A report last week claiming that Clear Channel Communications (CCC) is considering a bid for Chris Evans’ Ginger Media Group is the latest in a long line of stories speculating on the Texan media group’s next deal.
Scottish Radio Holdings, Talk Radio, Capital Radio, Maiden Outdoor, Pearl & Dean, and most recently Odeon Cinemas, have all been linked with the company which spent $1.5bn (&£909m) this year alone buying outdoor and radio assets across Europe. In the UK it already owns poster company More Group, about one third of radio station Jazz FM and has recently taken control of Katz Radio Sales.
But some observers are mystified by the exact nature of CCC’s strategy in Europe, and wonder just how clear it is.
Its European arm, Clear Channel International (CCI), is led by chief executive Roger Parry, the former boss of More Group which was taken over by CCC in June 1998. Parry now leads a London-based team of strategists, accountants and bankers that has bought into radio and outdoor companies in countries as far afield as Poland, Switzerland and Norway. Individual business managers in different markets report to him. Parry says CCI will only buy into companies where it has room to make a difference.
He says: “We buy a business purely to get behind the existing management and improve its financial structure. We are able to fund managers’ aggressive expansion programmes.” For example with Jazz FM, he says: CCI was able to reduce operating costs; merge its sales operation into Clear Channel Radio Sales (CCRS) to achieve economies of scale; promote it using More Group’s posters; and call on Clear Channel’s experience of running 50 jazz stations in the US to change the playlist to what is called “smooth jazz”, designed to retain light listeners for longer.
Jazz FM chief executive Richard Wheatly says losses in the nine months to June 30 were &£2m against a full year loss of &£1.4m, although turnover was up 14 per cent.
He said at the time: “The company’s performance has improved significantly since the end of the period under review…due to the increase in listening hours and a substantial reduction in costs.”
CCI is an aggressively acquisitive company with plenty of cash at its disposal from its US parent. It is also content to let entrepreneurial managers continue to run their own businesses – so long as they are scrupulous about financial reporting. One CCI insider says: “We are absolutely manic about that. We are the value police. It’s a numbers and data driven business.”
The More Group would find it difficult to grow by acquisition in the UK because of intense competition. Parry’s managers grumble that they never see their demanding, but apparently inspirational boss, as he continues to build CCl’s presence in Europe and in radio. A former BBC radio journalist, Parry has a passion for the medium which fits neatly with CCC’s strategy of expanding both outdoor and radio assets. “It is probably one of the reasons they gave me the job,” he says. The company owns 830 radio stations in the US, 240 in Australia and New Zealand and 15 in Europe, together with 425,000 panels. It sees radio and outdoor as two forms of communication that are not fragmenting, unlike TV.
CCI development director Jonathan Bass says: “People are spending more time in their cars, through increases in car ownership and traffic, which means they are spending more time listening to the radio or being exposed to posters. Both media are highly cost-effective for advertisers.”
He insists: “The strategy is not to force the two media down the throats of advertisers. It doesn’t require us to cross-sell, although we will do it if the advertiser wants it.”
European Union rules preclude the US-owned CCI from taking a controlling stake in a UK radio station. It owns 31.6 per cent of Jazz FM, and this month took control of the Katz radio sales house after CCC acquired Katz’s US parent AMFM in a deal valued at about &£13.8bn.
Katz handles about six to eight per cent of the UK’s radio sales in terms of revenue. By March next year it will be fully integrated with CCRS, which already handles Jazz FM’s sales. It is understood that the merged radio sales division has ambitions to handle 25 per cent of the country’s radio advertising sales in two years and to achieve this it must start picking up sales contracts, either through winning pitches against the UK’s other radio saleshouses or through taking a stake in radio stations and with it the right to handle its sales.
It has been suggested that Goldman Sachs, the US investment bank hired by Ginger to look at its growth options, leaked the story of CCl’s interest to push up Ginger’s value, which has been put at more than &£200m. It may have worked already – Ginger group chief executive David Campbell claims the article has already generated a fresh approach from a potential bidder.
The two companies – near neighbours in Soho’s Golden Square – are working together as part of a three-way consortium with Talk Radio to bid for the next London digital radio licence.
Ginger, which owns Virgin Radio, accepts that it must join with a big media player (or float) to realise its ambitions for expansion in areas such as TV production, films, music, sport and new media.
It will be interesting to see if Jazz FM’s next set of trading results are any better than the last – for CCI to succeed in UK radio sales it must prove to the media industry that it can boost revenue for the radio assets it looks after. Then it will become clearer whether CCC’s acquisition strategy really is on the right track. The management of Ginger will be watching results closely to see if CCI would make a suitable parent for its operations.