Sunday 23 June 2019

Sweet goodbyes

Two Saturdays in a row - two funerals.

John Myers was last week - a magnificent send off in Carlisle Cathedral. The great and good of Carlisle were there, along with Johns family and home town friends - and a good portion of radios best and brightest, who had made their way up to not far from the Scottish border to say goodbye to the great man. His presence filled the space. Barbra Streisand’s evergreen absorbed the cathedral as the coffin was brought in. Son Scott did the most wonderful Eulogy for his dad. Simon Cole, Simo and I just about managed to hold it together during our bits, and there was some wonderful singing - both solo and small group - from the team at Cumbria University - beautiful. Tears were shed. I’ve blogged below about John, and little more needs to be said about how big a radio presence we have all lost from our lives.

Yesterday was Nigel Ackroyd's funeral, in Burbage parish church in Leicestershire. Nigel was less-well known across the industry at large, but was much-loved in the Midlands, first at brmb/Xtra in the 80s/early 90s and then as my launch Marketing guru for Heart, where he stayed for the best part of a decade as we grew that station into the Midlands biggest. If Heart is the largest brand in UK radio today, Nigel can claim his part in getting the show on the road almost 25 years ago. How sad he has passed just a few months before that auspicious anniversary. Nigel found a second wind as the purveyor of all things sweet and chewy in Warwick’s only independent sweet shop. Many of those sweets were consumed yesterday in his honour. His funeral was smaller, more intimate, but still filled with love, music, and radio. If Streisand filled the cathedral last week, McCartney brought a smile to the parish church yesterday. More tears were shed.

Two lovely and moving ceremonies, to two men both gone from our lives, and the collective friendship of the radio community, far too young, at just 60 and 56.

Tuesday 4 June 2019

Team Thoughts

I'm 60 today, so I took myself and my bike up a steep hill, to prove I was still alive. I needed to do that this, of all weeks.

I'm out in Mallorca, where John and Linda were due to join us this weekend to celebrate my milestone. It'll be a quieter villa without them.

The tributes have been fantastic. I was so pleased to be invited onto The Radio 2 Jeremy Vine show yesterday, along with David Lloyd and Andy Peebles, to give him the send-off he would have wanted - on Europe's biggest radio stage. David has compiled a collection of radio tributes, including our R2 thoughts, here.

I thought, as I was riding up the hill, that I'd write a blog about John and share just a few thoughts on the type of man he was - and finish with three lessons I think we can all learn from how he lived his life.

We went back a long way. When I arrived at Radio Aire in 1990 he was at Red Rose. Those were pretty dysfunctional days inside the Transworld Group, so those of us charged with actually running the stations formed a close bond. John was the voice-over for Magic 828, the original magic station which we launched in 1991. I'm sure he over-charged me for the session - not the last time he'd best me in a negotiation:)

We then both got our big breaks at the same time. Me to go and launch Heart in the West Midlands, and him to launch Century in the North East. The established operators were out to get these new, upstart regional stations, so again we found ourselves making common cause. There was one moment, etched in my mind, when he and I, along with Tom Hunter (Scot FM) and Paul Chantler (Galaxy 101), four of the five regional MDs, met in london at the offices of Jazz FM in Castlereagh Street. Jazz only had a very small lift. When the lady who came to meet us saw the size of the four of us she must have bitten her tongue - talk about a cast of "heavies" squeezing into a confined space!!

The fifteen or so years from the early 90s to the late 2000s were our peak career years - and we ended up in lock step for most of the time - growing audiences and revenues together, trading licence wins and chasing the same acquisitions. Glory Days - as our shared hero Bruce would say.

As well as being rivals, we were also partners. We ended up owning about half of the MXR multiplex consortium between us, which meant in turn we both had multiple services on all of the regional muxes. People talk now about the dazzling digital future - but it sure didn't feel that bright back then, and both of us had to have strong nerves to keep going back to our respective boards to show them the mounting losses on our DAB P&L.

John's big coup happened before we'd even put our first bid in. "Do you fancy inviting Ford in" he said to me on the phone one day. "Ford who" I replied (Mr Ennals was elsewhere employed at the time). "Not Ford the person - Ford the worlds bloody largest car company" he shouted back! John had somehow made friends with Nick Scheele, Ford's Head of Europe, and had persuaded him over a round of golf he should be a partner in our bids. So we gifted them 5% and created a great story for our bids.

We were also sales partners for a long time, as the GMG Radio assets and Chrysalis Radio assets fitted together so well. Our monthly sales performance review meetings were always fun - unless we'd missed target of course! We even managed to employ John's son Scott - although he'd been 'home schooled' in the arts of radio production before he ever set foot inside Galaxy - that must be one of the reasons Hirsty's Daily Dose was so good.

Our biggest joint regret was not merging those two companies. They made a perfect fit, but despite repeated attempts by us both, we just couldn't get our two boards over the line on price and value. Agonisingly close. The big question of course was who would have run the business post-merger. We honestly never discussed it, because we knew the priority was to do the deal and not let ego's get in the way. Maybe it would have been a joint approach - him head of jingles, and me head of spreadsheets. Hat tip to Ashley Tabor of course for getting to that point himself, and much further - we were both huge admirers of how he took up the reins of the industry and reinvented it. The brands we helped create couldn't be in better hands.

The last 10 years saw our friendship deepen even further, as we kept trying to find new ways to amuse and involve ourselves in the industry we both loved so much. We kept trying to find a business we could both become involved in - and I was thrilled he agreed to come on board with Podcast Live - no pressure to make it a success now Matt!

John's was a life well lived, despite his illness, which he managed with the stoicism you'd expect of him. He tried manfully to lose weight, but we all know he was a giant of a man in every sense, and no matter how careful he was, he was always going to fill a room with his presence.

I could write a hundred more stories about John - but will save some for another time and place when I hope we can come together as an industry to celebrate his life. I want to finish this blog though with three thoughts for all of us (and particularly our kids as they start to find their way in the world), inspired by John's life:

1 - We can't all be networkers. It takes a special sort of person to be so well connected (Malcolm Gladwell in his book The Tipping Point calls them Mavens). But - we can all get to know networkers - in fact they make it easy. And the great thing about them is - you can ask them for a favour and they'll gladly do it - nothing is too much trouble. Which is why they are the people they are. So find networkers like John in your own life, and ask them to help you - they'll be glad to do it - and they will know you'll pay them back.

2. John was like the brother I never had. My best friend (and there are a few others who will say exactly the same), and yet......I didn't meet him until I was 30. Young adults today think their school friends, mates from college, or childhood neighbourhood chums, are the people they will remain closest to during life. I'm not sure that's true - and my experience with John is that truly great people can come into your life at any moment - so always be on the look-out for new friends. Take this great article by Paul Blanchard in City AM  Paul admits he only met John 5 years ago, yet the article has the feel of someone eulogising a friend they'd known all their life. That's powerful juju - so keep an eye out for it in others, no matter how old you are.

3. John and I started telling each other we loved each other a few years ago, and have never stopped. When mental health issues, especially for men, are so in the news, I think it's important we allow ourselves to express emotions freely - and telling another bloke you love him shouldn't be off limits. So do tell your mates how much they mean to you, before you lose that chance forever.

I'm off now, to enjoy the rest of my birthday, and rest of my break. Team would not have wanted it any other way.

Thursday 28 February 2019

What does success look like?

I’ve just appeared on R4s media show to discuss the Global Radio restructuring. The audio is here 

Amol didn't ask how much I think Global will save with this move. No one outside the Global boardroom can know for sure, but I'd guess that losing, say, 100 front line programming staff - the estimate that the good folk at RadioToday calculated (many of whom, as breakfast talent, will have been well paid) will save c £5m per annum. Closing 10 offices will probably also save £500,000 per annum each, given there will be some further redundancies there. So another £5m, giving an overall guesstimate of £10m in annual savings.

Amol did ask me one of those jaw dropping questions that only people who have never spent time worrying about their P&L can ask. Why do profitable groups need to make “more” profit? Why can't the status quo continue?

I’d say three things.

First, it’s what all private companies do (media or not) - search out profits. Like killer sharks, businesses need to keep moving forward or they die. The whole of western capitalism is built on the search for profit - remove that and you undermine everything that keeps powering our economic growth as a country.

Second, don’t get fooled that those existing profits can remain forever - there are other media sharks out there - many of them much, much bigger than Global. Newspapers, online aggregators, streamers, podcasters, vloggers - everyone wants a share of our media time, and then their unfair share of the advertising that this media time brings. Many a seemingly invulnerable big company has been brought low in double quick time when the market changes, and media feels more in flux today than it ever has.

Third - you need investment to stay alive, and in the case of these effectively new national radio brands with their new national breakfast shows, that means one thing only - marketing.

A national TV campaign of decent weight (70% cover/280 TVRs - which means 70% of the population would see the ad, on average 4 times (280/70=4)) on ITV will cost around £2m in media costs alone. Add in creative, fees and a bit of support (although external will increasingly come for Global via their OOH network) a decent campaign is probably a £2.5m investment. So, given three brands to promote, an extra £10m in profits soon gets eaten up in a campaign or two for each brand a year. Frighteningly, that may very well not be enough, as I will shortly explain.

Of course the goal is bigger listening numbers. And that's easy to say, and people might be forgiven thinking that if you throw £2.5m at TV advertising your audience is bound to go up - but this is at best a zero sum game, so your marketing spend isn’t just "picking up gold from the pavements".

As an industry, we are not adding new radio listeners every year - each one you gain has to be prized away from another station - in Global’s case almost certainly BBC R1 or R2 - and those guys aren’t going to give their listeners up easily. And in case we’ve forgotten - R1 and R2 have their own TV network to help them fight back. So if Global are headed this way, direct one-on-one combat with the BBC, it's a fight to the death. There's absolutely no point in doing a couple of quick bursts of TV and then sitting back, hoping for the best. You've got to have a five to ten year plan here. And that means big pockets are needed.

Knowing Ashley (Tabor, the ultimate owner of Global) and his ambition, and the drive of those around him,  he will have written down somewhere the answer to the question that drives all successful business people - “What does success look like?”

And I think his answer will be “Capital to be bigger in share and reach than R1, and Heart to be bigger in share and reach than R2”.

Now Capital as a network (excluding Capital Xtra) reaches 7.3m listeners (13%) vs 9.4m for R1(17%), so that feels like a closable gap to me with a new, national breakfast show with significant marketing - although R1 with Greg James at breakfast are definitely having a creative resurgence, so it won't be easy.

Heart network (excluding its spin-off brand extensions) is currently on 8.5m listeners (16%) vs R2s 14.9m (27%). That's a significantly bigger gap, and will take longer to close, but nothing is impossible, and R2 itself is perhaps more vulnerable now to challenge than it has been for 15 years or so.

Smooth, at around 5.8m listeners, is perhaps too far back to itself overtake R2, but of course any audience it can draw away will help Heart in its goal of overtaking the BBCs premier radio network. So I'd expect to see Smooth being marketed too, though perhaps not as intensively as Heart.

When we launched Heart 106.2 in London in 1995, no one gave us a hope of catching and overtaking Capital FM in either share or reach. 10 years later, in 2005, we were doing both.

I'm sure Ashley will see this restructuring as a fresh start, 12 years on from his entry into the radio business. He will have a new 10 year time frame very much in mind, and R1 and R2 in his sights. He thinks long term. Very long term. I certainly wouldn't put achieving both of these goals past him.

And where does that leave Bauer? I'll come back to them in Pt II next week

Wednesday 13 February 2019

The Big Play

Now the dust has settled (for now at least) on Bauer's remarkable series of deals the week before last, I thought I'd just post a few thoughts on where we and they go from here.

As a former Non-Executive Director of Celador Radio I'm obviously constrained from discussing our deal completely - but I should give a hat-tip in passing to Bauer's Development Director Peter Brimacombe, who I dealt with extensively in the run up to the disposal/acquisition. Having seen everything on his plate, I now know why he was sometimes late in returning my calls!

So, via Celador, Lincs and the Wireless local stations,  Bauer have bought another 20m hours or so (some have been subsequently sold off, but with national sales retained) to add to the 156m hours they already had under control. If they are also now selling all of Nation Radio's stations in the national marketplace, that represents around a 15% increase in their nationally traded hours. That's some move in an already heavily consolidated market.

John Myers has blogged on how he sees these developments here, and my good friend Matt Deegan did some tabulations which I have stolen, to show the new, approximate, state of play.



Bauer have closed the hours gap on Global, which for them is a necessary but not sufficient condition to close the revenue gap.

Between them, Global and Bauer did have a little more than 80% of all UK Commercial radio listening before these transactions, and managed to convert this into around 90% of UK commercial radio national revenue - via trading arrangements with agencies which essentially said "we have X% of the listening, so we want "X + another 5%" to "X + another 10%" of your revenue".

Of course in order to get the agencies to agree to these deals, prices have had to be carefully constrained. There hasn't been much price inflation in radio airtime for many years, as these two groups have traded price increases for dominant share deals.

This has meant that up until last week the 20% of the industry outside to two big groups has been forced to share just 10% of the national revenue. Bauer have just bought a little under half of that non-aligned business (the rest is principally Wireless Group's national brands and a very small number of still unaligned local stations). Bauer won't immediately be able to fold those additional hours into their share deals, and if you think about the maths, every extra pound they can persuade agencies to spend on their new acquisitions has to come from somewhere, and if it isn't from the existing locked-down deals with Global (which it won't be, knowing how well structured any Global deals are likely to be), it is difficult to see how it isn't right now a case of "robbing Peter to pay Paul", or should that be "robbing Steve to pay Graham"?

This is why the deals just done are a necessary, but not sufficient, condition for Bauer to improve their revenue share. In order to move the deals they have with agencies, I think they will have to offer more than just the same brands and stations that are on offer now. If nothing happens, agencies will rightly say "what has changed, apart who who holds the shares in the licences?" If the radio pot stays the same size, it's difficult to see the new, enlarged Bauer (but still some way behind Global in terms of listening share) shifting the needle very much at all. And if the point of these deals wasn't to close the gap, and leverage more national money, I'm not sure whether the overall level of return will be there for them.

I do think there will be a real desire, from national agencies, for Bauer to perform some radical surgery on their portfolio of brand offerings if they are going to be able to persuade advertisers to switch revenues. The real opportunity is to grow the radio cake overall by having two equally matched groups offering rival, attractive, national brands to advertisers. At the moment Bauer are (despite their protestations about the size of their Hits network) some way behind in this offering, and as long as Global have the biggest national brands all to themselves I can't see this changing the dynamic.

Classic, Heart, Smooth and Capital are all bigger than Kiss, Magic and Absolute at a national level. If that could be reversed, with Bauer's brands coming out on top (or even in the mix) the resulting rivalry to pitch to national clients for big ad spend budgets and sponsorships could genuinely persuade advertisers to move money out of other media and into radio - and particularly into Bauer's coffers. Although they probably wouldn't agree, I'd suspect Global too would benefit from an increased level of inter-brand rivalry being played out in the dealing rooms of the top London media agencies.

The other big question is where does Wireless Group/NewsUK sit in all this. At just 25m hours they are only 10% of the size of Global, and 15% the size of Bauer. This means that despite TalkSport having a very attractive audience demographic, TalkRadio starting to gain some traction, and Virgin obviously about to benefit significantly from the arrival of Chris Evans, they are arguably too small to really punch their weight on media agency radio schedules.

Bauer aren't sellers, so unless NewsUK want to offer an incredible price I can't see the Bauer assets changing hands. NewsUK aren't sellers either to my knowledge, and if they were you'd have thought Bauer would have bought those assets in this latest set of transactions - which they didn't.

So the only thing left is some form of merger. Probably not of assets - both parties will surely want to retain control of what they own. But national sales? NewsUK wouldn't want to be just "repped" by Bauer, and lose control over their only income stream, but a joint venture, where both parties are protected and jointly share control? Surely there is a deal to be done here to sell all of Bauer and NewsUKs portfolios together in a single company as a counterweight to Global? Then we really would have, in the national sales marketplace, two equally matched groups, both with an attractive bouquet of high profile brands and talent.

That really would be quite exciting for radio, if it comes off.

Tuesday 22 January 2019

Radio Wars

How interesting is radio in the UK right now?

Less than 24 hours after Chris Evans launches his new breakfast show on Virgin, another R2 escapee, Simon Mayo, is announced as the lead presenter on another new station, Scala Radio, due to launch in March. More on Scala in a moment, but first an update on my previous blog here on the economics of the Evans move.

I'm sticking to my guns on the cost to Wireless/News UK of Evans move. Despite the claimed creative challenges inspiring him to move, Chris will not have gone without personally matching his peak BBC fees of c £2m. His team will add a few hundred thousand on top. Add in employers NI/pensions etc and you must be looking at a £2.5m-£3m incremental cost. I did predict this would be a five year play, and Chris has already said he will extend his current three year contract to five years.

I did also predict they would need to bolster the team for the rest of the schedule. So far that hasn't happened, but it will be interesting to see if that changes when new listeners do arrive. Will they be happy with the current line-up or might they be expecting a back-up team as good as he had on R2? David Lloyd's first day review of the output augurs well and the link has some telescoped audio from the show if you missed it.

This is probably a secondary point. What is more critical is his decision, I'm sure taken with full board approval and based on solid research, not to run with ads in the show - just a sponsorship deal. as Adam Bowie reflected in his blog yesterday, sponsorships of high profile radio breakfast shows are valuable - and if I had to guess I'd say the Sky deal was worth £1m-£1.5m, although I'd also reckon a biggish chunk of that is in the form of a barter arrangement to run ads for the show on Sky (some of which have already aired). The show is also being promoted, as you would expect, across News UK titles (both a wrap around in The Sun and full page ads in The Times so far this week). Has there been any truly external, 3rd party paid-for advertising so far. A little, I think, on terrestrial TV, but so far not the major, all guns blazing ITV campaign we might have expected.

I still think £10m is the sort of sum required to launch a big, ambitious, popular music national show in the face of fierce competition from both BBC and commercial rivals. I'd regularly spend between £0.5m and £1.5m on station launches (aggregated over a 24-36 month period) in either London or big regions/cities. Grossing that up, and discounting for economies of scale but adding inflation, I think a biggish number is needed to cut through nationally at the level required. Quite possibly the big guns are being saved for later - a strategy I'd support, using the barter and in-house promotion, alongside inevitable launch pr, as a first salvo in the war. But I think they must know this is a "go big or go home" play - especially if they want to get weekly reach into the millions, which they must in order to make a return.

The biggest delta to the original numbers I quoted last year has been the decision to only run sponsorship at breakfast, and not advertising. Although breakfast only counts for 3 out of 24 hours (so around 12.5% of spots available by number), the size of the audience, and its prominence within the output, means weekday breakfast would on most stations generate a good 20%-25% of the total revenue booked across a year. I'd estimated they need £20m in annual revenues by the end of this five year period for the station to be making sufficient profits to be deemed a success. If you are going to block the easiest £5m of that off the bat, it makes the rest of the project that much harder to succeed. In the short term it will undoubtedly make the show more comfortable for new listeners - but in the long term will it fatally undermine the economics? It's all to play for, and the good news for all commercial radio listeners is it will put huge pressure on other stations to limit their own commercial exposure. For too long now operators have overloaded stations, particularly at breakfast time, with too many commercial messages. Chris may well force a rethink, if he succeeds in taking listeners away with a format and music mix closer to his commercial rivals than ever was the case on R2. Heart, Smooth, Magic and Absolute together have a size equivalent to R2, so The Wireless Group programming gurus will be training their guns on them as well as Chris's former BBC home.

On to Scala, a smaller, but no less interesting new play. Simon Mayo is, like Chris, a hugely talented and experienced radio player at the highest level. He doesn't of course have Chris's level of fame, nor the desire to get up at 4am again in order to host the breakfast show on this new station as he is booked in to mid-mornings (as a former R1 breakfast host, he knows the pain). Nevertheless a good six figure annual fee, alongside some other reasonable talents, will mean a programming budget I'd guess at c £1m per annum. Matt Deegan has nicely blogged here about the likely feel to the output. The transmission capacity for Scala is being found on DAB multiplex D2 from other channels being either discontinued or possibly having their bandwidth reduced, so arguably at nil additional cost to Bauer. But, to make a fair comparison, we should budget, say £0.5m per annum as the cost of using this capacity, which could be sold to 3rd parties if Bauer really didn't want or need it. Add in £0.5m for other incremental back-room/admin costs and you have a station which should be able to operate on a £2m per annum budget. Realistically this is not a staton which is going to "go big or go home" on its marketing. Slow burn is the order of the day here I'd guess. Bauer don't have an obvious newspaper or high profile magazine in their stable to use as a promotional vehicle - but I could imagine creative deals where, say, The Guardian could be partnered with to promote the station, in return for exposure for that newspaper across the Bauer Radio portfolio. You are still going to need some hard cash to get your marketing message across - but I could see £2m-£3m over the first couple of years doing a decent job.

So maybe a £2m marketing spend, and a couple of years supporting a £2m per annum cost base. That would suggest in round terms a £5m cash investment. Can that be recouped? Of course neither Bauer or News UK are selling companies, but you do need to crunch numbers as though you are in order to establish value for existing shareholders. My investment rule of thumb is that if you can create value that is 3 x your investment, that represents a decent return. That would imply a £15m value is needed. In turn, using pretty standard value multiples for Scala I'd think an asset value of 10.0x your annual profits is a sensible metric (although I had used a slightly punchier 12.0x for Virgin).  That means the station needs to be making an operating profit of around £1.5m. Assuming royalties, commissions and incremental sales costs (Bauer already has a big national team so these won't be high) take off 20% of any revenue earned, that means they would need annual revenues of £4m-£5m to make a £1.5m profit.

Commercial stations tend to generate roughly £1 of national advertising per year for every weekly hour of listening they achieve (that figure is simply the number of listeners x how long they listen each week). UK radio as a whole generates 470m listening hours each week, and total national advertising and sponsorship (including the rapidly growing pot of digital revenues) ran at a little under £500m in 2018. Some stations will do better than average, some worse, but Scala, backed by Bauer's pretty significant presence in the national marketplace, will trade at par I'd think.

So that implies they need around 4m listening hours per week. Both Radio 3 and Classic FM get around the same time spent listening to them each week (6.5 and 6.8 hours respectively), so there's no reason to suspect Scala won't get 6 average hours if its programming is good. So to get 4m listening hours it will need to reach 650,000 to 700,000 listeners. Classic's weekly audience is 5.2m, although it of course benefits both from a significant heritage, a great UK wide FM network, and a presence on the D1 DAB platform, which has excellent UK coverage. Scala will be DAB only, with no heritage, and will only be on the less extensive D2 platform. Despite this I think 650,000-700,000 listeners is a realistic aim, being just 15% of Classic's current audience, and probably only around 10% of the combined audience of Classic and R3, which I'd guess at between 6m-7m (R3 has 1.9m listeners, but there's only partial sharing of listeners).

So Scala is less risky financially than Virgin, but perhaps not with the overall upside of the Wireless/Evans enterprise. But perhaps that's inevitable, Bauer are the UKs 2nd largest group, behind Global, and their goal must be relatively safe, incremental growth to try and close that gap. Wireless/News UK are some way behind, so the risks, and rewards, need to be higher.

Let battle commence