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

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