DAB Dealt A Blow As Gcap Unveils Radical Measures
GCap Media has unveiled a “radical but realistic” set of measures to boost profits and maintain long term growth for the company, which deal a significant blow to DAB digital radio.
The new chief executive, Fru Hazlitt, confirmed the closure of digital stations theJazz and Planet Rock and the intended sale of the group’s majority stake in Digital One.
She also said the company believed that “DAB is not an economically viable platform for the company. In the short term, without massive investment and improbable changes in government policy, it is not a platform in which we can grow.”
Hazlitt said: “GCap Media will become a leaner and more dynamic company focused on maximising the revenue and profit potential of five key brands on FM and broadband, the platforms that we believe consumers want and which offer the greatest growth opportunities.”
GCap has agreed in principle to sell its shareholding to operator, Arqiva, and said in a statement that while the consideration for the sale is nominal, it has also agreed in principle that “the “Group will terminate at no cost the transmission contracts for all our capacity on Digital One except Classic FM”.
As well as closing down national digital stations theJazz and Planet Rock, GCap is selling Xfm analogue licences in Scotland, South Wales and Manchester, retaining only Xfm London.
The company is also scaling back investment in its classic hits network Gold to “an appropriate level”.
In addition, Capital 95.8 will have a “new flexible inventory policy with up to nine minutes of advertising per hour”.
Hazlitt’s package of measures is aimed at winning over shareholders in the wake of privately owned Global Radio’s £313 million bid for the company in December (see GCap Turns Down Global Radio Takeover Bid).
GCap pioneered DAB under Hazlitt’s predecessor, Ralph Bernard (see A Fresh Start For GCap With Hazlitt). Digital One became the first national commercial digital radio multiplex a decade ago.
Although DAB radio accounts for nearly 10% of all listening (see Over 16% Of All Radio Listening Now Via Digital), Hazlitt pointed out that only 4% of total listening was to digital-only stations not already available on analogue. Hazlitt said GCap had spent £8 million on DAB in the year to March 2007.
In December, former chief executive, Ralph Bernard, said at MediaTel Group’s ‘Future Of Radio’ seminar that digital radio cannot flourish unless Ofcom sets a date for switching off the analogue radio signal.
He added that there is a £10 million loss per annum on digital and the industry “won’t sit and accept that for another 10 years.”
Bernard also said that while it currently costs GCap £8 million a year to run its analogue stations, it costs £15 million to run its digital stations. “Where’s the logic in that? It can’t be sustained,” he said (see Bernard Calls For Radio Switchover Date).
The radio industry’s trade body, the Digital Radio Development has responded to today’s news, saying it “regrets the closure of Planet Rock and theJazz, but we look forward to the emergence of new national DAB only services, and the rationalision of the commercial radio national DAB provision.”
The DRDB said: “DAB digital radio is growing strongly and, as recently published receiver sales and listening figures show, remains a strong proposition for the UK radio industry, both commercial and public, and we believe the medium will emerge from this period of transition stronger and more attractive to both broadcasters and listeners.”
GCap Media unveiled theJazz in November 2006, with a national launch on Christmas day the same year (see GCap Jazzed Up With New Digital Radio Station).