Calling at your station
Commercial radio is booming. Fifteen consortia are bidding for the lucrative new Yorkshire and Humberside licence, and each offers a different format. So who will win? Meg Carter reports
Tuesday 27 February 1996
"Yorkshire is a dynamic, expanding market with a large population and significant potential from regeneration in Sheffield and Leeds," one bidder explains. "Get it right and it's pay dirt."
In fact, running a radio station in today's competitive market isn't so easy. Even a smaller local station can cost pounds l.5m a year to run, and that's before launch costs and marketing, according to City analysts Hoare Govett. With more stations competing for listeners, only careful planning, extensive research and significant investment in advertising can (almost) guarantee success.
Besides, the Yorkshire licensee will be pitched against a strong network of local commercial stations owned by publisher Emap - Viking FM in Hull has a 33 per cent share of its market; Aire FM in Leeds has 28 per cent, and Sheffield's Hallam FM 36 per cent.
"It will be difficult for someone to appeal on a regional basis - it's hard to represent Yorkshire as a whole," says Brendan Moffett, marketing services manager for Emap Radio's Yorkshire stations. "There are Sheffield people who won't travel to Leeds." The new licence will be awarded to extend listener choice - dance, speech or an "easy listening" format are favourites, sources suggest.
The pattern is being repeated across the UK, which now has more than 180 local commercial stations. New local licences and the success of national stationssuch as Virgin and Classic FM have pushed commercial radio ahead of the BBC for the first time. Advertising revenue is soaring. Outside players are taking note - the Guardian Media Group and Associated Newspapers have radio stakes; Yorkshire Television and Saga Magazines are now trying.
For the time being, growth is limited by current ownership restrictions and the rate at which the Radio Authority grants new licences. But this will soon change, which is why radio groups are also eyeing up the competition, assessing potential targets for merger or acquisition. Each potential bidder is adopting a different approach.
"We want local stations in major metropolitan areas - markets where there are major evening newspapers. We don't want regional stations - they are neither local nor national," says Emap Radio chief executive Tim Schoonmaker. Emap controls a major slice of local radio - its stations reach 7 million adults each week. It has grown through acquisition from a small base; in 1992, it acquired Radio City in the North-west and launched the London dance music station Kiss. Its strategy is based on "market leaders, major markets", he says.
Capital Radio, one of the other bidders, is the country's most successful commercial radio group. It operates 11 radio licences in London, Birmingham and the South-east. But its strength lies in Capital Radio, Britain's second-oldest commercial radio station. Capital is seen by many as an attractive acquisition target, which is why the management is eager to grow stronger though expanding and diversifying into multimedia and even restaurants - it will open a themed restaurant in Leicester Square this summer.
"In the short term, growth has to be opportunistic - the chance to buy exactly what you want is limited," says Capital managing director Richard Eyre. "Capital is bidding for the Yorkshire licence with a 'young contemporary' format."
Chrysalis Radio, a relative newcomer, took a stake in Metro Radio four years ago, which allowed it to assess the market before winning a regional Midlands licence and a local licence in London for two adult contemporary stations called Heart. "The development of strong brands is the way ahead," says Chrysalis's chief executive Richard Huntingford. The company recently bought Galaxy, the South-west regional dance music station, and is applying for the Yorkshire licence with a similar Galaxy format.
In contrast is CLT UK Radio, backed by Luxembourg-based media giant CLT, which seems content to spread its investment net wide. CLT owns 80 per cent of Atlantic 252, the London station Country 1035 and recently took a 49 per cent slice of Talk Radio UK. It also has a 15 per cent interest in the UK's fifth commercial TV station, Channel 5. "Our focus is developing stations over the longer term through licence applications and partnerships with other groups," explains CLT UK Radio managing director Travis Baxter.
The industry awaits the tussle with bated breath. Not even the major players can predict how the local commercial radio will look a year from now, but it appears only the big will prosper.
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