Radio regains momentum

Global Radio’s 170m purchase of Chrysalis and Ofcom awarding Channel 4-led consortium 4 Digital Group the second national commercial digital multiplex have given the sector reasons for optimism that should propel it into a new phase of consolidation. Caroline Parry reports

Few in the radio industry would deny that it has been an arduous couple of years for the sector. The combination of declining ad revenues, the protracted merger that created its biggest player GCap Media, the explosion of new technology and the sheer strength of the BBC have led to commercial radio looking sluggish and conservative.

Whereas radio was once considered the “sexy” medium, it has been upstaged by online, its nimble, fast-growing rival. But a flurry of activity, including the sale of Chrysalis Radio for £170m to Global Radio – a new venture headed by former ITV chief executive Charles Allen – and Ofcom’s decision to award Channel 4-led consortium 4 Digital Group the second national commercial digital multiplex, have given the industry a much needed shot in the arm.

“Radio is on the front foot and sexy again,” declares Andrew Harrison, chief executive of industry body RadioCentre. “Clearly there is change and momentum is building.”

Racehorse tycoons
Global, which is backed by Irish racehorse tycoons JP McManus and John Magnier, is building on the momentum of its acquisition of Chrysalis, which includes the Heart, Galaxy and LBC brands, and is now assembling its team.

Last week, Richard Park, the programme director of Emap-owned Magic 105.4, announced he was leaving to join Global as executive director on the main board. He joins Global chairman Allen, chief executive Ashley Tabor – a former Capital Radio executive – and Phil Riley, currently chief executive of Chrysalis Radio.

Universal McCann managing partner Mark Middlemass says: “Global knows that it needs to come to the media top table with critical mass. With Park they have bought in a powerhouse but he isn’t just going to move there for Chrysalis.”

While it remains unclear exactly what Park’s role will be at Global, few industry observers believe that the industry veteran, who saw Magic take the number one spot several times during his five-year tenure at Emap, is planning to sit in many day-to-day programming meetings. As Global looks around for its next target, Park’s background at 95.8 Capital, when it was part of Capital Radio Group, and Emap will no doubt prove useful.

Global’s entrance into the market comes as broadcast regulator Ofcom is consulting with the industry about the future. The consultation, which closed last week, helps radio’s future development by removing some layers of the heavy regulation that governs ownership, formats and “localness”. It also asks whether it is time to set a date for analogue switch off.

The response has been largely uniform, with the industry, led by RadioCentre, calling for more radical and faster reform. The consultation suggests reducing ownership regulations, while the industry wants all rules removed leaving issues to the Competition Commission. It also says it is too early to set a date for digital switchover but calls for a “roadmap” of development so the industry can justify its continued investment.

Consolidation phase
Paul Chantler, radio consultant at United Radio, says the emergence of Global and the Ofcom review are expected to push radio into a new phase of consolidation. He explains: “We were always told there would be three phases of consolidation. The first phase was GWR and Emap building their groups with local stations in the 1990s, then came the GWR and Capital Radio Group merger, and next will be the creation of the supergroup.”

The obvious targets are GCap, Emap and Virgin Radio, according to Bridgewell Securities media analyst Patrick Yau, who adds: “Global is being created as a platform to do deals in the UK or overseas. It appears to have significant access to capital to do this.”

But he believes that its next move could be Emap’s Celtic interests, which have already been mooted for a sale, or Virgin Radio. However, he adds that Virgin founder Sir Richard Branson retains the right to withdraw the brand from a new owner.

Although Yau does not rule out a bid for GCap, which itself appears to have gained renewed confidence from the appointment of Fru Hazlitt as managing director of GCap London and Richard Eyre, former ITV and Capital Radio chief executive, as chairman elect. But Yau points out that any potential GCap buyer would have to convince the Daily Mail & General Trust, a significant shareholder in the business.

Attracting attention
While all eyes are on Global, Channel 4 and its consortium partners, which include Emap, BSkyB, Chrysalis and The Carphone Warehouse, are also attracting attention. The consortium is now setting about launching ten new radio stations with the first services, E4 Radio and Closer, a new Emap service, expected to launch next July.

Nathalie Schwarz, Channel 4 director of radio and chairman of the 4 Digital Group, believes the consortium’s role is to invest in the medium, offer “distinctive” services and “take risks”. She adds that the BBC is a “fantastic challenge” to have and Channel 4 relishes it in the same way it did when it launched at the start of the 1980s.

The Channel 4 win has been welcomed across the industry, which is buzzing at the news of ten new national stations and Channel 4’s ability to cross-promote its services. Howard Bareham, head of radio at MindShare, says Channel 4 is a “serious contender” but adds that the services will only be available on digital and will take up to four years to properly establish.

He adds: “The BBC will keep marketing over the period [as 4 Digital is launching]. The launch of ten new digital services does not mean that a the country will rush out and buy digital radios.”

John Myers, chief executive of Guardian Media Group Radio, agrees with Bareham. “The very idea that Channel 4 is the saviour of commercial radio is barmy,” he says. “The main point is that everyone is now realising that radio has a big part in the future of media.”

The radio industry has perhaps been guilty of talking itself down in recent years but there is no doubt that trading conditions have been tough. It saw revenue fall by 10% in the last quarter of 2006 alone and the whole year was down by 5%. While many of the radio groups are sounding more optimistic than this time last year, when the World Cup led to a slump across broadcast advertising, others say that the market is still “nervous” and has yet to return to growth.

Chrysalis’ Riley is confident that it can do just that and says that radio is in a “great place now”. He adds: “I hope that Global will be a key player, that the market picks up advertising steam and that there is more consolidation. These things are more in sight than they were six months ago.”

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