Virgin Radio chief will face rocky road ahead

When John Pearson hands over the reins next year, the new chief faces a troubled future of disputed listening figures, encroaching competition and the prospect of a buy-out. Caroline Parry reports

Since Virgin Radio’s much-publicised launch more than a decade ago, the dramas that have unfolded inside its walls have tended to attract more attention than its programme output.

First there was the high-profile sacking of the station’s maverick breakfast show host and former owner Chris Evans in 2002, followed by his unfair dismissal court case and Virgin’s counter case, which it ultimately won.

Then Virgin Radio decided to speak out about its problems with Rajar and the sample sizes it uses to measure audience figures, just as the body’s measuring systems were being criticised and put under the microscope.

Now Virgin faces increased competition for its place as king of the rock stations from new brands such as Capital Radio Group’s Xfm, EMAP-owned Kerrang! and digital-only Planet Rock. In addition there are questions over the station’s ownership as the industry moves into a period of expected consolidation.

It comes as no surprise then that John Pearson, chief executive of SMG Radio, which owns Virgin Radio, has decided to quit after 12 years. He says he wants to change his work/life balance. He admits that his time at the station has never been dull: “Those issues are part of the appeal of the job and in a perverse way have made it one hell of an experience.”

Pearson plans to take next summer off before considering new roles, but he will remain at Virgin until next April to help with a smooth handover to his successor.

SMG is adamant that it has no plans to sell Virgin Radio, which it acquired in 2000 for &£225m from Evans’ Ginger Media Group. The company maintains that it is investing in its future through spin-off digital stations, such as Virgin Classic Rock, and regional licence applications. But one City analyst believes that it will be the future of SMG’s television interests – Grampian and Scottish Television – which will eventually dictate its future.

He says: “It seems most likely that ITV will buy SMG’s TV interests or it will take over SMG and sell off the parts that it doesn’t want.” These non-core assets include Virgin and the group’s outdoor and cinema division.

ITV is unlikely to make a move for at least a year, he says, but this has not stopped speculation about in whose hands the station will finally end up. Chrysalis Radio, owner of Heart and London talk station LBC; and Jazz FM-owner Guardian Media Group (GMG) are seen as the likely buyers. It has also been reported that Evans’s agent, Michael Foster, is trying to raise the capital to buy the station. Another City analyst says a Chrysalis acquisition of Virgin would be a good fit because they have similar cultures and the Virgin rock format and male listening bias would fill a gap in Chrysalis’s portfolio.

Such speculation means that any incoming chief executive will have the threat of acquisition hanging over his or her head from day one. Chrysalis Radio chief executive Phil Riley believes that could put off potential candidates as they will wonder whether it is a good job to take.

But SMG denies this will be a concern for potential candidates. SMG director of corporate affairs Callum Spreng says: ” This is one of the most high-profile jobs in UK radio so there will be no shortage of candidates and there should be no concerns about the future.”

Indeed, as one senior radio industry player points out, there will be no shortage of available talent as a result of job losses from the proposed merger between Capital and GWR. Among the contenders, perhaps, will be former EMAP Performance chief executive Tim Schoonmaker, who is a free agent again after leaving Odeon Cinemas earlier this month.

The industry insider believes that although there are many talented people at Virgin and SMG, Pearson’s successor will be an external appointment.

A radio industry insider who has worked with Pearson says the station would benefit from a new chief executive with a programming background, something Pearson lacked. “To Pearson’s credit, he retained some good talent in the company, such as sales director Lee Roberts and station manager Steve Taylor, but he is difficult to work with and has a record of losing programming controllers.”

But others describe Pearson as an affable character and “very personable”. One radio buyer says he has been both a good figurehead for Virgin and a good manager. In fact, Spreng says that SMG would prefer Pearson not to leave but that he has made up his mind. Both SMG and Pearson have vigorously denied suggestions of disagreements.

Even without the threat of takeover, Pearson’s replacement faces many challenges. The radio industry insider points out: “Virgin Radio isn’t in the most wonderful position it could be and it seems to have lost its way over recent years. It has not won any new licences and the number of listeners through the AM frequency is in decline, making it vulnerable, particularly as digital has not become mainstream yet.”

The station also has problems with Rajar. Pearson spoke out at the start of this year about Rajar under-representing its core audience of men aged between 25 and 34 years old. This followed a series of big rises and drops in its audience. For instance, Virgin’s listening figure fell by 16 per cent in the fourth quarter of 2004 and its share dropped from 2.6 per to 1.8 per cent on the previous quarter.

Both Rajar and Virgin say that steps are being taken to address this issue but it puts the station, advertisers and media buyers in the awkward position of not knowing how reliable the figures are. MindShare head of radio Howard Bareham says: “There is an issue and Virgin’s figures are notorious for going up and down. But if its audience is down then its sales are down. I think that Virgin was right to raise the issue and discuss it openly.”

The incoming chief will inherit stable programming and a settled breakfast slot, featuring DJs Pete & Geoff, but will have to settle key issues such as audience figures speedily. Moving on from these issues, the major challenge will be the battle for listeners and keeping the brand – once the new kid on the block – fresh and exciting, despite its advancing years.

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