GWR Group plc

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GWR Group plc

PO Box 2345, 3B2 Westlea
Swindon SN5 7HF
United Kingdom
Telephone: +44-118-928-4314
Fax: +44-118-928-4310
Web site: http://www.gwrgroup.musicradio.com

Public Company
Incorporated: 1981 as Wiltshire Radio
Employees: 804
Sales: £102.3 million ($163.7 million) (2000)
Stock Exchanges: London
Ticker Symbol: GWG
NAIC: 5131 Radio and Television Broadcasting

Fast-growing GWR Group plc is the United Kingdom’s leading commercial radio station group—in terms of number of radio stations owned; the company also has reached the government-imposed cap of 15 percent market share. GWR’s flagship station is nationally operating Classic FM, which commands its classical music category with an average of some six million listeners, beating out rival BBC Radio 3. The company, which owns 63 percent of a partnership, also holds the United Kingdom’s first national license for digital radio. The company launched its Digital One digital radio service in November 1999 with a bouquet of ten stations. Although digital radio sales remained slowed by high prices, as much as £800 ($1,200) for a home system, the company expects that more than 80 percent of the United Kingdom’s homes will have digital-capable radios by 2005 as prices come down. In addition to its national services, GWR also holds more than 40 local radio stations throughout the United Kingdom, covering the gamut of radio formats. More than 98 percent of GWR’s sales come from its U.K. home market. As the company continues, however, to press the British government to abandon the market caps imposed on commercial radio stations (which do not apply to government-owned BBC Corporation), GWR has gone overseas to look for growth. The company’s primary international station is in Australia, but it also owns stations in Austria, Finland, Holland, South Africa, Poland, Hungary, and Bulgaria. After taking over the radio holdings of the Daily Mail and General Trust (DMGT) media group in June 2000, GWR announced its intention to sell off some of its other radio stations to comply with government rules. The deal, which took the form of a shares swap, gave Daily Mail and General Trust a 27 percent holding in GWR. Led by founders Ralph Bernard, the group’s CEO, and HPJ Meakin, its chairman, GWR also has made inroads onto the Internet, launching Internet-based broadcasting of its Classic FM station, while also offering free Internet access to its Classic FM listeners. At the end of 2000 the group also announced its interest in moving into pay television, with plans to reformat DGMT’s arts station under the Classic FM format. Supporting its stations, the company set up a nationally operating sales office, Opus. The company posted revenues of more than £102 million in 2000.

Commercial Radio Revolution in the 1980s

Britain’s radio waves remained controlled by government-run British Broadcasting Corporation until the 1970s when the first local licenses for commercial radio were awarded. Although the national market remained a government monopoly until the early 1990s, local radio stations quickly flourished, and the United Kingdom radio market was to feature some 150 local station licenses by the early 1980s and some 200 stations by the early 1990s.

Yet the United Kingdom’s radio market was to remain limited in its impact. The focus on the local market meant small, revenue-poor stations, often owned by local celebrities or businesses, or institutions such as churches and schools. The results were generally amateurish stations unable to attract major advertisers. An equal hurdle to the commercial radio market was strict ownership rules put in place by the government, which included various ownership caps and restrictions: no single group could own more than 20 local stations or have more than 15 percent of all available licenses; owners of local newspapers were prohibited from owning more than 20 percent of any overlapping stations, while owners of national newspapers were limited to 20 percent ownership of any local radio stations. Another restriction was a requirement that companies broadcast simultaneously on both AM and FM bands. Such limitations prevented the formation of radio-oriented companies large enough to provide the technology advances needed by the radio market or broad enough audiences to attract major advertisers.

Among the new radio station owners were Henry Meakin, who had been behind the founding of media group Advent Communications in the late 1960s, and Ralph Bernard, who had held various radio positions, including a post at Sheffield’s Radio Hallam, since the mid-1970s. Meakin acquired the license for Wiltshire Radio, starting the company’s operations in 1981. He was joined for the launch of Wiltshire Radio by Bernard the following year. Meakin and Bernard quickly added a second local station. Yet their ambitions were to take their company to a national scale.

In 1985, Wiltshire Radio merged with Radio West, a failing station in Bristol’s local market. The company now changed its name to GWR. In 1987, GWR acquired another station, Plymouth Sound. That same year, the company went public, taking the name GWR Group Plc. Meakin took the chairman’s position and Bernard became CEO and, according to many, the visionary behind GWR’s growth.

The United Kingdom’s radio market had begun to transform itself by the end of the 1980s. A number of larger groups was building increasingly stronger market positions. Among these groups were Capital Radio, Emap, Scottish Media Group, and the Daily Mail and General Trust group. Pressure to pass new legislation governing the country’s radio waves had been building up through the decade. A first step toward the more liberalized market of the 1990s came with the publication of the Peakcock Review of Broadcasting, which recommended a number of changes, including the splitting of the AM and FM bands—enabling station license holders effectively to double their number of stations.

Other changes were in store as the government prepared the Broadcasting Act in 1990, which created a new licensing board, the Radio Authority, and provisions for the first national commercial radio licenses. The passage of this act—which nonetheless left most of the ownership restrictions in place—sparked a much-needed consolidation of the radio industry, as the industry’s larger players raced to position themselves at the top of the market. GWR proved among the most aggressive of the new industry leaders; by 1989, the company already had added two more stations, in Reading and Bournemouth. At the same time, GWR was making plans to win one of the proposed new national licenses to be awarded by the Radio Authority.

Radio On in the 1990s

GWR’s entry into national radio came in 1992, when Classic FM took to the air. GWR had taken a 17 percent share of Classic FM and made no secret of its ambition to gain full control of the classical music broadcaster. That year saw a true outbreak of acquisition fever among the contenders for the United Kingdom’s commercial radio market. By 1994, most of the country’s 200 licenses were controlled by just six companies, including GWR, Metro, Capital Radio, Emap, Scottish Radio, DMGT, and Chiltern. These larger groups were helping commercial radio reach respectability—and profitability—and a number of fronts. The creation of the Radio Advertising Bureau by the big six gave commercial radio greater appeal to major advertisers. GWR was also to join with Capital Radio to form the Media Sales and Marketing advertising sales group. The larger groups also were able to invest in new technology, not only for their broadcasts, but also to link advertisements across the different radio stations in each group. These developments sparked the first strong revenue growth across the industry, sending most of the groups’ profits soaring into triple-digit growth.

GWR’s stake in Classic FM gave it a share of the increasingly strong market for national advertising revenues. By 1993, national advertising already had captured more than half of all radio revenue (and more than two-thirds by the end of the decade). Meanwhile, GWR had built up a portfolio of 20 local radio stations. The company also had gained two important shareholders: Capital Radio, with 20 percent of GWR, and DMGT, which owned nearly as much. Such cross-holdings among the major radio groups sparked a wave of consolidation moves through the mid-1980s. They also provided GWR with the opportunity to gain full control of Classic FM at the end of 1996.

The Classic FM acquisition, which gave the company a six million-strong national audience, helped the company’s revenues soar from just £31 million at its September year-end in 1995 to more than £77 million at its new year-end in March 1997. At the same time, GWR brought its advertising sales in-house, creating the national advertising sales division Opus. The company meanwhile continued to build up its share of the local market, acquiring 30 percent of London New Radio, then paying nearly £4 million to acquire Radio Wyvern, of Hereford. This last acquisition, however, caused the company to top the station ownership limits, forcing it to sell part or all of a number of other stations. Yet the Radio Wyvern acquisition was seen as a strategic move for the company, giving GWR “a strong geographic fit with the group’s existing operations in the surrounding area,” as Meakin told the Independent.

Key Dates:

1981:: Wiltshire Radio is founded.
1982:: Wiltshire Radio begins broadcasting.
1985:: Wiltshire Radio merges with Radio West to form GWR.
1987:: GWR Group goes public.
1988:: GWR joins Classic FM partnership.
1992:: Classic FM begins broadcasting.
1996:: GWR acquires full control of Classic FM.
1998:: GWR wins Digital One license.
1999:: Digital One begins broadcasting; launches Internet radio broadcasts.
2000:: GWR acquires DMG Radio.

Bumping up against ownership restrictions had brought GWR to extend its acquisitive interests overseas, and the company began building up radio station portfolios in such countries as Australia and New Zealand, Austria, and other western European countries, while also eyeing the potentially lucrative markets in the former Eastern bloc countries. Nonetheless, the United Kingdom was to remain the company’s chief source of revenues, representing more than 98 percent of its sales at the end of the century.

That market was set to grow still more. In 1998, GWR led a group of investors to win the United Kingdom’s first national digital radio license—the company was uncontested in the bidding. The new radio service, which promised ten stations, included Classic FM and two other national radio stations, Virgin and Talk Radio, broadcasting digital quality sound, with a degree of interactivity (such as being able to tailor programming to listener preferences) that analog radio was unable to offer. GWR bet that digital radio would rise to become a major force in the U.K. radio market; the committed accepted, however, that its Digital One service might remain unprofitable for seven years or more. Hampering the penetration of digital radio was the high cost of digital-capable sets, with car radios costing upward of £500 and home sets up to £800. Increases in programming and consumer interest in high-technology was expected to fuel demand, in turn enabling prices to drop to a target of £100. GWR’s majority position in Digital One was expected to cost it up to £3 million per year for the next several years.

Digital One began broadcasting at the end of 1999. By then, GWR had moved onto the Internet as well, launching Classic FM in a web-based format. The company also set up its own free Internet service for Classic FM listeners. The company began to extend its presence on the Internet the following year, forming a new Internet investment subsidiary, ecast ventures, and also launching the Musicradio.com portal site offering access not only to Classic FM, but also to its local stations and digital-only stations through the Internet.

Meanwhile, GWR continued acquiring new radio stations, making seven purchases through 1999, including Orchard FM, based in Somerset, Gemini FM, and 97 FM Plymouth Sound. In 2000, GWR strengthened its ties with shareholder and longtime collaborator DMGT when it agreed to acquire that company’s DMG Radio division. The deal gave GWR eight new radio licenses in the United Kingdom, as well as operations in Australia and Hungary in exchange for an increase in DMGT’s holding in GWR to slightly less than 27 percent. The deal was expected to herald a new period of closer collaboration between the two companies, leveraging DMGT’s media resources with GWR’s broadcasting clout. GWR announced its intention to enter the pay-TV market, applying the Classic FM format to DMGT’s arts-oriented television channel.

Sales of digital radios began to rise steadily by the beginning of 2001, as prices began to fall. Meanwhile, the company’s flagship Classic FM continued to post new listening audience records, attracting more than six million listeners for a total weekly hour rate of 48.7 million. The company, meanwhile, was awaiting a new Government White Paper for the new century, expected to loosen the country’s ownership restrictions. With backing from many within the government, GWR hoped to make new acquisitions to increase its already strong position in its home market.

Principal Subsidiaries

GWR Radio Services Ltd.; Classic FM plc; Beacon Broadcasting Ltd; Wiltshire Radio plc; GWR (West) Ltd.; Thames Valley Broadcasting plc; Two Counties Radio Ltd; Chiltern Radio plc; Leicester Sound Ltd; Mercia Sound Ltd; Mid Anglia Radio plc; Radio Trent Ltd; Radio Broadland Ltd; Suffolk Group Radio plc; Radio Wyvern plc; Orchard Media Ltd; Plymouth Sound Ltd.; ecast ventures.