Media: Ginger's Virgin vs the Capital city slickers

Chris Evans's successful bid for Virgin Radio has left Capital Radio, which offered more money but lost out after lengthy negotiations, licking its wounds. Meg Carter looks at the challenges ahead for the deal's winners and losers.

Last week's front pages were dominated by a single image: Richard Branson's runaway balloon drifting up, up and away into clear Moroccan skies. The support crew for the Virgin boss's round-the-world attempt could do little more than watch helplessly, tears pricking in their eyes.

David Mansfield, chief executive of Capital Radio, knows how they felt. At the same time that Branson saw his dream slipping into the wide blue yonder, Capital was coming to terms with the news that its protracted courtship of Virgin Radio had failed. Branson jilted the London-based radio group's pounds 87m offer in favour of a slightly lower one made by the broadcaster Chris Evans. "Surprised and disappointed" was the only response from a stunned Capital.

There followed a triumphant week for Evans which saw him ecstatically boasting "I'm the boss, I'm the boss" on his Virgin Radio breakfast show, revelling in acres of enthusiastic press coverage and even joining Tony Blair for a celebrity drinks bash at Number 10. The week ended with Branson blowing Evans's trumpet in an interview with The Times, further profiles in the weekend press and Breakfast with Frost yesterday.

As for Capital, it drew the blinds and placed a "Do Not Disturb" sign on the door. The company is angry. Insiders report Mansfield to be "hurt" and "drained" by digs throughout the week's coverage about Capital's share price and repeated accusations of being boring. Outmanoeuvred, poor old Capital Radio appears to have been trounced in the publicity war, too.

Two factors explain why. First, Capital's plc status, which dictates steely corporate reserve even when presented with an opportunity to salvage public face. Second, astute media manipulation by Evans and spinmeister Matthew Freud, who works hand-in-glove with Evans and his TV company, Ginger Productions. Not only does Freud represent Evans personally, he also has PR minions sit in on Chris's shows logging quips and scams that might make tomorrow's headlines. No sooner is something said on air it has been written up and press-released.

Evans, meanwhile, has taken himself firmly in hand since regularly humiliating his employees on air and getting too drunk to present the next day's Radio 1 breakfast show. Recent weeks have seen a surprising number of interviews with Chris and his cronies presenting a cuddlier image. The strategy has worked. Not only did Branson go for Evans's "unpredictable streak", the papers lapped it up.

So Ginger, backed by the investment firm Apax, is buying Virgin for pounds 85m. Evans and partners, including Ginger Productions' managing director, John Revell, will take 55 per cent of a new company, Ginger Media; Virgin will take 20 per cent. Virgin Radio's chief executive, David Campbell, becomes chief executive of Ginger Media, while Evans's wily agent, Michael Foster, becomes chief executive of Ginger's TV interests. Evans will leave the day-to-day running of the business to them, apparently.

But how well will the new team bed down? And exactly what will the Ginger touch bring to Virgin programming which does not star Evans himself?

Industry observers note that Campbell and Revell have a volatile history - the pair worked together in the early days of Virgin Radio until they famously fell out. While few can deny Virgin Radio's programming could be performing better, there is no obvious source for the talent needed to fill the shoes of the older, more established DJs Evans has targeted for the chop. Chris Evans may be a skilled manager of his own image and career, but how generous will he prove to be in bringing on others?

It is easy to see how, with its City and suits profile, Capital has been polarised as Evans's dreary opposite. Heady with success, Evans even hinted to the Financial Times at possible takeovers or mergers. But there is plenty of life yet in the company he last week dismissed as a "bleating, blowing asthmatic dog". While Capital Radio may be a pounds 370m minnow compared to, say, a Granada, it is still one of the UK's most profitable media companies. "National radio or local, it doesn't really matter - it's about developing the business," the company whispers, claiming it has successfully repositioned itself as a music-based entertainment group whose interests span radio, themed restaurants, a record label, artists' management agency and Internet broadcasting. It has a successful record of buying under-performing local stations, restructuring them and dramatically increasing profits. Yes, it wants to expand in UK radio, but no, losing Virgin "isn't a major setback". In fact, there's still "ample scope for radio expansion".

Playing old fogey to Ginger's young upstart, however, may not be in the long-term interests of commercial radio, because it deflects attention from commercial radio's more pressing need: fighting the BBC. "The original Virgin-Capital deal is the safer bet for long-term commercial radio audience growth," believes David Fletcher, director at the media-buying specialist CIA Medianetwork. "The last thing the industry (and its advertisers) need is internecine warfare between Virgin and Capital."

This is, however, already on the cards. With pounds 87m burning a hole in its pocket, Capital is expected to turn its attention to smaller acquisitions - London's Melody Radio, perhaps, or Atlantic 252. Then there are new regional and local licences - it has already bid for the one in the north- west. As has Ginger. The next instalment will be in January.

Tuned in, as always

Were you gobsmacked by Chris Evans's takeover of Virgin Radio? You wouldn't have been at all shocked if you'd read the Media+ section on 3 November. Our cover story on that date was the first time any national newspaper took seriously the Ginger Whinger's on-air declaration that he wanted to buy the station from Richard Branson.

We are proud to have broken what `Broadcast' magazine describes in its latest issue as "the most bizarre media story of the year, maybe even the decade".

Media+ is taking a fortnight's break, but we'll be back on Monday 5 January.