NewsLine Column: Radio Looks At A Consolidated Future
Recent weeks have seen much discussion of how the Communications Bill will affect TV- the licence fee, regulation and the digital switch over. However, the Bill will also have huge implications for radio, as Gareth Jones, assistant editor of MediaTel’s NewsLine, outlines here.
Consolidation was the hot topic at last week’s Radio Festival in Cambridge, which saw some of the industry’s key players gather to discuss the implications of the Government’s recently published draft Communications Bill.
In its current form, the Bill, which looks set to become legislation next year, will radically alter the face of the UK’s commercial radio sector. The proposed relaxation of the media ownership regulations and the abolition of the outdated points system will mean that a minimum of three commercial radio groups, rather than the current 7, will be able to control the entire market. This will undoubtedly open the floodgates to a plethora of possible mergers and acquisitions.
The prospect of hostile take-overs is still some way off, but consolidation is very much on the horizon and some of the UK largest commercial radio groups are already rumoured to be slimming down for the post Communications Bill shake-up.
Analysts are predicting that the Daily Mail’s parent company DMGT will move to take over GWR, a company in which it already owns a substantial shareholding, while Virgin Radio’s owners SMG could well merge with Scottish Radio Holdings. The draft Bill would also clear the way for non-EU companies to buy into the UK’s commercial radio market, meaning that RTL would be free to move on Capital Radio, an option which has received so much speculation that it must at least be considered a possibility.
The benefits of consolidation are clear – allowing companies to merge will significantly reduce their operating costs, meaning that extra revenue can be ploughed into programming. The theory is that better quality programming will help commercial radio to increase its audience share, thereby giving it a greater slice of advertising revenue.
Opening up the market to non-European investment also looks set to give the industry a much-needed shot in the arm. Within two years some of the world’s most powerful corporations, Viacom, Disney and Clear Channel Worldwide to name but a few, could be vying for a place in the UK market – a welcome prospect for those who believe that competition is the key to success.
However, there are concerns that reducing the number of players in the commercial radio sector will lead to a reduction in the diversity of services on offer. The ability to change programming has been greatly relaxed, and under the new system Ofcom will adopt a “Goldilocks” approach to regulation, working on the premise of ‘not too little not too much’. This will mean greater scrutiny on the localness of radio but also a considerable relaxation of the rules governing the format of mainstream stations.
Most have welcomed this light touch approach, viewing it as an essential aspect of consolidation. However, it is worth considering that in the US, where consolidation has long been the norm, many stations don’t even have their own breakfast presenter, with the same DJ serving five or more different audiences.
It seems then that consolidation is something of a double-edged sword. The various pros and cons, which are sure to be scrutinised over the coming months, are clear and assuming the Bill finds its way through parliament, it will be up to the industry to proceed with caution.
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