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A finely tuned plan?

Posted in General, Media, Oliver Milman, Latest reporters' blogs April 17th, 2007 by Oliver Milman

Cash-strapped Scottish Media Group’s (SMG) decision to sell off its main asset, Virgin Radio, is an interesting one. As escape plans go, even the A-Team would struggle to come up with a strategy that required more crossing of fingers and muttering of prayers.

Rob Woodward, the new chief executive at SMG, has certainly raised eyebrows by trying to flog off the company’s prime asset before he’s even properly warmed his seat.

Also, relying on STV, the company’s troubled television arm, to haul it out of trouble is curious, while the decision not to continue the sale process of outdoor advertising business Primesight is downright strange.

Primesight has performed woefully over the past year, with no signs that things will improve. So, for Woodward to feel that he will somehow get better than the widely touted £65 million for the division is optimism exemplified.

It’s thought that Virgin Radio will bring in £105 million for SMG. Great - until you consider that the money will disappear down a black hole caused by SMG’s eye-watering 50 per cent drop in profits last year. Oh, and that it’s hard to see who will buy the station in the first place too.

Sir Richard Branson is the current front-runner, possible in a joint venture with radio group GCap. But beyond that, the options for Virgin Radio are scarce.

Media buyers are adamant that Virgin Radio can’t survive by itself, so a willing broadcaster will have to be found. As much as the station’s fancy podcasts and zany breakfast DJ Christian O’Connell appeal to its fairly loyal audience, a crippling slump in advertising revenues has resulted in a cash-poor radio industry uninterested in purchasing moderately-performing stations.

Of course, being a respected former Channel 4 executive, Woodward knows his stuff. His industry insight could haul SMG out of the mire. But his strategy is an incredibly bold one and there is the ominous prospect of thing getting far worse for the company before they get better.

As for Virgin Radio, its marketers will be hoping a swift change of ownership will result in a boost to a rather thin marketing budget, something that’s been lamented privately for months.

Whatever the future for SMG, even Hannibal, Face and Mr T would hesitate before taking on the task in hand.