A year of reckoning for traditional media

James%20Murdoch%2C%20News%20CorporationMedia owners faced a double-whammy in 2008 as they struggled to cut costs and faced the threat of advertisers slashing budgets.

Radio, perhaps, saw the most significant change when Global Radio snapped up GCap Media, owner of 95.8 Capital FM and Classic FM, for £375m in March. It came despite a major cost-cutting plan announced by then GCap chief executive Fru Hazlitt. The ambitious plan included handing back its majority share in the national commercial digital multiplex, but it failed to convince shareholders. It later brought in Stephen Miron, managing director of The Mail On Sunday and Mail Online, as chief executive.

Hazlitt’s announcement about Digital One sent digital audio broadcasting (DAB) into crisis, as operators admitted that they were struggling to make money out of new stations. In October, Channel 4 was forced to pull plans to launch three digital stations and, by December, the 4Digital Consortium was understood to be planning to dissolve and return the Digital Two licence to Ofcom.

The Times of India became the sector’s newest entrant after acquiring Virgin Radio from Scottish Media Group for £53m. In September, the station was relaunched as Absolute Radio.

The newspaper sector also faced much upheaval over the year, with cost cutting and redundancies announced across the board. In June, News International announced a restructure of its business, led by James Murdoch, who joined as News Corporation chairman and chief executive, Europe and Asia at the start of the year. He streamlined the management structure by merging News Group Newspapers and Times Media, resulting in redundancies.

The Independent News & Media also restructured management in April, but further doubt was cast over the future of its titles in November when it announced that it would be sharing the office space with Associated Newspapers as part of its cost saving measures. Meanwhile, The Daily Mail & General Trust looked to save a whopping £100m.

Trinity Mirror has been hit hard by the declining ad market too and, also in November, said further cost savings of £5m were needed on top of the £20m already announced.

Savings in TV cost jobs

A similar picture emerged in TV as the biggest commercial operator, ITV, outlined plans to reduce staff by nearly 20% – or 1,000 posts – and save £40m a year by cutting back on regional news.

In November, Channel 4 announced it would make 15% of its workforce redundant as part of a programme aimed at saving up to £100m over two years. Group marketing director Polly Cochrane announced she was leaving after ten years.

It was not all bad news at ITV. In February the Office of Fair Trading announced a review of the Contract Rights Renewal mechanism. Meanwhile, executive chairman Michael Grade, having spent much of 2007 assembling a team of “Galacticos”, was embarrassed when its star signing, Dawn Airey, managing director of global content, defected to rival Five in April and effectively ousted Five’s then chief executive Jane Lighting. Airey joined the channel in October.

ITV, Channel 4 and BBC Worldwide ran into problems with proposed joint venture Project Kangaroo, after an ongoing Competition Commission review halted its summer launch. The venture later lost its chief executive, Ashley Highfield, after just four months when he was poached by Microsoft to head UK consumer and online operations.

Microsoft made a number of ill-fated approaches to troubled search rival Yahoo! but was rebuffed each time. Yahoo! attempted instead to orchestrate a revenue-sharing deal with Google, but the deal was later abandoned due to competition concerns on both sides of the Atlantic.

While early optimism that the UK would not slide into recession led to predictions that ad revenue would grow by 4%, Group M ended the year by predicting a drop of 3%, and a further 5.6% fall next year. With predictions of a worsening picture in 2009, media owners can expect even tougher times ahead.

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