The Big DAB Gamble!

This morning’s announcement by Fru Hazlitt, (CEO of GCap Media) that “DAB is not viable”, is quite a momentous moment. Far be it from me to dramatise further an already dramatic announcement, but this is huge.

You’ve probably read all the facts elsewhere, but to put this all in context, here are some of the headlines from GCap’s statement this morning:

- Closure of national DAB stations Planet Rock and The Jazz
- Sell all the Xfm stations outside London or hand the licences back
- Sell off stake in Digital One Multiplex
- Abandon Capital’s ‘2 ads in a row’ policy
- Call for the switch off of AM

This ‘defence plan’ as it has been called, is really a last throw of the dice for GCap (even if it’s Fru’s first throw at this particular table). Global are hovering ‘vulture-like’ and we’ll see what the next few weeks bring. But back to the DAB issue. The UK’s largest commercial player has come out and basically said, “We think DAB is rubbish and we’re bailing out while we can”. Is this right, or are they just responding to a difficult economic climate, cutting costs, and dealing with a legacy of investment and belief in DAB which bordered on religious fervour, from Ralph et al.

This kind of puts commercial radio in an awkward spot as they’re now very divided with Bauer seemingly doing well with The Hits, Smash Hits, Heat Radio, and Q Radio and ready to launch ‘Closer’ as a radio brand. (No coincidence the timing of the press release to herald the announcement of Ric Blaxill joining Bauer’s national digital brands! He actually joined a while ago but this bit of pro-DAB PR says to the world… “We’re still investing in DAB and doing fine thank you very much”!!) And Channel 4 constantly have to put out statements saying how committed they are to the 2nd national multiplex.

So let’s try and make sense of this all. I believe Fru’s thinking was that the best way for GCap to survive as a company was to do something dramatic. The City loves bold initiatives. You take a gamble and hope that the city / investors back you. The ‘red or black’ scenario is a common one and GCap has gone for a defensive option of cutting where it can save most… DAB. The net spend in 2007/07 was £8 Million. This, combined with the other measures announced will hopefully placate the city and investors enough to not be tempted by an improved offer from Global in the next few weeks. I thought the comment from Charles Allen on the Times Online was a good one: “You can’t shrink your way to growth”. We shall see.

The sad thing about all this is that all the papers tomorrow will write “DAB in Crisis / The End of Digital Radio / Digital Killed The Radio Star” etc. There’s no doubt that the economics of it are challenging, particularly at the moment, however there is still a belief from many within commercial radio (not to mention the BBC!) who fervently believe in it. So GCap backing out of DAB should be seen more in the context of a company trying to survive this year “It’s about the here and now” – (Fru Hazlitt), rather than sounding the death knell for a technology that is already in around a quarter of homes in the UK.

Let’s spare a thought for the people at GCap. It can’t be a great place to be today. Planet Rock and The Jazz are both really good radio stations staffed by people who want to make great radio day in day out. And the Xfm sell off will no doubt affect a large swathe of employees. Plus, I wouldn’t place much money on the newly re-launched ‘Gold’ surviving. It’s on AM and DAB… both platforms are on today’s blacklist. They’ll be a lot of good people going home tonight with rather glum faces.

Two final thoughts on what probably should have been about 5 postings! (Sorry!!)

Capital is ditching its ‘only 2 ads in a row’ policy. Last year that policy cost the company almost £6 Million. About bloody time!! It was never the ‘silver bullet’ it was trumpeted to be at the time and was a great demonstration on how to loose £6 Million a year with no tangible benefit.

And ‘Jerry’s Final Thought’ today… What a damning indictment of the post merger GCap / ‘Bernard’ era today’s announcement is. Talk about a public slap in the face. Actually - it’s more like a public flogging! (Except the perpetrators are exiting stage left with rather large cheques in their back pockets and no whip marks visible!)

This will go down as one of commercial radio’s biggest U-turns ever… and the history of this company is almost comedic if the real twists and turns were laid out for all to see. Let’s pause… take breathe… and wait for the next roll of the dice as we remember the words of American playwright Wilson Mizner…

"Gambling… The sure way of getting nothing from something!"