Global to buy GMG Radio: Competition issues.

So, it's being reported today that Global Radio is to buy GMG Radio for £50million.  It's being reported that UTV Media, Absolute Radio and Bauer Radio are expected to lodge complaints to the Competition Commission.

It's strange to watch this happen, knowing that this has happened already in two broadcasting related industries, and in both of them, they are significantly weaker now, than they were before the whole merging process began.  Instead of becoming more than the sum of the parts, in both cases, the industries have become singiificantly less than the sum of the parts that made it, and it's already been happening in radio and it seems to be getting worse.

When radio stations first started being sold in the UK, back in the early 1990s, the usual valuation for a station was around £10million each.  Accounting for inflation, which doubles every 15 years roughly, that would make each station today worth somewhere between £20-25million.  Except, that Global has just bought 10 stations for £50million.  That's £5 million per radio station.  Accounting for inflation, that valuation of radio station back in the early 1990s would be somewhere near £2million.  In other words, the value of an individual radio station has fallen 80% in the last 20 or so years.

That's some pretty massive depreciation.  It's a damning indictment of an industry that seems to be doing what both Virgin Media in cable and ITV in terrestrial broadcasting.  Merging themselves, not into oblivion, but into irrelevance.  And as this trend continues, listeners will slowly continue to desert those stations that are part of this massive conglomerate, and seek other alternatives, from overseas if necessary. 

And there is a bigger issue than merely the massive depreciation in the value of the radio industry over the last 20 years.  This is the biggest radio company in the UK, buying the third biggest, when it is already way more than double the size and reach of the second biggest.  And all this does is make Global bigger and make radio a less attractive industry for people and other business to come into.  Radio was a better industry and a stronger industry, when there were more players in constant competition.

What's often refered to as consolidation is in fact nothing more than seeking to eliminate competition.  And Charles Allen, who was the man responsible for the assimiliation of many of the ITV regional companies into Granada, and the eventual merger with Carlton to form ITV plc in 2004, knows all about that.  And with GMG willing to sell, Global basically, being the biggest, could offer the most money, and yet, they still undervalued the group by at least half, according to GMG's own valuation in it's last annual report.

Global want to basically consolidate all of commercial radio under one company, much like Charles Allen tried to do at ITV, and almost succeeded.  This deal is not designed to increase competition or preserve it, it is designed to reduce it.  For that very reason alone, the Competition Commission should refuse this deal. 

XM / Sirius Merger could be approved imminently.

There are a lot of reports out there, far too many to link, but they all suggest, like this one, that approval for the merger between XM Satellite Radio and Sirius Satellite radio is due to come imminently from the US Department of Justice.

This smells to me very similar to the British Satellite Broadcasting / Sky Television, which was allowed to go ahead, despite the fact that it was against the rules that BSB were told to work by by the IBA. Sky had the deep pockets of Rupert Murdoch and News Corp to fall back on. BSB had no such benefactor, and most of their shareholders were worried about the upcoming 1991 Channel 3(ITV) licence process.

Sky were the 'winners' in that so called merger. They basically absorbed BSB into their company with the token changing of the name to "British Sky Broadcasting" rather than tell it like it really was, Sky basically swallowing up BSB.

The real similarity here though is that XM and Sirius, like Sky and BSB, are both losing money, hand over fist, quarter by quarter. Because these two are the only competing satellite radio services in the US and Canada, this really shouldn't happen, in much the same way that BSB and Sky should not have happened. But you know it's going to. History says the merger will go ahead, the market says the merger will go ahead, my head says the merger will go ahead, but my heart does not want it to. I cannot abide the creation of a monopoly by a market that is supposed to favour competition.

The shareholders have voted for it, now we wait for the confirmation from the DoJ that, as we expect, this merger will happen, despite what we know to be in the better interests of everyone. If the market is so good, then let the market decide, and if the market decides that neither should survive, then so be it.