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Virgin
FM bid a mix of money, egos, by Wendy Frew - 5th April
2004
(Credit:
The Sydney Morning Herald)
When Sam Chisholm fronted a press
conference held in the offices of Sydney talkback
radio station 2GB last week, he could barely contain
his glee.
The
veteran TV executive - so often described by the
press as Australia's consummate deal maker - and
his old mate, multimillionaire ad man John Singleton,
were there to announce an ambitious radio venture
with British billionaire Sir Richard Branson.
The
plan outlined by the three men - Branson was patched
in to the press conference via a phone hook-up
from a resort in the French Alps - was a bold
attempt to launch a new FM radio network in Australia,
already one of the world's most competitive markets.
Macquarie Radio Network, 70 per cent owned by
Singleton, and chaired by Chisholm, would provide
the infrastructure for the new network, while
Branson would bring to the table his well-known
Virgin brand under which he has launched everything
from records and mobile phones to airlines and
railways.
If
the Virgin-Macquarie rhetoric can be believed,
competitors will soon be falling like nine pins,
while listeners are bowled over by a funky new
FM network, heavy on music and light on talk.
But not everyone is impressed with this vision
majestic.
Certainly,
Chisholm believes the new alliance will be irresistible
to listeners and advertisers alike. When he outlined
it to journalists last week, he was clearly delighted
to have set a cat among the radio pigeons, relishing
once again, the chance to prove he is a force
to be reckoned with.
"This
is really just the beginning of what we hope is
going to be a long-term partnership [that will]
establish a brand new set of rules for the radio
industry in this country," he said.
"This
is a combination the market should sit up and
take notice."
But
it didn't take long before the first questions
were asked about where the funding would come
from, if there was enough revenue in the FM advertising
kitty to be shared with a new competitor, and
whether listeners wanted another network offering
more of the same.
Sceptics
also pointed out this was the third media deal
Chisholm and Singleton had brought to the market
in the past four months.
In
December, they announced a plan to partially merge
their Sydney talkback stations 2GB and 2CH with
archrival 2UE, owned by Southern Cross Broadcasting.
Within a week, the deal had collapsed because
of employee, political and community opposition.
Chisholm
might think his deal with Branson will have Southern
Cross boss Tony Bell weeping over lost opportunities.
But Bell is more likely to view his recent acquisition
of TV production house Southern Star as a way
to completely scupper any ideas Chisholm and Singleton
may have had to use Southern Cross to further
their expansion plans.
Not
long after the 2UE-2GB merger exploded in full
view of the media and the public, Chisholm and
Singleton turned up in the midst of a fight over
television broadcasting rights for the Sydney
and Victorian racing industry. Singleton claimed
to be acting as a "peacemaker" between
warring parties, while Chisholm was involved with
several of the teams bidding for a piece of the
action. However, those plans seem to have died
a quiet death.
The
two friends last week played up their chances
of a push into the bigger and more lucrative television
market if, or when, a fourth commercial TV licence
ever becomes available. Australia's commercial
TV licences are capped at three until January
2007 but the Federal Government is expected to
conduct a review of the ban on a fourth licence
this year.
Despite
Chisholm's long and successful career with Kerry
Packer's Nine Network and Rupert Murdoch's UK
pay TV business, BSkyB, this part of the grand
plan to mix it with the big boys was dismissed
by critics and supporters alike as nothing more
than self-promotion.
One
analyst described the Virgin-Macquarie alliance
as "an alarming combination of big bank accounts
and bigger egos".
In
the words of media buyer Anne Parsons, "they
see themselves as rock stars".
Not
everyone is so dismissive of the radio plan.
UK-backed
DMG Australia, which owns the Nova network, is
only too aware that what last week looked like
a one-horse race for three new east coast radio
licences up for auction, has now become a battle
that could once again blow out prices for licences.
DMG
shocked competitors in 2000 when it paid $155
million for its first Sydney licence. It's now
paid a total of $295 million for five metropolitan
licences. However, its spending might be checked
this time round by its owner, the Daily Mail Group,
which is reported to be considering major acquisitions
in the UK.
DMG
chief executive Paul Thompson told a business
lunch last week the Virgin and Macquarie team
was "pretty scary" because of the amount
of money he suspected Branson might throw into
the pot.
"I
don't think it will be very easy at all for anyone
else to get a licence. I accept they are a pretty
significant threat," Thompson said.
Neither
is local incumbent Austereo, which owns the 2Day
and MMM networks, taking the challenge lying down.
Surprised by last Monday's announcement, Austereo
chairman Peter Harvie described Virgin and Macquarie
as "a very impressive group".
"There
is no doubt about it . . . we respect their ability,"
he said.
If
Virgin-Macquarie fails to outbid DMG for the licences,
it plans to wait for other assets to come on to
the market. Austereo's Harvie says his new rival
hasn't made an offer for the under-performing
MMM network and he isn't in a mood to sell. But
Austereo's cash-strapped majority owner, Village
Roadshow, might have other ideas.
Village
has already made clear it will have to sell assets
if it can't raise more bank finance for its preference
share buyback. Its 59 per cent stake in the radio
broadcaster would raise a handy $342 million.
Even
if Virgin enters the market, it will still have
to woo advertisers, convincing them it won't further
fragment the market and, in the long term, that
the cost of another player won't be paid for by
higher advertising rates.
Singleton
claims he can take clients from existing players
and increase the amount of money they spend on
radio advertising.
But
media buyer Fusion Strategy's managing director,
Steve Allen, says expanding the market's overall
ad spending will be difficult.
"They
are not going to find many new advertisers that
others haven't got to," Allen said.
Links:
Official
websites
Virgin.com
Virgin
Radio UK
DMG
Australia
Southern
Cross Broadcasting
Macquarie
Radio Network
Articles
The
war of the ratings
The
Virgin Files - The life and times of Sir Richard
Branson and Virgin
Profiles
Richard
Branson
Virgin
Virgin
Radio
Radio
Stations
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