Tuesday, 28 May 2013

How to solve a problem like Global

Copyright: Real and Smooth Ltd.
After the Competition Commission's decision on the acquisition of GMG Radio (trading as Real and Smooth Ltd) by Global Radio, the owner of national brands such as Capital FM and Heart, the group has to sell seven stations in areas where the company would have an unfair advantage in the advertising market in those areas.

In most areas, they have to sell at least one regional station, which means one national brand will be sold or franchised to keep the other.

Most professionals and anoraks agree that Global's reported £70m acquisition is to expand the Heart brand into areas of the UK the station doesn't broadcast on FM on licences currently held by Real Radio, which should mean those stations will be kept on by Global, although there's debate if the mix of North Wales local FM Heart licences will be kept, despite cumbersome Welsh language commitments, especially on the Anglesey licence instead of the North and mid-Wales Real regional licence which has no Welsh commitments and already has an agreement with Ofcom to network with the South Wales Real station as it'd mean existing listeners would be forced to retune.

Another issue is the Smooth regional licences, do Global sell the brand on, franchise it  or merge with existing brand Gold, the oldies/classic hits station which also caters to over 45's, but with an older musical sound in comparison to Smooth?

In the North West, Smooth is the most listened to regional station with under a million listeners in a market place saturated with AC and CHR formats, yet in London, the UK's most competitive market, the station bobs around the 400-600k listener level while their nearest competitor Magic 105.4, owned by Bauer Radio has under 2 million listeners.

Suggestions have been made that Smooth could be re-focused (for the third time mind) as a Soft AC station to directly compete with Magic, yet the brand has been used as a classic soul, later refocusing as an Easy Listening station and hasn't made a dent in the market, this would be a waste of resources, which is why I personally feel that a straight FM simulcast of Gold would be the best use for this frequency as it'd cut costs considerably and bring a new format to London's FM marketplace.

Smooth could still be kept on as a brand in London by flipping the formats of Gold and Smooth so that the latter moves to Gold's 1548 AM frequency.  This would allay any fears of a lack of a London presence in the national advertising market to any investor interested in their regional FM licences.

Capital is a likely candidate to be franchised off in areas where the CC has asked Global to consider to sell.  Who'd want to buy them though if a company can't change the programming output? Orion, who acquired a Heart franchise in the East Midlands and Gold in the West Midlands eventually quit as a franchisee to go it alone with Gem and Free Radio 80s.   A consortium may come forward to buy those licences from Global to 'hold' them before the rules change again which would let them buy the stations again, but do Global want to be around in ten years when they surely have a strategy to sell the group altogether to an overseas investor?

What happens next?

Global have another 11 weeks at time of posting to inform the Competition Commission their plans to sell or franchise the stations in each area.

It's also very likely that we'll see a decision to sell classic rock station Real Radio XS in Glasgow and Manchester although the CC didn't include the Scottish station on the for sale list as Global have no direct brand to merge the licence with.

Whatever happens, the radio landscape will be different, even if a brand continues with a new owner with no change in programming output.

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