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Capital Radio plc

Capital Radio plc

30 Leicester Square
London WC2H TLA
United Kingdom
Telephone: ( + 44) 20 7766-6000
Fax: ( + 44)207766-6100
Web site: http://www.capitalradio.plc.uk

Public Company
Incorporated:
1973
Employees: 1,035
Sales: £105.2 million ($206.4 million) (1999)
Stock Exchanges: London
Ticker Symbol: CAP.L
NAIC: 513112 Radio Stations

London-based Capital Radio plc is one of the United Kingdoms leading radio and media groups. Its holdings include its flagship Capital FM 95.8 station, which, with more than three million listeners in the London area, has captured the largest metropolitan audience of any radio station in the world. Beyond its grip on the London market, Capital Radio owns the licenses for some 20 other commercial radio stations across the United Kingdom, in markets including Kent, Birmingham, and South Wales. Capital also has aggressively pursued licenses in the promising digital radio market, opening at the end of the 1990s. Since late 1999, the company has been awarded digital licenses to more than 20 local markets, as well as multiplex licenses in the Birmingham, Manchester, and London markets through a joint venture with rival media company Emap. Capital Radio also has been rapidly expanding into the Internet arena, operating a variety of commercial and station-related sites. After an aborted attempt to enter the restaurant business in the mid-1990s, Capital Radio has begun to look closer to home for further expansion; in May 2000 the company beat out Scottish Media Group when it reached an agreement to acquire the Border TV television and radio group. Capital Radio is headed by CEO Dave Mansfield.

Commercial Radio Pioneer in the 1970s

Until the 1970s, British radio waves were the exclusive province of BBC Radio. In 1972, however, the British government opened the countrys airwaves to the first commercial stations. LBC, with a mandate to provide news and information, began broadcasting in 1973. Two weeks later marked the debut of Capital Radio, which had been given the mandate to provide general entertainment programming. Richard Attenborough, who become chairman of the company (and later was named president for life), was the stations first broadcaster.

Capital Radios early years were difficult ones, however. Advertisers were difficult to find, audiences were reluctant to tune into what many considered the low brow and at best amateurish nature of commercial radio. Throughout the 1970s, Capital Radio was forced to turn to its major investors for funding to stay on the air. At one point, Attenborough was forced to sell a painting by Degas to pay the companys employees. Nonetheless, the company enjoyed some successes as well, setting up its own Community Affairs Department and organizing the Capital Helpline, the Help a London Child charity program. In the late 1970s, the company inaugurated the Flying Eye, the first airborne traffic reporter over the London area.

The companys big break came in 1984 when Chris Tarrant joined the company as a presenter for the stations lunch-time show. When Tarrant moved to the breakfast slot, however, his popularity soared; Tarrant became a primary force behind Capital Radios steady audience gains. Toward the end of the decade, Capital Radio began to prepare for much-needed changes in the independent radio marketwhich by then had reached nearly 200 stationsby going public, making it the first radio station to gain a listing on the London Stock Exchange. The publication of the Peacock Review of Broadcasting sparked a number of developments in the commercial radio world. One of the most significant changes was the splitting of the AM and FM programming requirements (radio stations previously had been required to simulcast the same programming on both bands).

As a result, Capital Radio was able to create two stations: 95.8 Capital FM began programming contemporary hit music, while its AM counterpart, 1548 AM Capital Gold, turned to a classic golden hits playlist. By 1990, the Capital Gold station had become one of the most successful on the AM band, while 95.8 Capital FM topped previous audience champion BBC1 for the first time. With nearly three million listeners, the FM station became not only the undisputed leader of the London market, but also the world leader in metropolitan audience share.

Expansion in the 1990s

The passage of the Broadcasting Act of 1990 established a new Radio Authority, which was given charge of attributing new local and national licenses. The new legislation helped pave the way for a shakeup in the radio industry, as a number of major groups began to lead a consolidation of the market. Capital Radio joined the resulting acquisition fray in 1993 when it made its first acquisition, paying £18 million for Midlands Radio Plc., giving it that companys two key Birmingham market AM and FM stations. The company also bought stakes in two other radio groups, GWR and Metro Radio.

The following year, Capital bought another radio company, Southern Radio, paying £33 million for that companys stations in Kent, Sussex, Isle of Wight and Hampshire. With its potential audience reaching beyond London to include much of the Southeast, the company hoped to become more competitive against other media, particularly television, in attracting advertisers. At the same time, Capital itself became the subject of takeover rumors. The company nonetheless maintained its independent course. By the end of 1994, commercial radio, which had long been the ugly duckling of Britains media, had overtaken BBC Radio for the first time on a national scale. This breakthrough gave the entire industry a boost among advertisers and began U.K. radios long-running leadership in advertising growth rates. Severe government restrictionswhich included a market-based point system that restricted the various major radio groups from extending their holdingswere hampering Capital Radios growth. Nonetheless, the company managed to acquire Oxfords Fox FM by 1996.

Hope for the future appeared on several fronts, however. In 1996, the government prepared the New Broadcasting Act, which opened the way to the first licenses for digital radio transmission, as well as loosening some of the station ownership restrictions. That same year, Capital Radio launched its first Internet site, becoming one of the earliest entrants in what was to become the boom market for the turn of the century. The company also branched out into record production, setting up the joint venture Wildstar Records with Telstar. Meanwhile, Capital Radio began to cast its expansive gaze beyond radio; in November 1996, the company paid £57 million to acquire the My Kinda Town restaurant group, composed of a number of theme-based restaurants, including the Chicago Pizza Pie Factory, Tacos, Beach Blanket Babylon, and Harry J. Beans. These restaurants joined another company venture in the works, the Capital Radio Café partnership being constructed on the ground floor of the companys headquarters.

The My Kinda Town acquisition was immediately greeted with disapproval on the stock market, which sent Capital Radios share price plummeting. The following year proved the market right: struggling to integrate the various restaurant concepts, Capital Radio attempted to convert a number of its restaurants to a Latin theme format, which included the Havana restaurant concept, before deciding to focus its restaurant interests wholly on the Radio Café and Havana concepts. By 1999, My Kinda Town continued to provide the company with a bad case of indigestion, and in that year the company sold off the Havana restaurant chain and closed down its restaurant division, keeping only its four Radio Cafés, which were then regrouped directly under the company.

Returning to radio in 1997, Capital Radios expansion ambitions were thwarted when its attempted £87 million acquisition of the Virgin Radio groupwhich held one of the rare national commercial radio broadcasting licenseswas referred to the Mergers and Monopolies Commission. The companys file was promptly caught up in red tape. In the meantime, popular Virgin Radio personality Chris Evanslongtime opponent of Chris Tarrant in London radios War of the Two Chris managed to find investors willing to back him in a buyout of Virgin Radio. Capital Radio, now led by CEO Dave Mansfield, was forced to content himself with the purchase of the much smaller XFM radio group, set up just nine months earlier, for £4 million. The company followed up that acquisition in 1998 with the purchases of Red Dragon Radio and Touch Radio, both broadcasting in South Wales.

In 1998, the Wildstar joint venture partnership with Telstar led to the formation of a new joint venture, MusicCapital.com, to set up an online retail music service. Operated under Capital Radios new Digital Interactive subsidiary, the joint venture marked a new phase in the companys Internet expansion. At the same time, the company began preparing for the next revolution in radio broadcasting, setting up another joint venture, now with rival radio and magazine group Emap plc, to form CE Digital to compete for the coming opening of the United Kingdoms digital radio market.

CE Digital won licenses to broadcast digital multiplex radio stations to the London, Manchester, and Birmingham markets, while Capital went off on its own to win the local license to nearly 20 more digital radio marketsincluding the digital multiplex license for the Cardiff market, a national digital license, and 16 other local market digital licenses. In January 2000, the company realized its long-held ambition to become a national broadcaster when XFM began transmission over the SkyDigital satellite network. Full rollout of its XFM digital radio network was expected to be completed by mid-2000.

Company Perspectives:

Capital Radio is the UKs leading radio group. It is our intention to build on our strengths and to embrace digital technology, which we believe will offer significant growth opportunities, as well as establishing a leading Internet presence.

With its Internet interests building up steamin the late 1990s the company constructed a network of music-content web sitesCapital Radio began to look toward a new media market. In April 2000, the company beat out the Scottish Media Group in its bid to acquire the Border TV television and radio group. Capital Radio agreed to buy up the television station, a member of the ITV network, and four local radio stations, in a deal worth nearly £150 million. The Border acquisition helped boost Capital Radios presence in the northeast, west, and Midlands regions.

By mid-2000, Capital Radio had built its coverage to include one third of the United Kingdoms adult population. The company also announced its intention to pursue further acquisitions and license bids to extend its coverage across the United Kingdom. With advertising revenues risingreflecting the strength of the British economy and the surge of so called dot-corn companies seeking to establish their brand namesCapital Radio entered the new century on an upbeat note. As CEO Dave Mansfield said, as reported by Reuters, The good news will continue. Its been an outstanding time for the company, every dimension of our business has worked well, and were feeling pretty bouncy.

Principal Subsidiaries

Birmingham Broadcasting Ltd.; Border TV; Bucks Broadcasting Ltd. (63%); Capital Radio Digital Ltd.; Capital Radio Investments Ltd.; Capital Radio Management Ltd.; Capital Radio Telstar Entertainment Direct Ltd. (50%); Cardiff Broadcasting Co. Ltd.; CE Digital Ltd. (50%); First Oxfordshire Radio Co. Ltd. (57%); Independent Radio News Ltd. (46%); Midlands Radio plc; The Ocean Radio Group Ltd.; Prospect Group Holdings Ltd. (20%); Radio Advertising Bureau Ltd. (45%); Radio Invicta Ltd.; Southern Radio Group Ltd.; Southern Radio Ltd.; Wildstar Records Ltd. (50%); Xfm Ltd.

Principal Competitors

Amazon.com, Inc.; British Broadcasting Corporation (BBC); Chrysalis Group plc; Scottish Radio; Emap plc; Virgin Group plc; GWR Group plc.

Key Dates:

1972:
British government awards commercial radio licenses.
1973:
Capital Radio goes on air.
1984:
Chris Tarrant debuts on Capital Radio.
1987:
Company is listed on London Stock Exchange.
1988:
1548 Capital Gold AM is launched.
1990:
95.8 Capital FMs audience tops that of BBC Radio One in London.
1996:
New Broadcasting Act establishes licensing plan for digital radio.
1996:
The first Capital Radio Café is opened.
1999:
CE digital joint venture awards three digital multiplex licenses.
2000:
XFM digital radio is launched.

Further Reading

Barker, Sophie, US Media Run Rule Over Digital Capital, Daily Telegraph, October 28, 1999, p. 40.

Marr, Melissa, Capital Radio Pumps Out Rockin Results, Reuters, May 9, 2000.

, Capital Radio Wins Border TV Over with New Bid, Reuters, April 13, 2000.

Rankin, Kate, Having an Absolutely Capital Time, Daily Telegraph, November 14, 1998, p. 33.

Robins, Jane, Fury of a Would-Be Venture Capitalist, Independent, October 6, 1998, p. 14.

M.L. Cohen

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