Virgin FM bid a mix of money, egos

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.


Official websites

Virgin Radio UK

DMG Australia

Southern Cross Broadcasting

Macquarie Radio Network


The war of the ratings

The Virgin Files - The life and times of Sir Richard Branson and Virgin


Richard Branson


Virgin Radio

Radio Stations