Feeding Global’s Cash Cows

So the worst kept secret was finally let out of the bag today, when Global announced that it is to re-brand the Galaxy Network, Trent, Leicester Sound, Ram FM and Red Dragon as ‘Capital FM’. For Global, this gives them three strong national networks – Heart, Capital and Classic.

From a radio fan point of view, it’s a shame that these stations will become predominantly networked with their sister station. Trent FM, as leader of the now defunct Hit Music Network did a great job as a local station, with lots of opportunities for new talent and clever localised networking to the other sites. However, the changes, from a business point of view, are a good way for Global to maximise the return on their investment. The Tabors took a big gamble on the acquisition of Chrysalis and GCap and they will now extract their rewards.

The acquisitions were expensive and made at a time that pushed the price up. However, in another way the timings were excellent as on the horizon was massive deregulation that would primarily reduce the fixed costs of the business.

The ‘Heartification’ did two things; it reduced the need for many roles in the business and let it shut down many costly buildings. Lower billed clients are being moved to a self-service system, execs that are left will concentrate on higher value clients and national has picked up significantly since the re-brand (though the cut in COI spend has hit the group).

The ‘Capitalisation’ will do a similar job. Indeed you can read the Ofcom rules on regional stations and argue that North East and Yorkshire could be collapsed together with no local programming needed at all. The success of the Heart re-brand has obviously buoyed on the group who over the coming months will be able to argue for bigger super regions of stations within their network. In the Independent, Richard Park made no secret of his desire to network Breakfast. We are merely part way through where all of this is destined to go.

The group’s other stations –Gold, XFM, Choice and LBC – are mere anomalies in the plan. Gold, XFM and Choice are run on shoe-string and co-managed within the business. LBC acts as a news hub for the group so serves a dual purpose, its recent ratings success, driven by a very strong breakfast show, is a nice bonus.

We’re just six months away from the third anniversary of the GCap acquisition. In those three years Global has managed to do what many leveraged buy outs don’t achieve – and that’s develop a clear exit strategy. They have, at least, halved the costs of the business, they have grown revenue and they have created three attractive natioanl radio assets in Classic FM, Capital Network and Heart Network.

They’ve also minimised cash out and investment in the future. Online has been curtailed, digital is outwardly supported, but without any actual commitments – there is little interest in anything outside of analogue radio.

As long as the economic recovery continues, within a year, they’ll have a plump business ready for a flotation or trade sale. That’s providing of course two things. 1. That the growth in ‘digital’ (used in the broadest of terms) doesn’t happen at a faster rate. 2. That the market or an organisation is willing to spend the right amount of money to acquire their business.

The danger for Global, once again, is all in the timing. They have bet the farm on making their analogue cash cows look very attractive. There isn’t much else left in the shed should no one be interested in them at market.

9 thoughts on “Feeding Global’s Cash Cows”

  1. Like you said its the worse kept secret, although i did wonder if they where going to call it the galaxy network instead (although not sure what they would do about capital as a station).

    It will be interesting to see what happens in the next few quarters with their numbers, and also their local advertising as its going to effect it one way or the other.. since the full ‘Heartification’ i have heard of a few local businesses in my home town (colchester, essex) saying they wont advertise on heart any more as they dont feel its local to them any more. But they should really see results for the regional and nation advertising and super regional or even a full national commercial station is the way forward and has been a very long time coming.

    Yet again there is the sadness of yet more staff having to go, even less opportunities for new people to come in, but again this is also a possible opportunity for local stations / community stations to take advantage where they can on the localness front.

    I like you and many others await to see what happens..

  2. Tabor said: “I’m afraid to say there are not 33 good mid-morning presenters in this country and there are not another 33 good afternoon presenters. I wish there were, but there aren’t.”

    This was taken from the Guardian this morning. It is the most disrespectful reason ever given to justify networking I’ve ever read. So, he’s saying if there was enough talent they wouldn’t do it, therefore it’s only because there aren’t the people, nothing to do with saving money.

    Trying to ‘blame’ small cogs in a big wheel for their decisions isn’t brave, it’s a very cheap shot.

  3. Another thing to consider here is that they are closing the Leeds Network hub, granted they are offering London based jobs to those affected.

    But it means that more radio jobs are moving to London…

    Since the BBC is moving a lot of Media staff to Manchester, why the move to London for “Capital”. So like you mentioned about timing…. I think its a bit off.

  4. Rebranding Red Dragon FM to Capital is commercial suicide – the plan to rebrand Buick to Chevrolet in Canada was soon dropped after people complained.
    Red Dragon needs to be 100% standalone.

  5. Global aren’t just milking the cash cow here. They’re butchering the cow for the beef and selling it on to the supermarkets. Not even the local butchers will benefit from this move.

  6. But even if the local butchers’ won’t benefit straight away, it’s up to those stations still genuinely dedicated to local programming to step up their game and fill the void. There are plenty of opportunities to be had in local with the vacuum formed by networking en-masse.

  7. @ TEDPITMAN

    I would have thought that Capital is the perfect name for Cardiff. You can hear the announcements now “Live from the capital of Wales this is Capital FM”

    It worked with Capital Gold for several years.

    The East Midlands, Yorkshire & North East I’m less sure about.

  8. Red Dragon FM is a standalone station, and should not be a Capital one. It needs to be 24-7 local, apart from the Top 40 Show.

    Previous networking was hit-and-miss, remember the Today’s Best Mix era?

    Global should sell off Heart 106.2 to UTV or Lincs FM, it would be good for them.
    After all, they have Capital, offloading Heart would give UTV or the Lincs FM Group a presence in London.

  9. Well, shouldn’t Heart 106.2 go to UTV or Lincs FM then? Global don’t need Heart 106.2 in London, they’ve got XFM, Capital and LBC – and Heart 106.2 would be perfect for Lincs FM or UTV Radio to buy out.

    Someone discuss it at Digital Spy!

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