Q: The first listenership numbers for Virgin Radio since it has been under the Bennett Coleman group came out last week, and it has lost some 500,000 listeners?

A: Yes, nearly 25% of their audience.

Q: You were involved with that station in its heyday and you know its audience well. What do you think is going wrong there?

A: It’s a combination of two partners that are involved in the operation and I’m not singling out any one of the two, but I think the combination of the operators—they are totally out of their depth. The Indian operator has stepped into a minefield where radio is very mature. There are a lot of stations. The BBC is very powerful; it’s the biggest state broadcaster in the world; commercial radio is highly developed, with Capital Radio, Heart, Magic, XFM… These are all big, big, smart operators. So I think there is probably an overconfidence aspect from India and I think from the English perspective, there is probably a slight naivete… I think the combined entities are out of their depth. Full stop.

The station doesn’t have the Virgin brand anymore. Were the new owners keen to have the Virgin brand and if so, why did the deal not happen?

They (TIML) were very keen to have the Virgin brand and to be fair to them, they approached Virgin quite some time before the transaction was completed. They came to us, I had the first meeting with them about that issue, earlier in India and then I think they had one or two meetings in London, and they were very keen to sign the brand.

More after the jump:

Why did the deal not happen?

We, as in Virgin, were not comfortable, and we had concerns as to their ability to run the operation and give value to the brand. I personally felt that the brand might suffer more than it had already suffered—and it had suffered—when Virgin sold the brand to SMG it suffered terribly for the next four years. So I didn’t feel comfortable, and London (Virgin’s headquarters) was not pleased to hear this. In other words they did not want the brand to come off air. So this was not done with any degree of pleasure. And we would have much preferred for the brand to stay on air. There was nothing to be gained by taking the brand off the air, other than to protect the integrity of the brand.

And the sad post script to the story is: probably no one has come out looking like a winner. We don’t have the brand Virgin Radio (on air)—the Iconic Virgin radio is no longer on the air in the UK, and besides, the one that is on the air (that has been taken over) is not doing very well.

You already had a partnership with HT Media in India and it’s well known that HT and the Times of India group are arch rivals. Did that play a part in your decision? (HT Media is the publisher of Hindustan Times and competes with The Times of India group across several media segments.)

Yeah, it did.

Did HT try to influence you?

Nope. I had one conversation with HT at which they very calmly said that they hoped that if it were to proceed, it would not adversely affect our relationship. That was the only comment they ever made and they were very professional and very honest through the whole process.
I have to be honest, I was mindful of that and we were, but at no point did HT try to influence us. So yes, there was the aspect of loyalty to HT and then there was the other aspect, which was that we had not a great deal of confidence in what we thought was the future. The overriding reason was that the radio station would not come to be presented in a way which we thought it should have.

And I completely refute this concept that the brand change is the reason they lost the listeners. They were gifted 2.3 million listeners. They had them the day the brand changed. The station suddenly ceases to be called Virgin radio so the listeners ran away? That is rubbish.

There may have been a slight disappointment with the brand change for some people (at the most). If your favourite TV channel changes name, but if it maintains the same high quality, I don’t think you would switch channels. I just don’t think that would be the case.

I think the listenership of 2.3 million was not treated with the respect they should have been. They lost 500,000 listeners in the first month. Something must have been wrong.

You think the price Bennett Coleman paid for the station was a fair price?

The market sets prices. It can be argued that something is worth more or this is worth less, but the market sets the price.

But if you were to value the station?

Twenty-five million pounds. Dead on. (At the time) We did not think it was worth that much money. (But) Sitting here today, it’s worth 25 million pounds. End of story.

But the Times Group has suggested that the station has a lot of online listeners and that that is only going to grow and may be there is a revenue model there. Your thoughts on that?

There are other radio operators in the UK, and I ask you why are most of them shutting down their digital operations. There is no business model for digital radio. No one can sell it. Virgin was one of the first operators ever to get into digital radio. Back in the 1990s, Virgin had a massive online presence. The revenue-generating platform is the free-to-air terrestrial radio station. If you don’t have that operating first and foremost, all the rest of that is no use.
Their only option to commercial success is not to explore digital revenues but to get listeners back to their main terrestrial station. But I have my doubts—I don’t think they really know how to do that.
And it’s interesting, isn’t it, that a company can be totally dominant in one country and can still have serious, serious troubles in others?

Tomorrow: Virgin Radio’s business in India, Indian radio industry issues—rate attrition, listenership reporting, differentiators, news on FM, radio ad spends.


Absolute Radio responds:

Absolute Radio CEO Donnach O’Driscoll responded via email to some of the references made by Grace in this interview. The reference is in bold and the response is below each.

The combination of operators—TIML and Absolute—are out of their depth in the London radio market.

The track record of the parties involved speak for themselves. The operational team at one Golden square is largely unchanged from before the acquisition. In addition to myself, Clive Dickens is the station’s Chief Operations Officer and he has over 25 years’ experience in UK radio including London. Chris Lawson, brand director, comes from Bauer and has over fifteen years of experience, with particular experience in brand development and digital marketing. Our aspirations are to build a global music and entertainment brand that is relevant to our core audience and focussed on real music. 

TIML wanted the Virgin brand but Virgin disagreed because they did not feel confident about the new operators’ capability to run the station and add value to the brand.

TIML carefully considered the possible use of the Virgin Radio brand and conducted extensive consumer research around this issue at the time of the acquisition. The Virgin licence terms were also considered too restrictive and not fit for purpose in the context of a digital age 21st century radio station. The decline in audience between 1999 and 2008 under the Virgin name was also a factor. The overwhelming conclusion, reached by TIML, was that it should acquire the station without the Virgin brand and proceeded accordingly.

The listenership drop is not due to a change of brand, it’s because the operators have changed the product itself. They were gifted 2.3 million listeners but they are not treating the listeners with the respect they deserve.

The station, as Virgin Radio, had 4.2m listeners in Q1 2000. At the time of acquisition, the station had 2.3m listeners. Accordingly, in this period, Virgin Radio lost 1.9m listeners.

The immediate task at hand, which is proceeding to plan, is to implement the necessary changes that will, over the long term, deliver growth in audience and revenues, with a proposition that is relevant to our core audience. This is being developed and rolled out with unprecedented involvement (and enthusiasm) of our audience through research groups, open playlist sessions, feedback from 1/2 million VIP listeners, our blogs and some 25 other ‘touchpoints’ our listeners now have with Absolute Radio. Indeed the rebranding exercise has been the subject of much positive comment in the media including the respect afforded our audience in both the cross fade period (in the lead up to the station re-branding) and since.

The RAJAR methodology, which measures reported listening, is supported by us. Our independent research, however, points to the possibility of misattribution under this methodology where there has been a significant change, such as in the renaming of a station. This is something which will feature more and more as numerous stations change their names in the coming months. However, we accept this and remain focussed on delivering our long term objectives.