Media Analysis: Forum - Is the SMG-Ginger deal good news for advertisers?/Alasdair Reid reports on who will benefit from Scottish Media Group’s pounds 225m acquisition

We all know what senior Granada sources think of the latest acquisition by Scottish Media Group. They insist the pounds 225 million SMG will pay for Ginger Media is silly money. They believe it doesn’t represent anything like good value for SMG shareholders (especially an SMG shareholder called Granada). And they think that it’s folly to spend all this money on a company that is so reliant on the audience pulling power of one performer, Chris Evans.

We all know what senior Granada sources think of the latest

acquisition by Scottish Media Group. They insist the pounds 225 million

SMG will pay for Ginger Media is silly money. They believe it doesn’t

represent anything like good value for SMG shareholders (especially an

SMG shareholder called Granada). And they think that it’s folly to spend

all this money on a company that is so reliant on the audience pulling

power of one performer, Chris Evans.



Granada has an agenda. It has never hidden its desire to make a bid for

SMG when the time is right. SMG, for its part, has never made a secret

of its intention to make things as hard as possible for Granada. And

this latest deal makes it harder for Granada to absorb SMG without

breaching regulations that restrict consolidation of ownership.



But maybe - over the short term at least - that’s somewhat academic.



A matter of weeks ago, Granada was primed and ready to move on SMG, so

its views on the Ginger deal would have been an important

consideration.



But the proposed United News & Media merger with Carlton has changed

everything.



Granada now has bigger fish to fry, and, as it prepares a bid for one or

other or both of its two major rivals, its threats to mount an SMG bid

over the coming weeks are taken a lot less seriously.



In short, SMG has more breathing space than it could have expected a few

weeks back. SMG will seek to make good use of that space. Last week it

announced it was restructuring in acknowledgement of the non-Scottish

nature of its properties. Its national UK media - Pearl & Dean,

Primesight and Virgin Radio - will now be overseen by the Ginger Group

chief executive, David Campbell.



John Pearson, the chief executive of Virgin Radio, says this restructure

sends important signals, though it does not mean there will be any

radical sales shake-up in the immediate future. He states: ’We do not

intend to combine our sales teams. We don’t see a need for it. The three

national media now owned by SMG - posters, cinema and radio - have

unique dynamics. But it would be wise for us to acknowledge that, as

advertisers centralise and agencies consolidate, an increasingly smaller

number of people are talking to each other in the media market.’



The immediate benefits, he adds, will be felt in other ways: ’There are

marketing opportunities available to us now that weren’t there before.

For instance, our (Virgin Radio) ad campaign runs on Scottish Television

and in Pearl & Dean cinemas. In the future, those sorts of talks will be

conducted on a different basis. But the important message to take from

the Ginger deal is that we see this as a platform for growth across

existing media and possibly into others.’



Some industry sources remain unconvinced about SMG’s rhetoric. They

question whether it has a long-term future as an independent entity.

Within months, ITV will consolidate into ownership by one company. It is

unlikely, they argue, that SMG will be that company.



On the other hand, this argument tends to assume that SMG is principally

an ITV franchise holder. This latest deal (and the subsequent SMG

restructure) begins to undermine that assumption. In short, SMG could

find a way to sell just its ITV franchises, while remaining a lot more

than a Glasgow newspaper publisher. One way or another, advertisers

would like a clearer idea of what the grand vision is - and the fact

that SMG now has a greater London presence may be one of the more

obvious upsides in this. Campbell will doubtless be asked to make up a

lot of corporate public relations ground over the coming weeks.



Peter Buchanan, the director of marketing communications at the Central

Office of Information, a big radio advertiser, says: ’The deal could

inject faster investment into Virgin Radio.’ But he insists the bigger

picture is important. ’We are more concerned about further mergers

within ITV and whether advertisers will benefit from that. This deal

effectively blocks a Granada takeover of SMG.’



Derek Morris, a founding partner of Unity, says it will be interesting

to see if SMG can unlock added value from this acquisition.



He says: ’You’ve got to believe that it was motivated in part by an

instinct for self-preservation, but they must have convinced City

analysts that there are synergies to be found in this particular

acquisition. The interesting thing about SMG following this deal is the

fact that it has a complete suite of media - everything from posters

through print and electronic media to cinema. The big question is

whether SMG can make something of that in the advertising market through

cross-selling.



’Many people remain broadly sceptical about whether it’s possible. Emap

has set up a new structure to do exactly that, albeit with a more

limited spectrum of media. And it is easier to see how it might succeed

by offering a mixed-media deal to youth advertisers. But Emap’s

teenage-targeted media comprises a vertical market. SMG is a horizontal

company and I find it difficult to see how you cross-sell on a

horizontal basis.’



Much of that is echoed by Robert Ray, joint managing director of

MediaVest.



He comments: ’I believe it’s healthy for media owners to think more in

terms of the audience groups they can offer, rather than in terms of

media as a commodity. I welcome the potential to move beyond

one-dimensional conversations. But a broader approach has to be in the

interests of the advertiser as well as the media owner.



At a broader level, I also worry about the present climate and the

assumption that media owners have to keep getting bigger. Sometimes we

lose sight of the fact that we are talking about potentially

unacceptable levels of concentration in individual media sectors.’



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