Media: Fury of a would-be venture Capitalist

Capital Radio's Richard Park may look laid-back but, as the commercial radio industry celebrates its first 25 years, he is a frustrated director of programmes. Why? It's the Byzantine nature of licence regulation and competition with the BBC.bins

Everywhere you go at Capital Radio's Leicester Square office in London, pop music is playing, loud and relentlessly. It's in the reception area, the lifts and the corridors. And the radio's on full blast in the office of Richard Park, the director of programmes, who this week celebrates 25 years in commercial radio. The predominant feeling around the place is that a quarter of a century of this industry has made it brash and confident - but also mightily frustrated.

Park's career tells the story of the successful side of the business. In October 1973, when the first commercial radio licences were awarded, he joined Radio Clyde in Scotland as a DJ and sports presenter, and remembers it as a period of liberation. "After years of nothing but the BBC, we could see the desperate need for diversity," he says. While most of commercial radio was practically strangled at birth by over-regulation, Clyde gave a voice to Scottish nationalism, and was so successful that it soon overtook the local BBC stations in listening figures.

In 1987 Park moved to London, where Capital Radio was thriving after a rocky start. He launched Capital Gold in 1988, and has presided over a maturing business, focusing increasingly on a target audience of 15- to-34-year-olds, and on expanding Capital's businesses around the country to make it one of the three big national players along with GWR, which owns Classic FM, and Emap, the owner of London's Kiss 100 and Manchester Piccadilly.

Now, though, as the parties get under way to celebrate the 25-year anniversaries of the business, and of Capital, there is a sense of looking to the future with frustration - of a need for commercial radio to break loose once more if, after coming of age, it is to be allowed to mature.

A glimpse into the in-tray of Richard Park explains why. His priority right now is connected with a radio licence that is up for grabs in the North-east of England around Newcastle, and which will be awarded by the Radio Authority this Friday. Along with 15 others, Capital has put in a bid, and would like to establish "Fun Radio", a station for children aged four to 14, that would include pop music, competitions and phone- ins alongside a remit to make technology fun and to connect the radio to using the Internet.

It's all very sound, and very New Labour with its emphasis on community, science and creativity. But it raises a number of issues. Why is it, for instance, that the BBC, which has nearly half the radio listenership in the country and is financed by a licence fee, not already developing children's radio? Or put another way, why is commercial radio offering a public service that the BBC has failed to satisfy?

Park, like many in the business, is irritated by the relationship between the BBC and commercial radio. The BBC, he says, is concentrating on doing things that the commercial sector could do equally well, like playing pop music on Radio 1. It tries to keep its market share up, for instance by bringing down the age of its target audience for Radio 2; and its success with Radio 5 could make the station a direct competitor to any future development of Talk Radio.

But the fact which most annoys the commercial sector is that, when faced with competition from the BBC, they are not on a level playing field. The BBC has the flexibility to change its stations' remits overnight if it wishes - to make its target audiences older or younger, to switch its music styles or whatever. Commercial radio, though, is hamstrung by strict conditions on licences which can result in tough fines for even minor infringements. Last year Leicester Sound was found to have only 341/2 minutes of speech in a three-hour period, when it was supposed to have 36 minutes. For a 90-second infringement of its licence, the station was fined pounds 5,000. Park reckons the situation is unsustainable, and that "it's not inconceivable that some BBC channels will fall into the commercial domain in the next 10 years" instead of replicating services and splitting audiences.

The North-east raises another thorny issue. The Radio Authority has proved extremely reluctant to award new licences to any of the three big commercial radio companies, and if the past is anything to go by, it will bypass them again on Friday and favour a smaller, local player. The idea is to widen diversity - but the consequences have often been perverse.

Last year, for instance, the authority spurned bigger companies and awarded a London licence to one Chris Parry, who proposed an alternative music channel called XFM. While many liked Parry's choice of music, the station did not make money and looked as if it would fold. After nine months Capital was able to step in and buy it because, despite its complete power in awarding licences, the Radio Authority can block their sale only if the prospective purchasers are seen as "unfit".

Park, understandably, seems, if not bitter, then astounded. "For running a station for nine months and failing, the guy will get pounds 4m," he says, "which is more than I'll ever earn for succeeding in the business. It's not a judgement about him, it's a comment on the system."

The same could happen in Newcastle - a small group of individuals could be awarded the licence, and sell out to Capital within a year. Anyone wanting to make a fast buck should be thinking about applying for a radio licence - it's a far faster route to riches than a lottery ticket.

Both barriers to the expansion of Capital, and the other big players, are part of a bigger debate over the future of commercial radio. The system as it stands puts firm obstacles in the way of consolidating radio companies, and does not allow them to grow as American radio giants have. Unsurprisingly, Park and others would like government to free up the heavy regulation on commercial radio, in its next Broadcasting Bill. Though that would be a "second term" priority for Labour, Chris Smith, the Culture Secretary, seems sympathetic. In a speech to an industry audience in June he said the Government was "committed to regulation with the lightest touch," and his department would "continue to listen to the radio industry and help where we can".

Park argues for the end to a points system that limits the market share of any large company. Each is restricted to 15 per cent of the potential total audience for commercial radio - which sounds reasonable until you realise that a small station like XFM can take up as many of Capital's points as its Capital station, simply because it has the potential to reach as many listeners; never mind that it doesn't in practice.

Also, the system is far more restrictive than television - where the limit on growth is 15 per cent of the total audience, including the BBC. If the BBC were included in the radio calculations, it would practically double the maximum size of Capital and its main competitors.

It's not necessarily that big is good. But everyone recognises that the situation is a mess, with powerful companies anxious to expand but facing illogical limits on their ability to do so.

Capital still has a number of points left, and is in acquisition mode, but a few years down the line it will, like GWR and Emap, be straining at the leash, and desperate for Government to allow commercial radio to approach its half-century anniversary in a less contorted, far freer market- place.

Ups And Downs Of Life In The City

1973: On 16 October Capital and LBC are the first two commercial radio stations to launch in the UK. The omens are not good: it's the middle of the three-day week and a lot of business has halted. The first disc to be spun on the station is "Bridge over Troubled Water" by Simon and Garfunkel.

1976: Launch of Help a London Child campaign, and of the Flying Eye, London's first traffic-spotting plane. But the early years are a struggle, and the station relies on cash injections from investors such as The Observer, and at one stage chairman Richard Attenborough (above, left) pawns a Degas painting to pay wages.

1979: 1 April - Capital's Sunday Soapbox features John Irving from Golders Green, who declares that the Government has axed the next two Thursdays. Most listeners are not fooled, but a Middle Eastern Airline cancels Thursday flights.

1984: Chris Tarrant (above, right) joins Capital, initially working on the Lunchtime Show, but soon moving to the breakfast slot, where he will eventually wage "the war of the two Chrises" with Chris Evans.

1987: Capital becomes the first radio station to float on the London Stock Exchange.

1990: Capital FM's audience exceeds that of BBC Radio 1 in London for the first time. Its 3 million listeners a week make it the most popular metropolitan radio station in the world.

1996: Capital gets permission to construct a weather station on top of Euston Tower. Gusting winds make readings impossible.

1997: Capital moves from Euston Tower to Leicester Square in the West End.