of a splash.”

Capital’s bid for Xfm might be seen as throwing money at a failing station that never really got off the ground. But it does offer the successful group a chance to acquire a third station in London, and one which potentially carries a lot of credibility with an audience which is not listening to either Capital Gold or Capital FM.

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