SPOTLIGHT ON: RADIO: What does the MMC’s report imply for the radio industry? - An official inquiry into the Capital-Virgin deal caused a stir, Alasdair Reid writes

It’s been a funny old month for the radio industry. Funny peculiar, that is - they’re certainly not laughing down at Capital Radio. First, Richard Branson scuppers its plans by selling Virgin Radio to Chris Evans, then the President of the Board of Trade, Margaret Beckett, rubs salt in the wound. Academic it may be, but Beckett was duty bound to publish the results of a Monopolies and Mergers Commission investigation into a possible Capital-Virgin deal - and she did so last week.

It’s been a funny old month for the radio industry. Funny peculiar,

that is - they’re certainly not laughing down at Capital Radio. First,

Richard Branson scuppers its plans by selling Virgin Radio to Chris

Evans, then the President of the Board of Trade, Margaret Beckett, rubs

salt in the wound. Academic it may be, but Beckett was duty bound to

publish the results of a Monopolies and Mergers Commission investigation

into a possible Capital-Virgin deal - and she did so last week.



The report not only angered and confused Capital, it mystified a large

part of the radio industry, too. It states, of course, that the Virgin

acquisition could not have gone ahead in its proposed form - the deal

would have given Capital a 65.9 per cent share of the London radio

advertising market and a 44.2 per cent share of the national radio

advertising market.



Unacceptable, says the MMC. Unacceptable? The 1996 Broadcasting Act,

after all, cleared the way for the big radio groups to own more than one

FM station per licence area. The Government recognised that

consolidation of ownership would benefit the radio and advertising

industries. Are we now back at square one?



The radio industry has argued that radio revenue should not be regarded

as just a small part of the whole display advertising revenue pot. There

is now evidence that if radio raises its prices it loses out to other

media. There are, in effect, no advertising monopoly situations that it

can possibly abuse.



Not only has the MMC ignored those arguments but it has failed to give

any clear guidance on where it believes market-share limits should be

drawn. In its wisdom, the MMC seems to have decided that radio

advertising is a discrete market - not just nationally but regionally,

too. But we can’t be sure. Emap Radio, for instance, has 66 per cent of

the market in Manchester. Should it now be subject to investigation? Or

is Manchester not big enough to qualify as a discrete radio advertising

market?



Capital’s commercial director, Paul Davies, argues that the potential

muddle is a setback for the industry. ’Our competition in London comes

from LWT, Carlton and the Evening Standard and we argue the bigger you

are, the better placed you are to make a case for radio per se. A merger

between Capital and Virgin would have given us a greater opportunity to

take audience from the BBC,’ he says.



Pessimists say it would be ironic if TV companies - who might have no

brief to expand the radio industry - saw this ruling as an opportunity

to enter the market.



Justin Sampson, director of operations at the Radio Advertising Bureau,

says it is too early to assess the general implications for the radio

business but he does condemn the muddle. ’It’s not healthy to box in

companies in their core business and it’s an odd signal to send out when

we are preparing to invest in digital,’ he argues.



Gains in the Broadcasting Act came as a result of effective lobbying in

both Houses of Parliament. Is it time to have a quiet word in some ears

at the MMC? Moves to co-ordinate a new campaign are underway at the

industry’s trade body, the Commercial Radio Companies’ Association, but

some sources say that little is likely to happen before the next

Broadcasting Bill, due at some point within the current Parliament.



Tim Schoonmaker, chief executive of Emap Radio, says that the industry

is now determined to widen the debate. ’It’s important for people to

compare what we have to deal with and the situation at the BBC. It has

five national radio networks and can launch anything from digital TV

channels to projects on the Internet, as long as it makes calls to a

couple of civil servants. It’s clear that that question needs to be

addressed.’



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