Will SMG sacrifice Evans for Virgin?

Virgin Radio’s popularity is waning, despite good profit expectations. If owner SMG is serious about radio, it may have to ditch the station’s star.

The UK media likes nothing better than to give its former darlings a good kicking when they eventually, and inevitably, fall out of favour.

This year’s fall guy is the former “saviour of British youth broadcasting” and Ginger creator Chris Evans.

Channel 4’s axe has fallen on Evans’ long-running TV vehicle TFI Friday, whose final run will end this Christmas. And his Virgin Radio breakfast show has lost 100,000 listeners over the past quarter, according to the latest Rajar listening figures. He still attracts 2 million listeners, but in 1998, at his peak of popularity, Evans had 4.7 million listeners a week.

Yet Evans’ decline in popularity does not appear to have dented advertisers’ faith in Virgin Radio.

Next week Ginger Media Group’s (GMG) owners, Scottish Media Group (SMG), reports its half year figures. Their publication comes six months after SMG bought GMG for &£225m; it is the first time GMG’s figures have had to be published.

City analysts predict that SMG will show strong growth. Virgin Radio’s revenues are expected to be up between 25 and 30 per cent, with two-thirds coming from dot-com advertising. This means that underlying growth, not including dot-com advertising, would be in line with Capital Radio’s, which reported a half year revenue up 21 per cent.

MindShare head of radio Howard Bareham says: “There’s not another national station which offers advertisers a national presence with the 25-34 age group, for a relatively low capital cost entry.”

Bareham continues: “Gone are the days when people bought Virgin Radio for Chris Evans. When he took over from Branson he was a godsend and reinvented the station through his own personality, but now the management need to do something to refresh the station.”

Virgin Radio could build new profiles of listeners or even change its name, he suggests.

Another media buyer says: “There is still huge demand for the station, but it will start to tail off because it is losing listeners.”

SMG director of corporate affairs Callum Spreng says the company is unable to comment on speculation ahead of announcing its results next week.

When SMG acquired GMG there was much speculation about the Scottish group’s intentions. Was the buy-out an attempt by SMG to protect itself from takeover by Granada? Was it the beginnings of an SMG radio empire? Or part of SMG’s cross-media expansion plan?

WestLB Panmure analyst Paul Richards says: “At the time the acquisition price seemed expensive but increasingly it looks like SMG got a good deal.”

To put the Virgin deal into perspective, small, regional Scottish radio station Beat 106 was bought by Capital in June for &£33m. With a weekly reach of just 360,000, Beat makes the Virgin deal look great value – &£225m for a national station with a weekly reach of 3.8 million listeners.

If SMG is serious about building its radio business it needs to expand by buying other stations. But there are few up for grabs, and it faces stiff competition from the other big radio groups.

And, as Richards adds: “Unless it buys top-class assets, acquisition could dilute the quality of what SMG already owns.

But insiders say that if SMG is serious about radio, it will need to give Virgin Radio a major revamp, bringing in new talent and possibly a major star to replace Evans, and this will not happen while Evans is there.

Getting rid of Evans, who made &£75m when he sold the station to SMG two years after buying it from Richard Branson, would cost SMG dear. A Virgin Radio insider estimates it would require about &£40m to buy Evans out of his contract, which runs until Christmas 2002. A GMG spokeswoman says: “SMG has always said it is committed to Chris [Evans] and vice versa.”

Evans’ breakfast show comprises only three hours a day of Virgin Radio’s programming, albeit the most high-profile slot. But the decline in listeners for Evans’ breakfast show reflects a general trend at Virgin Radio.

Virgin Radio’s total listening figures (comprising the London and AM stations) have plunged 381,000 over the three months to June 25. Over the same period the station’s share of listening is down from 2.7 per cent to 2.3 per cent and average hours spent listening to the station have dropped from 6.6 per listener to 6.3.

It’s not all cheer over at Ginger Television either, with the demise of TFI Friday. Earlier this year, the Independent Television Commission’s annual report described it as “no longer the attraction it once was,” though Channel 4 head of entertainment Kevin Lygo insists: “We look forward to continuing our long association with Chris Evans into next year and the future.”

Ginger TV’s National Lottery show, Red Alert, with Lulu flopped spectacularly, though its music and gossip youth show, The Priory, featuring Zoe Ball and Jamie Theakston, and its spin-off TV series of the film Lock Stock and Two Smoking Barrels may fare better. But within the TV industry, rumours abound of a staff exodus from Ginger TV.

Virgin Radio is undoubtedly the prime asset of Ginger, but SMG needs a station revamp and a radio growth strategy if it is to continue seeing the kind of revenues it expects to announce next week. How essential Evans is to SMG’s plans – and SMG to his plans – remains to be seen.

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