Rich willing to pay hefty premiums for 'trophy assets'

MEDIA & MARKETING:BUSINESSMEN JP McManus, John Magnier and Michael Tabor, and their company Global Radio, recently agreed to buy UK radio group Gcap Media for £375 million (€468 million), a multiple of 50 times Gcap's historic earnings. So it was a job well done by Richard Eyre, chairman of Gcap and former chief executive of Capital Radio and ITV.

Eyre is in Dublin next week to speak at a seminar about media company valuations, where no doubt he'll be advising delegates about how to extract maximum value from the sales process.

According to Eyre: "Media assets have always been much more attractive for rich people to own than a widget factory. They are in the same asset category as football clubs. They are trophy assets." Once the new owners are in place, Eyre is expected to leave the Gcap hot seat with Ashley Tabor, chief executive of Global, expected to lead the merged group. Eyre acknowledges that in this deal, "the majority of hand-to-hand combat took place between Tabor junior for Global and Gcap chief Fru Hazlitt" while himself and the Global chairman Charles Allen sat in the background like "eminence grises".

One reason why Global paid such a big premium for Gcap is because Gcap has had some success in adding online capability to tie in with its radio stations. This has been achieved through cross-promotion of websites and radio stations and by the extension of radio brands online through music, entertainment and local content.

However not all Gcap shareholders were convinced, which was one of the reasons the group was sold. Eyre explained: "Gcap management identified and presented a really convincing digital strategy but some shareholders felt that the noise of the advertising slowdown was louder than the potential from the proposed digital strategy. In my view, that was not the right assessment but I could understand the fund managers' point of view. However Gcap's new owners will have the opportunity to take the long view and they will not be beholden to anybody."

Having worked across all forms of media during his career, Eyre remains confident that traditional media will continue to prosper in the internet era. He points out that despite being such an old medium, radio shares many of the interactive characteristics of the internet.

Eyre said: "There are those pundits who predict that it's all over for all media except the internet and if you don't agree with them, well then you are a luddite. But then people realise newspapers have not disappeared and TV has not died. These are enduring assets and they always will be. I think what will happen is that we will source more and more TV programmes from the internet. But the TV will be the computer, not the other way around." He added: "Radio and television have been slower to adapt to the internet than the print media, though newspapers still have not worked out how to make money out of their online content."

For media owners contemplating a sale, Eyre advises having good lines of communication with staff. "Media companies are all about people and takeovers can be very unsettling for staff. In uncertain times, competitors will swoop and headhunt the best employees."

Giving advertisers more data

When media buyers are planning their advertising campaigns, they like to know the profile of the people who will see their ad. Until now, this information has not been available for websites, but the first Joint National Internet Research (JNIR) released this week has gone some way towards addressing the issue.

The research by Behaviour & Attitudes and Amas was limited to the extent that it only covered the viewing population in Ireland for 19 Irish websites who paid to be included in the survey. The findings confirm what most advertisers already know: the web is a niche medium that is mainly suitable for upmarket and younger demographics. This is because 51 per cent of the 5,185 people surveyed never connect to the internet. In the DE working class category, 70 per cent of people never use the internet.

For many Irish websites, advertisers now have more hard data to go on than page impressions and unique users. For instance, the JNIR has this to say about Ireland.com, the website of The Irish Times:

The website's weekly audience in Ireland is estimated at 87,000 people;

• Men account for 56 per cent or 49,000 of weekly users;

• Weekly usage is highest among ABC1s, representing 78 per cent or 68,000 users;

• 70 per cent of users are 19-44 year olds;

•48 per cent of Ireland.com users have bought a flight online in the past month and 31 per cent have booked a hotel room or other accommodation.