How Do You Solve A Problem Like Consolidation?

ls

Image: Nick Jeffery

So, a few issues for Global Radio as the Competition Competition decide the group need to dispose of a number radio stations:

East Midlands: Smooth OR Capital
Cardiff and South Wales: Real OR Capital
North Wales: Real OR Heart
Greater Manchester and the North-West: Capital OR Real XS with either Real or Smooth
North-East: Real OR Smooth OR Capital
South and West Yorkshire: Real OR Capital
Central Scotland: Real OR Capital

I have some sympathy for Global as I’ve been in a similar, albeit smaller, position when I worked at GWR and we had acquired two Vibe FM radio stations into a new joint-venture with SRH. We, too, had to go through lots of regulatory hoops, and we also lost. Having to sell on the stations.

Strategically, the worst thing about these deals is the sheer amount of time they take up. It’s incredibly distracting and you end up taking your eye off the ball of loads of day to day business issues.

With a deal the size of the GMG acquisition, I imagine one of the issues was there were so many potential scenarios about what the CC may say. This means that you have to have a number of plans – again something that takes up a lot of time.

Now they’ve got the decision, there’s also lots of choices to make.

Are they after the most audience, the most revenue or true national coverage for their brands? For example, it’s probably a sensible guess that they would like a near-as-possible s national station in Heart and then a what-they-can-manage network with Capital. So, probably Smooth will take the brunt of disposals. But then there’s something like Smooth North West which rates really well. It’s not an easy pick.

The other thing to think about, is not to assume that they merely want to own the most stations. The point of having decent national networks is that Global become the defacto dominator in national sales. And to do that, you don’t necessarily need to own all the stations. You just need the national sales contracts.

I would have thought Global’s strategy would be to keep the stations where they have the biggest opportunity of upside – stations that have strong local and national revenue potential and those that occupy a broad format. Therefore, I would have thought the main aim was to retain Heart as the primary network.

Which would suggest the following green ones are keeps…

East Midlands: Smooth OR Capital
Cardiff and South Wales: Real OR Capital
North Wales: Real OR Heart
Greater Manchester and the North-West: Capital OR Real XS with either Real or Smooth
North-East: Real OR Smooth OR Capital
South and West Yorkshire: Real OR Capital
Central Scotland: Real OR Capital

But then, I even look at that list, and think “would you let Capital Yorks go”?

None of this is easy.

Then you think about who’s around to acquire the stations that you dispose of? And at what price? It’s a fire sale. Bauer can’t really buy much (not that they would want to sell to them). The other radio groups left in the UK haven’t really got deep pockets.

The last thing you would want to do is crack open your national networks, sell them for little money AND not necessarily be able to keep your national sales operation. Whilst you may want to ‘licence’ the brand out, the other UK operators might not want to play ball AND they know that you’ve got only 12 weeks to do the deal.

The deal you want is for a White Knight to come along. You want someone who will buy all of those stations, get a brand licence off you, and keep your national sales contract. Maybe, perhaps,  someone from a different country? Indeed, the selling price – what £20-30m max – isn’t actually that much in the grand scheme of things. Perhaps a new buyer wouldn’t even have to pay cash?

That way, it doesn’t matter, really, what you sell, as you still achieve your main aims – being the number one sales point – and earning as much from the stations you own as possible.

Warehousing

Some consider this sort of thing to be a warehousing deal. ie you’re getting round the rules, whilst someone ‘looks after’  them for you whilst you wait for the rules to change.

In reality, these are actually very difficult to accomplish. The problem is you don’t know how long it will take to change the rules, it could be a long time. If that’s the case the acquirer really needs to be building the business – whatever that is.

I was involved a bit when UBC bought a load of Classic Gold’s off of GWR, though GWR still had a stake in the new acquisition vehicle – CGDL. Whilst some people regard this as a warehousing job, in reality, views diverged quite regularly. The UBC-end would very much do what they wanted to grow the business for their shareholders. And as a quoted company – that’s clearly their prerogative.

What’s happened with Orion is another interesting example. They brought all the stations that Global had put up for sale, keeping Global’s national sales operation and (for a while) keeping the Heart brand too. The market shifted quite suddenly in the Midlands (Capital rebrands etc) and Orion clearly had a rethink about what would serve them well – swapping Heart for Gem. I also suppose it must have been a little confusing for regional advertisers to argue against Heart in the West Midlands, but be enthusiastic for it in the East Midlands! But they’ve still kept their national airtime contract with the big G, so it must be doing well for them. Again – once you’ve sold the stations it’s very difficult to keep any influence.

Summary

Well, it’s all a bit of a mess. Particularly for the staff at stations where there’s some question marks. But, if they can find one, I think we’ll see a single buyer (existing or more likely a new entrant)  who’ll keep the stations part of the Global-led brands with Global selling the national airtime. This should cement Global’s national brand proposition – even if they don’t own the stations.

I would also expect something in the deal that aligns the objectives of the two long-term. You can’t, truly, roll out a national brand if your partners decide against it later…

Whilst some will say “they had that already by selling GMG” – they didn’t really. Converting Real to Heart is a big win for the national plan and revenue growth. A Global-led Smooth network also has a good chance of building on GMG’s groundwork in relation to audience – again providing more national ad opportunities for Global Sales.

In addition, Global get nice new Smooth stations in London and the West Midlands that they’ll be in a great position to grow local revenue from. Plus, in London, I imagine Smooth is going to be re-positioned to give Magic a bit of a kick in! Remember – a declining Magic means Capital or Heart is far more likely to go number one!

I think this year is going to be a busy one for stations changing hands – this is, sadly for the people involved, just the beginning.

The Wanted & Global

A funny article just popped up on The Guardian’s website talking about playlisting in general and specifically that Global (owner of pop radio stations) play The Wanted (an artist managed by another company in their group).

The article touches on payola (paying cash/providing services to get songs on the playlist). In my experience most stations wouldn’t consider playing songs that they think would turn people off their radio station – even for cash. Where the line does get blurry is when events are involved. Whether it’s BBC or Commercial, when a radio station organises a big pop event, they’re guaranteed to up the plays of the artists being featured. Radio 1 often ups the plays before they announce the artists for the Big Weekend, so you can always tell who’s going to be playing.

Probably the closest stations get, is from ‘must carry’ acts for events, ie if you want a Rihanna you have to take a lesser artist on the rosta. That also might result in a few extra plays on the station for that artist.

In the article there’s a mention of the Broadcasting Code in relation to Global’s playing of The Wanted:

No commercial arrangement that involves payment, or the provision of some other valuable consideration, to the broadcaster may influence the selection or rotation of music for broadcast.

UPDATED: Jimmy Buckland writes to tell me ‘undue prominence’ has been removed from the Code. Serves me right for some late Sunday googling. You can tell I don’t really do regulation any more…. 

I’m not sure if this is relevant to Global. I think the question is probably less about the above but perhaps about ‘undue prominence’.

No undue prominence may be given in any programme to a product or service.
The Code goes on to say:
Undue prominence may result from:
the presence of, or reference to, a product or service (including company names, brand names, logos) in a programme where there is no editorial justification; or
the manner in which a product or service (including company names, brand names, logos) appears or is referred to in a programme.
They’re probably fine on 1, though the fine line is going to be 2. When does a DJ talk up for a song become undue prominence?

Undue prominence is a difficult thing though.

Stations could face the same charge about promoting a station website. Or even someone else’s website. Twitter perhaps, or maybe Facebook?

Selling your own products is nothing new though. We’ve already seen radio stations (and TV channels) named after brands –  Saga FM or the Audi Channel, anyone? Should Audi have had to report on Ford’s cars for balance? What about Sky’s cross-promotion of premium channels on its free to air or basic services?

At the end of the day, Global used their own platform to promote their own band, a band that if famous and successful would be completely on brand for their radio stations. Catch-22. Their first ‘hit’ was generated by significant airplay on Capital/Galaxy and Heart (with some late spot-plays from Bauer) alongside significant online support from the Global websites. The buzz generated by the ‘unexpected’ hit then guaranteed further airplay on other commercial stations and for the first time plays on Radio 1. They’ve gone on to be a successful, albeit odd-looking, boyband.

Surely it would be crazy if radio stations couldn’t use their own channels to promote their own activities? After all, if BMG were to a run a radio station, no one would be surprised if they played their own artists would they?

Perhaps if there has to be some transparency all a station should have to do is mention these activities in their Public File?

I leave the final comment to Popjustice

[blackbirdpie url=”http://twitter.com/#!/Popjustice/status/125650882154086400″]

 

Being Compliant

I thought i’d have a quick look at what GWR Bristol, sorry, thisisheart in Bristol was playing to see if they’d become compliant after Ofcom’s yellow card. In other words, were two thirds of their songs from the last two years? This was the 10am hour:

GWR Bristol

That’s seven out of eleven songs from the last two years, a 64% hit rate. To me that would seem pretty much compliant! And only one Take That song as well.

Not Being Contemporary Enough

Earlier today Ofcom issued a yellow card to GWR Bristol for having drifted out of its format musically. In case you haven’t heard, the majority of Global Radio’s local stations are being turned into Heart. This is being carried out in three phases, with the second phase due to kick in a week Monday (and which will see GWR Bristol itself become a Heart).

Whilst the name change is the big thing, all of the stations actually started taking the Heart music log at the end of last year. Having had a listen, the daytimes basically follow London with a couple of extra contemporary tunes thrown in. And this is where all the trouble’s started. Global (GWR’s owners) are trying to keep all of the Heart’s roughly similar, so they’re keen not to deviate too much from the London log.

The problem is that Heart was originally licensed to be a complimentary station to the CHRs that existed (in the West Mids and London) and therefore trying to Heartify a load of CHRs isn’t really in the spirit of the format. This GWR yellow-card is the first time that Global have been called on it. Interestingly in the judgement Ofcom make specific reference to the fact there’s a similar problem across the rest of the Heart and soon-to-be-Heart network. In other words GWR Bristol is not an isolated case.

To keep Ofcom happy Global has to up the contemporary factor (that’s songs released in the last two years) to about 2/3rds of the output in non-specialist programming – which is basically 6am to 7pm (less a time tunnel) in weekdays. This is quite a significant change from the ‘Heart format’  and will neccessiate a little more investment into ‘Heart network 2’ – something Global are not very keen on doing.

What is odd is Global’s response where they’ve made this weird statement:
“GWR Bristol was asked to supply music logs to Ofcom by today, Friday 13 March. The requested information was supplied by yesterday, 12 March. Ofcom’s decision was made without reference to either the station, or by talking to its owners, Global Radio,”

On the music logs front, well, you don’t actually need to look at the logs if you just listen to the radio station, do you? Ofcom’s got Radiomonitor just like everyone else. And if I was Ofcom issuing quite a group-wide statement, I think i’d rather trust what was on-air rather than a list faxed through from Mark in London.

And, to be honest, Ofcom don’t need to talk to Global. Much of this thinking was explained when Ocean FM got it’s musical wrap over the knuckles. Plus its something that pretty much everyone in the industry’s been talking about. The main danger, which happens when you’re in a big company, is arrogance. A ‘we can do what we want attitude’.

What Global fail to understand is that if Ofcom’s gone through relaxing significantly it’s rules – then it’s going to defend what it has left. The biggest failing is whoever thought they could get away with 47% rercurrents – if they’d had 60% they probably would have got away with it – and that would of been probably one (maybe two) extra songs an hour. Now they’re stuck with having to increase their contemporary output from 47% to 66%, making Heart a much less focused proposition and having Ofcom on their backs. As a yellow-card’s been issued it’s much easier for Ofcom to keep monitoring the situation rather than have to wait for complaints.

The most interesting thing, however, is Ofcom’s date that GWR Bristol (and the other network stations) must comply by – March 23rd. The date in which phase two of the Heartification starts, if that doesn’t shown Ofcom’s intent, I don’t know what would.

Global Radio Buys GCap Media

They’ve been after a new radio group for ages and finally they’ve found got one. Global Radio’s offer has been endorsed by the Directors of GCap Media and recommended to the other shareholders.

What does this mean? Well if the shareholders accept it (which they are very likely to do) Global will be the new owners probably sometime in June. However they won’t be able to control the company directly until the OFT/Competition Commission agree the acquisition. This could take three months from now to be agreed which would mean they’re not properly in charge until July/August.

Does this mean GCap will continue with Fru’s ‘strategy‘ in the meantime? Unlikely. Global are likely to have put a halt to most of the major transactions. I think it’s safe to say Capital Life and theJazz will cease tonight, whilst the regional XFMs and Digital One are likely to stay in the group. Planet Rock’s a bit more interesting. I believe there’s a number of parties who would still like to buy it, but will Global keep it? To be honest, I think it’s unlikely, they’ve got enough brands to be getting on with and probably will like another paying tenant on Digital One.

More Global thoughts here.

What Global Does Next…

This coming week will probably be the last for GCap Media as Global Radio agrees the final terms to acquire the “belegaured radio group” (copyright every newspaper).

Whilst traditionally it’s the acquiree that feels the brunt of any changes or cuts, the unique nature of the takeover creates some interesting questions. First and foremost, GCap is a much larger entity than Global and not only in audience ad revenue terms but in numbers of staff and broadcast locations.

Global Radio is quite a compact radio group, two main analogue brands – Galaxy and Heart – with some key operations co-located like Heart and the LBCs in London and Galaxy and Heart in the West Midlands. GCap on the other hand is spread across over 40 different locations with large group functions based in London, Bristol, Reading and Nottingham. Indeed, whilst some of GCap’s systems are a little confused, they are at least geared up to operate across multiple stations and radio brands and will probably find it easier to add the Global stations onto, rather than try and shoe-horn 50 stations into the ex-Chrysalis systems.

Continue reading “What Global Does Next…” »

Bauer Buys EMAP Radio (and some magazines too)

No, not Jack Bauer, he couldn’t buy anything as he’s in jail. H Bauer, the German media bods have bought Emap’s radio and magazine arm as well as their shareholding in the Emap-C4 joint-venture Box TV (that runs all the music TV channels). The radio side was valued at £422m.

The deal’s bad news for lots of people who hoped they’d be the winner. As well as a load of VC money with various people like Tim Schoonmaker and Phil Riley fronting it, Global Radio (the operators of Heart, Galaxy and LBC) are going to be a bit miffed about their loss. Global was created as an organisation that would drive consolidation and extract value from new scale. Instead they’re now at risk of being sidelined and they’re going to have to do a deal or they’ll probably be flogged off to someone like GMG. New pants time at Bramley Road.

We’re also going to have to find out what H Bauer’s view is on things – from digital radio to localness, their involvement is a wild card for the radio industry. Or have they just acquired these assets to sell them on to someone else. We’ll have to wait and see.