Some in the radio world have for a while questioned the long term future of so called 'digital audio broadcasting', expressing the opinion that that 'kind' of digital radio (ie through the air to digital radio sets) may well be superseded as the consumer's main choice for radio listening by internet radio services long before it has ever really taken off in a commercial sense. New GCap boss Fru Hazlitt is seemingly one of those people, and her opinion is more important than most given she is the chief of one of the biggest investors in DAB to date. But before we get to GCap pulling out of DAB, what's this about Xfm?
Yes, as expected, Hazlitt yesterday announced her plans for turning round the fortunes of London based radio group GCap, the primary aim being to convince the City the company has a future as an independent concern, and that its shareholders shouldn't just sell out to any potential buyers, in particular the acquisition hungry Global Radio.
"Turning round fortunes" normally means cost cutting, and Hazlitt's plans include plenty of that. The pulling out of DAB is probably the big story of all this, though it was the new GCap chief's plans for Xfm that made Team CMU gasp. She says she intends to sell off the Xfm outposts in Scotland, Manchester and South Wales, the latter of which has only recently gone on air. That decision essentially brings to an end ambitions within Xfm to transform the alternative station from being a London local to being the national home of indie radio, something in which the Xfm team have invested much energy in recent years, especially to win the FM licences in Manchester and South Wales.
It's not clear whether the three Xfm local stations will be sold as a mini-network or individually, nor whether any buyer will buy the right to use the Xfm name. Even if they do, with GCap continuing to operate Xfm in London it is probably inevitable any new owner of the regional stations will eventually want to give them a separate identity. It's also not clear what the move will mean for Xfm London - which currently broadcasts nationally on DAB, satellite, cable and the net. Given Hazlitt's newly stated opinion on DAB, the station may be withdrawn from DAB services as soon as contracts allow. While it will continue to have national reach elsewhere, contracts relating to the sale of the regional stations may limit the promotion of those services outside the capital. That might give the new national NME radio station being planned by IPC, and being spearheaded by one of Xfm's original founders, Sammy Jacob, an opportunity to grab the national indie station crown.
The other cuts in analogue radio will most likely come from GCap's Gold network, which was created by the merger of the Classic Gold and Capital Gold networks last year. In her strategy outline yesterday Hazlitt said she would reduce investment in the classic hits brand to "an appropriate level". Given she doesn't seem to see much of a future for AM radio services (coming from Virgin Radio, she knows all about the limitations of music services on AM), and given that Classic Gold is primarily an AM based radio service, that "appropriate level" of investment could be very low.
But, as we said, the big story in Hazlitt's announcement was really her intentions in the DAB space, though those intentions weren't a surprise, having been much rumoured last week. Basically, GCap, one of the early big investors in digital audio broadcasting, is completely moving out of the space. It will sell its 63% stake in the original national DAB multiplex, Digital One, to its partner in the venture Arqiva. The simulcast of GCap services on DAB will become a low priority, and will probably cease as contracts with local multiplex owners allow - as part of the agreement with Arqiva all GCap stations but Classic FM will disappear from the Digital One network. The move also sees GCap close down its remaining digital only stations - that's Planet Rock and theJazz.
Outlining her new dislike of all things DAB, Hazlitt said: "The majority of people who are listening through DAB receivers are listening to stations that are simulcasting on FM. The majority of DAB receivers out there are FM-enabled too. If you put that against a background of the cost structure of DAB, it cannot be an economically viable platform. It is about here and now, and what we believe is right for the future of the new GCap. DAB with its current cost structure and slow consumer response is not an economically viable platform for the group".
Hazlitt says GCap's new priorities will be FM radio, in the short term, and broadband internet services in the long term. With that in mind Hazlitt's new strategy also requires GCap to change its political position on the future of radio. Previous GCap chief Ralph Bernard was a fan of DAB and was encouraging the government to set a timetable for turning off FM radio, in a bid to persuade more consumers to upgrade to digital. The all new GCap will want FM radio to last as long as possible, certainly until internet radio services are in a position to take over. All of which means Hazlitt's GCap will be lobbying in a different direction on the issue.
Of course before we start assuming all of Hazlitt's plans are a given, we now have to wait and see how her shareholders respond to her proposals. Global Radio are keen to take over GCap, and although their original offer to buy the firm was knocked back, they may now make another offer. As previously reported, Global Radio have committed to the City's Takeover Panel that if they are going to make another offer they will do so by 5 Mar. If they do buy GCap, Hazlitt will almost certainly be out of a job - how much of her strategy would be adopted by Global Radio chief Charles Allen we know not. So, I think it's fair to say everything remains in the air until a new Global offer or 5 Mar, whichever comes first.