A major consolidation of local radio companies could reduce competition and hurt local stations, the government watchdog has found.
The Competition and Markets Authority (CMA) said that a series of takeovers by Bauer Media, the company behind Kiss, Magic and Absolute Radio, could push up advertising costs for independent stations.
The CMA’s provisional report found that a string of acquisitions were likely to put First Radio Sales (FRS) out of business. The company represents 118 radio stations across the country.
The findings come after Bauer led a major consolidation of the £570 million-a-year commercial radio sector.
This year it has bought 16 stations from Celador Entertainment, nine from Lincs FM, 12 from Wireless Group, and took over UKRD, which owns 10 stations. The last acquisition also gave it a 50% stake in FRS.
Advertisers wanting to run hyperlocal ads will approach a radio station directly, but to reach listeners in a bigger area they often use sales houses that represent several stations, such as FRS.
FRS would probably exit the market even without the added pressure of Bauer’s takeovers, Bauer told the CMA. The sales house has already been losing market share and revenue in recent years.
“Bauer also argued that … FRS would have ceased to be profitable in the short to medium term, due to station loss, and that it could not compete effectively for national advertising, and so would have exited the market,” the CMA said.
But the CMA found that FRS was likely to continue trading in the short term if the acquisitions did not go ahead, although its business may be vulnerable and would likely close within the next decade.
It added: “If FRS were to shut down, local radio stations would have to seek sales representation from Bauer or Global (the largest commercial radio group in the UK), leaving local radio stations with little choice when trying to sell national radio advertising airtime and potentially leading to them paying higher commission rates.”
Meanwhile, competition for the supply of advertising in Wolverhampton would also be hit by the takeover of Wireless, the CMA found.
Bauer said: “We note the CMA’s findings. We firmly believe that these transactions are pro-competitive and will benefit both the acquired stations and the broader local commercial radio industry as we look to invest in the radio industry’s digital future.
“Our focus now is on agreeing a route forward with the CMA that supports a strong and sustainable future for the local commercial radio sector.”
A recent switch away from local commercial radio to national stations has put pressure on the smaller players, leading regulator Ofcom to relax regulations to allow local stations to combine forces.
After Global, Bauer is the sector’s biggest player, Britons listening to a commercial station are tuned into a Bauer channel almost 38% of the time. It reaches 26 million listeners every day.
The authority will consult on the findings until January 6 next year before making a final decision by March 17.