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.
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