People here seem to be making a massive assumption about Orion Media's ability to buy further radio stations.
The big question which I think should be asked in respect of the above is CAN they?
Surely they still have liabilities to fund the acquisition of their stations from Global (Gem 106 and the Free stations)?
Is there really any chance that Orion's credit line would be extended further when things don't exactly seem to be a bed of roses with the stations they have already?
It would all depend whether the investor saw the purchases as good value and trusted Orion to maintain/increase that value (not least by increasing the value and cost-effectiveness of the existing company).
I agree that's by no means a foregone conclusion.. but if they can pick them up at a fire sale discount, and not increase the cost base, then it's not so incredible. It's not like seeking extra cash to fund the running costs of your existing portfolio.
(I suspect the same applies to Celador and probably UTV)
Of course what people are forgetting here is some groups may be put off buying some of these stations as it will require them to find new premises, hire staff, sort branding and build studio's very sharpish in order to take on the stations which will be very expensive an a big put off for the likes of Celador for example.
Au contraire. If Celador bought any of the Smooths, as they are regional licences, there's no need for any programming to come from that region(s) and so the station could be run from its present home and network - say - the Southampton feed minus the local Southampton content*.
*Subject to the service being available on DAB in enough of the country. I'm not sure of the precise details of that (minimum % of GB they'd need to cover).
What would be good is a wide choice of different formats in each area in an ideal world. But in London we have Kiss chasing the Capital audience and vice versa - result a watered down dance station (Kiss).
Then let's let Global have Kiss too; it would then become a REAL dance station. Capital could become 100% pop hits aimed at under 25s, Kiss 100% dance for under 30s and Heart can... continue to do whatever it's doing this month,
*Subject to the service being available on DAB in enough of the country. I'm not sure of the precise details of that (minimum % of GB they'd need to cover).
And there's the rub. If they don't have 98% national coverage on DAB (expensive) then these broken up regional licences will need to go local again. Hmmm.
And there's the rub. If they don't have 98% national coverage on DAB (expensive) then these broken up regional licences will need to go local again. Hmmm.
It's not 98%, it's 80% minimum. In fact Kiss is slightly less than this on the local muxes, by agreement with Ofcom.
It's easy to achieve this with a 64k mono slot on Digital 1 or slots on local muxes.
As far as I understand it - and I'm more than willing to be corrected if I have this completely wrong - the issue is not listener choice, it's taking out a competitor for advertising in a market.
Therefore, if Global closed, say, Smooth and Real Radio XS in central Scotland, that wouldn't dramatically affect the choice for advertisers in central Scotland as Bauer and Global would still be the only two big players.
Politically I imagine it would also go down like a fart in a spacesuit with Ofcom and the Government, and Global may need some favours off those guys in the future.
Of course, by my logic simply selling any stations to Bauer doesn't solve the situation either. The only way that, and closing stations down, could change anything is by balancing things a bit (owning 2 FM stations instead of 4, Bauer maybe owning 96.3 and 105.2, Global owning 106.1 and 100.3).
Yes it was the balancing I had in mind when considering the closure of Smooth 105.2 (same would presumably apply elsewhere).
If you look at it from Global's point of view, which is most preferable......someone else owning Smooth or Smooth simply not existing?
Put another way, how much money would Global see as an acceptable fee for letting a competitor have it? If, to take it to extremes, there is only one bidder offering a quid, it isn;'t really fair to expect Global to just have to accept it and hand it over.
Perhaps an auction with a reserve price agreed with the CC would be the way forward, and if that reserve price isn't met then Global can either keep Smooth or shut it down as suits/agreed.
Might another solution be for Global and Bauer to have joint ownership of, say, Smooth 105.2 but with Bauer as the majority shareholder? This would then allow for 105.2 Clyde 2 to come about and Global and Bauer could share the spoils.
Were Global to close all the Smooths a possibility might be the advertisal of a new national FM station that Bauer's Magic would be a frontrunner for.
As you correctly say though, the issue is ownership, not listener choice.
What would the Competition Commission do if there were no buyers for stations that Global needed to offload? Can they force them to shut those businesses down?
What would the Competition Commission do if there were no buyers for stations that Global needed to offload? Can they force them to shut those businesses down?
I raised a similar point further back in the thread and the answer was the licenses would be handed back.
Has the takeover actually taken place? or is it all subject to the CC report?
Surely if Global were forced to sell their stations for a pittance to their competitors it would be unfair to say the least.
Would be interested in the procedure here.
Has the takeover actually taken place? or is it all subject to the CC report?
The takeover went ahead last June, so Global can't call it off and hand the stations back to GMG or anything like that. Real/Smooth are just stuck in limbo while the CC investigation takes place
It is understood the deal to buy GMG Radio has been completed and cannot be derailed by any potential regulatory issues. If the regulatory body has any issues with a lessening of competition, it will fall to Global Radio to comply.
On the face of it, Global's buying of GMG's stations with the high risk of having to sell them might look like an enormous gamble,
But looked at another way, Global's key interest in GMG was their Real stations They amount they paid.....£70 mil or such.......was significantly less than the valuation would have been at the height of the market.
This might therefore be seen as a reasonable price for the Real stations on their own, with the others coming as a job lot.
This is similar to what happened when UTV bought TWG. Their key interest was in Talksport, and the ILRs sort of just came with the package. UTV then got rid of some of the ILRs, either by selling them on or shutting them down (as was the case in Scotland with Q96 and Wave 102 sold and Talk 107 closed)
In the case of Global, they had no choice but to go ahead. GMG wanted to sell and wouldn't have been up for sitting around for a year. The fact that Global are left holding the baby is just part of the deal.
Put another way, how much money would Global see as an acceptable fee for letting a competitor have it? If, to take it to extremes, there is only one bidder offering a quid, it isn;'t really fair to expect Global to just have to accept it and hand it over.
A Smooth station not owned by Global (or something similar) needs to exist in certain areas to meet the CC minimum alternative competition thresholds. If Smooth doesnt exist, then Global's share of those markets will be too high
A Smooth station not owned by Global (or something similar) needs to exist in certain areas to meet the CC minimum alternative competition thresholds. If Smooth doesnt exist, then Global's share of those markets will be too high
......which brings us back to whether someone like Bauer would be a willing buyer for Smooth at any price, given that they would be assisting Global in the process.
Or, theoretically, what would Global's position be if was, say, Bauer who took Smooth off Global.........then simply closed it?
......which brings us back to whether someone like Bauer would be a willing buyer for Smooth at any price, given that they would be assisting Global in the process.
Or, theoretically, what would Global's position be if was, say, Bauer who took Smooth off Global.........then simply closed it?
Then would they not see that as 'business/money loss?'
The takeover went ahead last June, so Global can't call it off and hand the stations back to GMG or anything like that. Real/Smooth are just stuck in limbo while the CC investigation takes place
Thank you.
I assume that any pre-takeover talks Global had with the CC must have been favourable.
There must also be an opportunity for negotiation before the final report is due. So these recommendations could become watered-down.
......which brings us back to whether someone like Bauer would be a willing buyer for Smooth at any price, given that they would be assisting Global in the process.
Or, theoretically, what would Global's position be if was, say, Bauer who took Smooth off Global.........then simply closed it?
but is Bauer the only buyer? If Bauer pass it up wouldnt utv and orion just buy it instead? If Smooth had its cost structure radically revised it could be profitable and by radically i mean both the DJ talent cost and the back office
In Central Scotland competition may be reduced but in reality small companies can't afford to advertise on stations like Clyde 1 or Real Radio.
Bauer's current market share in the West of Scotland (Glasgow) is around 20% and it's similar in East Scotland.
Global only has 6% market share with Capital Scotland. Add Real and they would have another 10.3% supposing they maintain the share of audience after rebranding to Heart. Smooth has around 6% market share. So in total if allowed Global would have 22.4% market share with Capital, Real and Smooth. I expect they would dump Real XS as surplus to requirements.
Compare the combined Global share in West Central Scotland as outlined above with Bauer's Dundee share at 26.5% or Bauer's Aberdeen market share of 24.8% or Bauer's Westsound with 23.4% share, all of those are more than what Global's combined Capital/Real/Smooth stations currently achieve.
There seems no case to protect the market from this takeover when there is clear evidence that Global's competitors already have a greater market share in areas close to those where the merger applies.
There must also be an opportunity for negotiation before the final report is due. So these recommendations could become watered-down.
I think that's the really important point.
The Competition Commission have given their initial thoughts but the final outcome may be much less severe for Global.
Indeed the CC may well settle for the sale of Smooth (excl London/WM), Capital Cardiff & Heart N Wales, and then sign off the deal. The Yorkshire situation seems open to negotiation, as those Bauer heritage stations are still very strong competitors to Real & Capital.
Some stations, such as Capital Scotland and Real XS, are loss-making. Others such as Real Yorkshire are just about breaking even. I fear for the future of some of these stations if they are not owned by big groups, as the economies of scale won't be there to keep them on-air.
The Competition Commission have given their initial thoughts but the final outcome may be much less severe for Global.
Indeed the CC may well settle for the sale of Smooth (excl London/WM), Capital Cardiff & Heart N Wales, and then sign off the deal. The Yorkshire situation seems open to negotiation, as those Bauer heritage stations are still very strong competitors to Real & Capital.
Some stations, such as Capital Scotland and Real XS, are loss-making. Others such as Real Yorkshire are just about breaking even. I fear for the future of some of these stations if they are not owned by big groups, as the economies of scale won't be there to keep them on-air.
Forgot the East Midland licenses! I assume that if they want to keep the 3 former hit music stations together under the capital brand, they may agree with CC to sell Capital Yorkshire. Therefore by doing that they're also dumping the ex-Galaxy requirements which is killing 2 birds with 1 stone (Eg. Andi Durrant/Capital Mixtape)
Plus it gives Bauer strong competition in Yorkshire (as Kiss 105) whilst Capital retains its current shares in the East Midlands.
Unless if Orion (as I've said before) acquires it and rebrands it back to Galaxy 105.
I raised a similar point further back in the thread and the answer was the licenses would be handed back.
Has the takeover actually taken place? or is it all subject to the CC report?
Surely if Global were forced to sell their stations for a pittance to their competitors it would be unfair to say the least.
Would be interested in the procedure here.
Unfair, maybe. Amusing? Yes! Global must have known these issues would probably arise before doing the deal and be prepare from them. If they were just gambling on the takeover going without incident then tough titty to them. Some you win some you lose. Its a bit like buying a land without planning permission, putting a building on it and hoping you get retrospective permission. No good monaing about it when you get told to tear it down...
There seems no case to protect the market from this takeover when there is clear evidence that Global's competitors already have a greater market share in areas close to those where the merger applies.
Absolutely. Even in the days when heritage ILRs were monopoly providers many struggled. Now as then advertisers will advertise if the rates are attractive for the audience reached, if they aren't they won't.
Think back to a point 6 years ago in Glasgow when we had Real Radio, Saga Radio, XFM, Clyde and Q96....all under different owners. It was unsustainable nonsense, little more than a radio job creation scheme paid for by hapless pension funds.
The market has since sorted itself out so it would be a pity if this process was thrown into reverse. I dare say many are salivating at the possibility of some of Global's stations ending back in local ownership and with more local programming. But to me that is just self interest that fails to recognise the bigger picture.
Global wanted the Real stations and I am sure already had plans for what would happen when the competition commission got involved.
I can see Smooth sold off or broken up. As Global are allowed to keep the London and West Midlands licence for Smooth they may decide to retain ownership of those licences and offer the others to a company who will continue to run Smooth under a franchise or sell off the rest of Smooth and convert London and West Midlands licences to Gold, handing back 1548 in London. As Smooth needs no local programming it could be an attractive offer to a company who wants to run radio on the cheap.
Real XS will also go in both licence areas, sold or licence handed back.
In Wales there is no way they will sell Real South Wales licence. I think as they did with BRMB they will sacrifice Capital South Wales, maybe trying to find someone who will run it under franchise as Capital but if not they maybe Bauer who will re brand to Red Dragon.
In North Wales I can see the Real North Wales licence sold or handed back. Town and County may want the North Wales licence to expand Nation Radio. Again I cant see Global selling the ready established Heart stations in North Wales.
Yorkshire is the tough one, however I see Heart as their premium brand and they may decided to lose Capital there in order to ensure Heart is available in virtually every county of the UK.
Of course Global may be able to offer other solutions, and I am sure there would be a worry at Ofcom that if the licences were handed back that new companies may fail, we will see in due course!
As Smooth needs no local programming it could be an attractive offer to a company who wants to run radio on the cheap.
As long as the new owner of Smooth continues to either be on D1 or meet the minimum quota on local muxes with the exception of Glasgow which would still have to provide 7 hours of local output on weekdays being in Scotland.
Comments
It would all depend whether the investor saw the purchases as good value and trusted Orion to maintain/increase that value (not least by increasing the value and cost-effectiveness of the existing company).
I agree that's by no means a foregone conclusion.. but if they can pick them up at a fire sale discount, and not increase the cost base, then it's not so incredible. It's not like seeking extra cash to fund the running costs of your existing portfolio.
(I suspect the same applies to Celador and probably UTV)
Au contraire. If Celador bought any of the Smooths, as they are regional licences, there's no need for any programming to come from that region(s) and so the station could be run from its present home and network - say - the Southampton feed minus the local Southampton content*.
*Subject to the service being available on DAB in enough of the country. I'm not sure of the precise details of that (minimum % of GB they'd need to cover).
Then let's let Global have Kiss too; it would then become a REAL dance station. Capital could become 100% pop hits aimed at under 25s, Kiss 100% dance for under 30s and Heart can... continue to do whatever it's doing this month,
And there's the rub. If they don't have 98% national coverage on DAB (expensive) then these broken up regional licences will need to go local again. Hmmm.
It's not 98%, it's 80% minimum. In fact Kiss is slightly less than this on the local muxes, by agreement with Ofcom.
It's easy to achieve this with a 64k mono slot on Digital 1 or slots on local muxes.
Yes it was the balancing I had in mind when considering the closure of Smooth 105.2 (same would presumably apply elsewhere).
If you look at it from Global's point of view, which is most preferable......someone else owning Smooth or Smooth simply not existing?
Put another way, how much money would Global see as an acceptable fee for letting a competitor have it? If, to take it to extremes, there is only one bidder offering a quid, it isn;'t really fair to expect Global to just have to accept it and hand it over.
Perhaps an auction with a reserve price agreed with the CC would be the way forward, and if that reserve price isn't met then Global can either keep Smooth or shut it down as suits/agreed.
Might another solution be for Global and Bauer to have joint ownership of, say, Smooth 105.2 but with Bauer as the majority shareholder? This would then allow for 105.2 Clyde 2 to come about and Global and Bauer could share the spoils.
Were Global to close all the Smooths a possibility might be the advertisal of a new national FM station that Bauer's Magic would be a frontrunner for.
As you correctly say though, the issue is ownership, not listener choice.
Has the takeover actually taken place? or is it all subject to the CC report?
Surely if Global were forced to sell their stations for a pittance to their competitors it would be unfair to say the least.
Would be interested in the procedure here.
The takeover went ahead last June, so Global can't call it off and hand the stations back to GMG or anything like that. Real/Smooth are just stuck in limbo while the CC investigation takes place
http://www.guardian.co.uk/media/2012/jun/25/global-radio-takeover-gmg
But looked at another way, Global's key interest in GMG was their Real stations They amount they paid.....£70 mil or such.......was significantly less than the valuation would have been at the height of the market.
This might therefore be seen as a reasonable price for the Real stations on their own, with the others coming as a job lot.
This is similar to what happened when UTV bought TWG. Their key interest was in Talksport, and the ILRs sort of just came with the package. UTV then got rid of some of the ILRs, either by selling them on or shutting them down (as was the case in Scotland with Q96 and Wave 102 sold and Talk 107 closed)
In the case of Global, they had no choice but to go ahead. GMG wanted to sell and wouldn't have been up for sitting around for a year. The fact that Global are left holding the baby is just part of the deal.
A Smooth station not owned by Global (or something similar) needs to exist in certain areas to meet the CC minimum alternative competition thresholds. If Smooth doesnt exist, then Global's share of those markets will be too high
......which brings us back to whether someone like Bauer would be a willing buyer for Smooth at any price, given that they would be assisting Global in the process.
Or, theoretically, what would Global's position be if was, say, Bauer who took Smooth off Global.........then simply closed it?
Then would they not see that as 'business/money loss?'
Thank you.
I assume that any pre-takeover talks Global had with the CC must have been favourable.
There must also be an opportunity for negotiation before the final report is due. So these recommendations could become watered-down.
but is Bauer the only buyer? If Bauer pass it up wouldnt utv and orion just buy it instead? If Smooth had its cost structure radically revised it could be profitable and by radically i mean both the DJ talent cost and the back office
Bauer's current market share in the West of Scotland (Glasgow) is around 20% and it's similar in East Scotland.
Global only has 6% market share with Capital Scotland. Add Real and they would have another 10.3% supposing they maintain the share of audience after rebranding to Heart. Smooth has around 6% market share. So in total if allowed Global would have 22.4% market share with Capital, Real and Smooth. I expect they would dump Real XS as surplus to requirements.
Compare the combined Global share in West Central Scotland as outlined above with Bauer's Dundee share at 26.5% or Bauer's Aberdeen market share of 24.8% or Bauer's Westsound with 23.4% share, all of those are more than what Global's combined Capital/Real/Smooth stations currently achieve.
There seems no case to protect the market from this takeover when there is clear evidence that Global's competitors already have a greater market share in areas close to those where the merger applies.
I think that's the really important point.
The Competition Commission have given their initial thoughts but the final outcome may be much less severe for Global.
Indeed the CC may well settle for the sale of Smooth (excl London/WM), Capital Cardiff & Heart N Wales, and then sign off the deal. The Yorkshire situation seems open to negotiation, as those Bauer heritage stations are still very strong competitors to Real & Capital.
Some stations, such as Capital Scotland and Real XS, are loss-making. Others such as Real Yorkshire are just about breaking even. I fear for the future of some of these stations if they are not owned by big groups, as the economies of scale won't be there to keep them on-air.
Forgot the East Midland licenses! I assume that if they want to keep the 3 former hit music stations together under the capital brand, they may agree with CC to sell Capital Yorkshire. Therefore by doing that they're also dumping the ex-Galaxy requirements which is killing 2 birds with 1 stone (Eg. Andi Durrant/Capital Mixtape)
Plus it gives Bauer strong competition in Yorkshire (as Kiss 105) whilst Capital retains its current shares in the East Midlands.
Unless if Orion (as I've said before) acquires it and rebrands it back to Galaxy 105.
Unfair, maybe. Amusing? Yes! Global must have known these issues would probably arise before doing the deal and be prepare from them. If they were just gambling on the takeover going without incident then tough titty to them. Some you win some you lose. Its a bit like buying a land without planning permission, putting a building on it and hoping you get retrospective permission. No good monaing about it when you get told to tear it down...
Absolutely. Even in the days when heritage ILRs were monopoly providers many struggled. Now as then advertisers will advertise if the rates are attractive for the audience reached, if they aren't they won't.
Think back to a point 6 years ago in Glasgow when we had Real Radio, Saga Radio, XFM, Clyde and Q96....all under different owners. It was unsustainable nonsense, little more than a radio job creation scheme paid for by hapless pension funds.
The market has since sorted itself out so it would be a pity if this process was thrown into reverse. I dare say many are salivating at the possibility of some of Global's stations ending back in local ownership and with more local programming. But to me that is just self interest that fails to recognise the bigger picture.
Global still own the Galaxy brand and trademarks, they're not about to just hand them over.
I can see Smooth sold off or broken up. As Global are allowed to keep the London and West Midlands licence for Smooth they may decide to retain ownership of those licences and offer the others to a company who will continue to run Smooth under a franchise or sell off the rest of Smooth and convert London and West Midlands licences to Gold, handing back 1548 in London. As Smooth needs no local programming it could be an attractive offer to a company who wants to run radio on the cheap.
Real XS will also go in both licence areas, sold or licence handed back.
In Wales there is no way they will sell Real South Wales licence. I think as they did with BRMB they will sacrifice Capital South Wales, maybe trying to find someone who will run it under franchise as Capital but if not they maybe Bauer who will re brand to Red Dragon.
In North Wales I can see the Real North Wales licence sold or handed back. Town and County may want the North Wales licence to expand Nation Radio. Again I cant see Global selling the ready established Heart stations in North Wales.
Yorkshire is the tough one, however I see Heart as their premium brand and they may decided to lose Capital there in order to ensure Heart is available in virtually every county of the UK.
Of course Global may be able to offer other solutions, and I am sure there would be a worry at Ofcom that if the licences were handed back that new companies may fail, we will see in due course!
As long as the new owner of Smooth continues to either be on D1 or meet the minimum quota on local muxes with the exception of Glasgow which would still have to provide 7 hours of local output on weekdays being in Scotland.