Radio Daze

Communicorp, Denis O’Brien’s radio group, became a shareholder in a restructuring in 2010. A year later Maher left the station in a management shake-up. Two years ago, Phantom was renamed TXFM after relocating to Communicorp’s Marconi House.

Despite Communicorp’s immense resources, TXFM failed to reverse its losses. Communicorp and its other backers sank €5.2m into the venture but, a month ago, it became the first licence to be handed back to the regulator.

Although there is some growth returning to the radio advertising market, the TXFM failure demonstrated that conditions remain tough.

According to a report from Davy, the radio business will struggle in 2016 as the market remains highly competitive.

The latest JNLR listenership figures released on Wednesday evening provided little comfort to commercial investors.

Aside from RTE Radio 1, most national stations saw leading presenters shed listeners. Communicorp’s talk stations Newstalk and Today FM saw big names including Pat Kenny and George Hook lose listeners, while RTE’s 2fm is also finding that return to growth is an uphill battle.

Radio’s commercial break is lasting longer than expected.

John Purcell of the Independent Broadcasters of Ireland (IBI) believes the radio sector will remain resilient. The decision by Communicorp and the other TXFM shareholders to return the licence is evidence that margins at many radio stations are extremely slim.

He estimates that radio will see growth of about 3% in 2016: “We’re recovering in two and three per cents, not the tens and fifteens and twenties we fell by, so it’s a long recovery. We can’t be complacent.”

Davy analyst Robert Stokes said the Irish radio advertising market had been severely hit by the downturn, falling an estimated 50% from peak to trough. He added radio had yet to feel the broader recovery. “The economic growth experienced in Ireland in recent years has not been reflected in the Irish radio advertising market, which moved only slowly out of the trough.”

Stokes said that 2015 became increasingly competitive for radio operators, with stations increasing their spend on marketing and investment in talent, while discount pricing remained a feature of the advertising market.

Listeners spend similar amounts of time listening to the radio as they do watching television and going online, according to Core Media, one of the country’s largest media buying agencies. Yet the medium still lags behind in the advertising investment it attracts. In 2015, radio got a 14.3% share of ad spend in the Republic of Ireland, down from 15.1% in 2014. This is a greater percentage share decline than any other sector with the exception of magazines, said the agency in its annual review.

Despite this, Craig Farrell of Core Media believes radio may grow by 5%, which is one of the higher estimates among the agencies.

Bill Kinlay of rival agency Mindshare said the radio market was extremely competitive, with Wireless Group (which was formerly UTV Radio), Communicorp and RTE squaring up to each other.

“RTE are getting their act together in a big way. They are much more organised than they used to be. The focus has been on 2fm under Dan Healy and they are on the way, making good progress.”

Kinlay believes radio is having a worse time than TV or outdoor advertising. “There are a number of reasons. I don’t think it’s anyone saying, ‘I’m going to pull money out of outdoor or pull money out of radio and put it on TV.’”

In the main, he said, a lot of clients use radio as a frequency building medium. “It adds frequency behind your TV message or your print message, and it’s still strong at doing that. But as things have tightened up, clients have cut back and might be saying, ‘I’ll do one less campaign on radio this year.’”

The radio market has been fairly flat for the first quarter, “so it’s not as if has fallen off a cliff”, said Kinlay. For the year, Mindshare predicts a 1%-2% rise in ad spending on radio.

Another challenge for radio is to find its place in an increasingly digital world. Wireless Group has just rebranded its sales division as UrbanMedia.

“One of the key decisions for us was that radio wasn’t in the name, as we felt it should reflect all we can offer,” said the UrbanMedia sales director Brian McCarthy.

Advertisers are seeking social media and digital aspects to their campaigns, so UrbanMedia is focusing on campaigns online, as well as radio.

Spot advertising, the traditional advertising slots on commercial breaks, is on the decline.

“I know that there is talk of spending increasing but I don’t think any client is going to spend more money on spot advertising than they were last year, and that’s an ongoing trend,” said McCarthy.

While this year is expected to see modest growth, Davy predicted that it would be 2017 before radio ad sales numbers would start to improve.

McCarthy claimed that the industry would “have to work for it”. “We’re all going to have to do better and make sure we’re all promoting radio as a medium,” he said.

One innovation welcomed by advertisers has been the radio player, bringing together RTE and commercial stations on a single app.

“I’d rather be fighting over a big pie that is created by us all than over what could be a decreasing pie,” McCarthy said.

Despite the challenging backdrop, several senior broadcasting sources said that the sector as a whole felt shocked when the TXFM licence was handed back.

Communicorp and the other TXFM shareholders, McGuinness and Desmond, decided not to reapply for the licence, which was in the process of being renewed by the Broadcasting Authority of Ireland (BAI). Communicorp’s involvement had been seen as a guarantee that the station would survive.

One source said: “It had all the resources of Communicorp behind it and was only paying the salaries of six people. It wouldn’t have taken much investment to try something different, dress it up, reinvent it. For them to give it back is amazing.”

Sources believe the station was losing €100,000 a year.

Another media insider said that the failure was evidence that one licence too many had been granted by the BAI.

“We’re really at the outer reaches of the number of radio stations that this small country can support,” he said.

Gervaise Slowey, chief executive of Communicorp, said that it was “a really reluctant decision” to give back the TXFM licence.

“The problem with the station was that it was a fantastically loved station by a niche audience,” she said. “The reality was that the market was too small.”

The shareholders had to make a decision, Slowey added. “You can’t go in without a long-term commitment, and we just felt we weren’t going to be able to make it work.”

While Communicorp decided to walk away from TXFM, Slowey said that she was encouraged by overall listening figures for radio.

About 83% of people still listen to radio in Ireland, despite the rise of Spotify and other digital alternatives.

Slowey said that Communicorp research carried out among the big ad agencies a fortnight ago suggested that spending in the overall advertising market was expected to rise by 5% this year.

Within that increase, digital is expected to be up by 17%, and Slowey believes outdoor, radio and TV will all experience about 3% growth, although TV may end the year a bit higher than the other two.

Slowey said that Communicorp would be ahead of predicted market growth.

“It has been a poor April, but it’s not a month that tells the story — you have to look at the full year.”

Newstalk, the group’s national talk station, has become a an important alternative to RTE’s news output. However, since launching in September 2006, it has struggled to make a profit.

Slowey declined to comment on whether the station was now breaking even.

Accounts for the group in 2014 suggest that O’Brien continues to support the group financially, lending it €16m in that year alone.

Slowey admitted that talk radio was very expensive.

“It is very difficult to make the commercials work. We are getting there and Newstalk is growing its market share, generally speaking. It has ups and downs but we are on the right track.”

She said that the group was very pleased with Newstalk’s development and was “looking forward to keeping on building up that business”.

The station does face challenges. Its election coverage, for example, cost €400,000.

“That’s doing the count centres around the country, and meeting the politicians. We don’t get a single penny for a public service like that,” said Slowey.

“If there is another election we just wouldn’t have the money to do that. That would be a serious concern for us.

“The reality of public service broadcasting is that it is enormously expensive.”

Despite the drain on O’Brien’s resources, the group is in the process of having its licence application renewed. The vast majority of commercial stations are profitable, even though it can take time. Sean Ashmore, chief executive of 4FM, is a co-founder of Sunshine 106.8 in Dublin. Formerly Dublin’s Country, Sunshine moved into profit a year ago after 13 years on air.

Now seven years on air, 4FM is approaching breakeven but is not there yet. “It is tough and it continues to be tough,” said Ashmore. “But there is light at the end of the tunnel — even if it’s some distance away.”

Some in the industry believe it could take 20 years for Newstalk to become a truly established brand. Now halfway through that time frame, all it needs is the perseverance of its billionaire shareholder.

Maher is the first to admit that the expectations for Phantom FM were unrealistic. “There is a degree of sanity in it now. If you go back 10 years, there was crazy money being spent on radio stations and there was a lot more money from advertisers,” he said.

Maher, now running digital station 8radio.com, had been planning to found a radio station to compete against Phantom for the niche licence but estimated that, at most, the station could bring in €400,000 a year in commercial revenue. It would be run on a shoestring.

“The business model has to be right. You would have to cut costs to the extent you wouldn’t be in the JNLR survey; you will outsource an awful lot of your back office, even possibly sales.

“Radio is just not seen as cool at the moment. When I go to an ad agency, it’s ‘get me on Google, get me on Facebook’. Radio always had a cool vibe that probably outweighed its audience, but I don’t think it’s there at the moment.”