Bidding for a commercial radio licence resembles a lottery, but, as Michael Taylor reports, there is anger brewing over the most recent regional decision
When the Radio Licensing Committee of media regulator Ofcom first gathered in December 2007 to look through bids to run a new FM radio licence on the 106 FM frequency in Manchester it didn't expect the consequences of its decision to cause such a row.For a start there were half as many bids for the licence as there had been the year before when music format XFM beat off 21 other hopefuls to land the 97.7 FM franchise.
That process was also notable for the absence of Guardian Media Group (GMG), owner of the powerful daily newspaper, the Manchester Evening News, and a relatively minor player in the Manchester radio market. A week before the 97.7FM bids were due in. the company issued a statement saying its initial plans to go for the licence with a talk format would be shelved. It was difficult to make a business case, it said.
A year-and-a-half later and much had changed. As one of 11 bidders, GMG threw its hat into the ring for the 106 FM frequency with a music and speech format called Rock Talk FM. When the group eventually won the licence there was shock around the radio industry, but not because of the nature of the proposed station. Rather because much had changed.
While the licence for the 106 FM band for the whole of Greater Manchester was advertised in July 2006, bids were submitted in December and the decision was announced in February 2007.
During the period when bids were submitted Ofcom cleared the way for GMG to acquire the North West-wide radio station Century FM, adding to the group's other North West-wide licence, Smooth Radio, which had undergone two rebrandings from its initial incarnation as Jazz FM.
The later award of RockTalk propelled GMG to a powerful position in regional radio. A new division has been formed under a managing director, Roy Bennett, who has taken on the job of running the three FM stations and their junior AM offshoots and will locate the three stations in Laser House at Salford Quays.
So far Century and Smooth sell about £38m a year in advertising. Obviously commercial confidentiality means the target figures for RockTalk haven't been revealed, but the business plan was ambitious, according to Ofcom.
How it will gain its market share is therefore the crunch question, along with the question of how much a media business with long tentacles into all areas of the media in the Manchester area will be able to offer packages of advertising across all media.
It is certainly the case that Channel M, the city TV station for Manchester is run very closely alongside the Manchester Evening News. Ofcom seemed to be suggesting that the award was not made in spite of GMG's media assets in Manchester, but because of them.
"RockTalk's business plan was ambitious but justifiable, given the editorial and commercial resources available to RockTalk's parent company GMG in Manchester," said a statement.
Insider has since learned that one of the failed bidders is calling on media industry regulator Ofcom to appoint an independent adjudicator to examine the extent of media ownership in the city by GMG and whether the group's award of a new FM licence was a "dreadful error"
The call, by Anil Ruia, chairman of UK 1 FM, which was one of ten bidders beaten off by the GMG's winning RockTalk format, comes after Rob McLoughlin, Ruia's business partner, was told by an Ofcom official that the issue of GMG's ownership of Manchester's only daily newspaper, Smooth FM, Century FM and several local weekly newspapers and fledgling television station Channel M was not taken into account.
In a letter to Lord Currie, the chairman of Ofcom, Ruia says: "The admission is breath takingx85 and at a moment of great sensitivity in British politics the admission is quite frankly shocking and hard to defend."
Media licences have been subject to judicial review, which remains an option for UK1 to pursue.
But John Myers, chief executive of GMG Radio, does not rate their chances. He told Insider: "Anyone who loses a licence bid thinks it should be them. We've often been losers ourselves. But I have spoken to Ofcom and this review is just not a reality. There has never been a successful judicial review of a licence award."
Michelle Surrell is managing director of Emap Radio in the North West, which runs Key 103, Radio City in Liverpool and Rock FM in Preston and was another of the failed bidders. Emap had been hoping to launch a talk format in Manchester to complement the licence it has won to broadcast a new talk format in Liverpool. Surrell is more sanguine and is getting on with the demanding job of setting up their new station.
"My first reaction when I heard the news was disappointment because we put in an exceptional application and we hoped it would work alongside City Talk Liverpool, which we won earlier in the year. It would have made a very powerful offering to listeners and advertisers," she says.
Ofcom's argument is that it was following the terms of the 2003 Communications Act. It doesn't have to consider media ownership regulations, or the effect of offering choice to advertisers, or whether a regional monopoly could be created.
Also, in Manchester, local commercial radio's share of listening is significantly weaker at the older end of the market where BBC Radio 2 is currently very popular. Into this crowded marketplace a hybrid station incorporating key elements of talk and music would be likely to take share from Radio 2
Also in: June 2007
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