MEDIA: FORUM; How will MS&M’s dominance affect radio sales?

Emap centralised the sales for all of its stations into the Capital- owned Media Sales and Marketing last week. It’s hard to see how the rival Independent Radio Sales can survive this blow. Does this move bring a welcome coherence to the market? Or should the Office of Fair Trading be informed? Alasdair Reid investigates

Back in January, Emap Radio’s chief executive, Tim Schoonmaker,

canvassed industry opinion on what he should do to centralise his sales

arrangements. Almost unanimously, media buyers told him not to hand it

all to Media Sales and Marketing. Schoonmaker has decided to do just

that. Giving advice can be a thankless task.

The move could spell the death of Independent Radio Sales and gives MS&M

(owned by the Capital Radio group) control of a vast chunk of national

sales in independent local radio. The stations now represented by MS&M

command 60 per cent of independent local radio listening. MS&M won’t

sell all the airtime on those stations - around half is sold on a local

basis - but it will be the only point of access for national

advertisers. And these are, by and large, the big metropolitan stations,

so they attract a revenue share in excess of their share of listening.

MS&M reckons that, strictly speaking, it will now control 37 per cent of

ILR revenue taken from national advertisers through London buying

points. But it says that this figure is not the most important one. If

you look at the market as a whole, including national stations like

Classic FM, its share of total radio revenue is as low as 20 per cent.

Perhaps. But the Capital Group as a whole now has a massive influence on

the commercial radio industry, especially when you take Capital FM into

account, even though it has its own sales force.

Is this a workable situation? Does MS&M now have a monopoly in its

market sector? Should the Office of Fair Trading be called in?

Paul Davies, the managing director of MS&M, maintains that the real

issue is whether this is against the customers’ interests or not. ‘Radio

has only just managed to capture a 4 per cent share of UK advertising

revenue, so it can hardly be described as a dominant medium - people can

walk away from radio in a way that they can’t with some other media,’ he

argues. ‘So we will hardly be in a position to dictate terms to

advertisers.’

He points out that MS&M has a good relationship with agencies and the

Institute of Practitioners in Advertising. Last year it developed a

customer charter with them. He feels that buyers appreciate the fact

that, in the wake of the Broadcasting Bill, radio sales arrangements

were always likely to change.

‘I think agencies have always understood that to get more efficient

trading in the radio industry there would have to be concessions in

terms of the size of the sales points,’ he says. ‘We are now able to put

more into the industry in terms of resource, expertise and the ability

to build radio’s strong brands.’

Are agencies convinced? Derek Morris, the joint media director of BMP

DDB Needham, and the IPA’s Media Policy Group member responsible for

radio, hasn’t called the OFT. Not yet, anyway - he’s still assessing the

mood of the IPA membership. But he admits that he is concerned by this

development. ‘For me, the issue is not the size of MS&M, but the size of

the Capital Radio group,’ he asserts. ‘This latest consolidation and the

expected appointment of MS&M to sell Chiltern Radio means that Capital

will have an involvement in some two-thirds of UK radio revenue.

‘That is a lot of eggs in one basket and at first sight does not seem to

be in the best interests of competition. But the market has to address

the upside of this move as well as the feared downside. Within this

analysis, it must consider the real prospect of further acquisitions by

Capital and also consider the precedent set by this consolidation and

how it may be extended to other media markets. I await to hear what they

have to say for themselves.’

Steve Hyde, the broadcast director of Zenith Media, finds himself in an

awkward position. Capital is a Zenith client, but Zenith is also the

UK’s biggest spender in radio and he must also look after Zenith’s

interests in the marketplace. After careful consideration, he comes down

in favour of the Emap move.

‘In reality, we haven’t seen much competition in this market in the

past. IRS and MS&M have effectively had local monopolies,’ he says. ‘And

I don’t have a problem with MS&M handling a greater share of the local

radio marketplace if it adds to the resource committed to selling radio.

‘I can’t see there being an impact on ad rates - if we found that to be

so, we wouldn’t invest in radio as we have done in the past. But the

worst situation possible would be for the ILR market to continue in a

fragmented state. In the past, inconsistencies in airtime sales from

station to station have cost ILR a lot of revenue. I would have had a

greater problem if Emap had decided to set up on its own.’

Neil Jones, a director of TMD Carat, says he will be surprised if this

isn’t referred to the OFT. ‘Emap wouldn’t have made this decision unless

it had been convinced that it would maximise its revenue potential by

going this route - and MS&M is obviously going to use its leverage in

order to deliver,’ he says.

‘I’d also question MS&M’s ability to sell Kiss 100 FM (an Emap station)

against Capital FM. Capital FM is the biggest radio property in the UK

and its owners are never going to let another part of the group damage

it in any way.’

June Langford, the managing director of Glover Langford Lynds and chair

of the radio working party of the Association of Media and

Communications Specialists, agrees whole-heartedly. ‘When

competitiveness is eroded, the dangers are that you see monopolistic

trading and conditional selling starting to appear,’ she states. ‘There

will inevitably be a hardening of the market and in radio we have

already been paying increases above the rate of inflation in recent

years.

‘MS&M may argue that it will simplify buying, but for people who are

dedicated to using radio, this has not been a problem. I feel very

strongly that Amco should recommend a referral to the OFT.’

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