What will Bauer do with the Irish radio stations it picks up from Denis O’Brien?

Thirty-two years after the late dawn of licensed commercial radio in the Republic, a new era for the sector is pencilled to start at the end of May when the ink will dry on Bauer Media Audio's deal to acquire the largest player in the market, Denis O'Brien's Communicorp Group, and its stations will transfer to German ownership.

There’s a new media magnate in town and her name is Yvonne.

Bauer Media Audio, which already operates stations in the UK, Sweden, Norway, Poland, Slovakia, Denmark and Finland, is part of Hamburg-headquartered Bauer Media Group, a massive family-owned media conglomerate that employs about 15,000 people and dates back to a small printing operation in 1875.

Since 2010, it has been led by chief executive and majority shareholder Yvonne Bauer (44), who as the second-youngest child of Heinz Bauer, grandson of the founder, belongs to the fifth generation of Bauers to run the company and is estimated by Forbes to be worth $2.5 billion (€2 billion).

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The expected completion date of May 31st was issued by Communicorp on Friday, as it confirmed it had secured the necessary media merger approval from Minister for Media Catherine Martin.

The other required clearance from the Competition and Consumer Protection Commission (CCPC) was received less than a month after Communicorp’s February notification of the sale. This was a straightforward assessment for the CCPC given that Bauer was not otherwise active in the State’s radio market, and the sale of its magazines on Irish shelves – Bauer’s global publishing empire includes Grazia, Heat and indeed Empire – did not exactly represent a media interest that would trouble any competition regulator.

Bauer is now poised to take over national stations Today FM and Newstalk, Dublin music stations Spin 1038 and 98FM and Limerick-based regional station Spin Southwest. Digital sport station Off the Ball, digital audio advertising exchange audioXI and aggregated listening platform GoLoud are also part of the deal.

Speaking at a student webinar the day it was announced, O’Brien explained he had sold his radio business because he couldn’t “put his hand on his heart” and say teenagers would continue to listen to his music radio stations in even the short term.

“I just don’t know whether a 12-year-old today who is going to be 15 in three years’ time is going to be listening to Spin,” he said.

“Everybody’s on Spotify because people can afford Spotify. People are listening to podcasts. So half of me is saying ‘oh I think the radio business is going to be great’, because we did diversify into podcasts and digital offerings, but I just can’t put my hand on my heart and say it’s going to be great in five years’ time.”

Growth curve

The Irish radio market certainly seems to be at quite a different point in the growth curve than it was in 1989, when what was then Classic Hits 98FM went on air the morning after the Berlin Wall fell and, according to O’Brien, “started making money after three months”.

But if Spotify is such a radio-killer – and radio industry groups chasing advertising revenues fervently reject that idea – why did Bauer pay what is understood to be more than €100 million for Communicorp? What’s in it for them?

The simplest answer is that Bauer likes radio still. It must do, given it operates more than a 100 stations around the world, including Cool FM, Downtown Radio and Downtown Country in Northern Ireland, and Magic, Kiss, Absolute Radio and the Hits Radio network, among others, in Britain. It has 55 million listeners and sees an opportunity to add on another 1.75 million.

It must reckon that its new stations’ share of the Republic’s radio advertising market – estimated by media agency Core to be about €104 million – can outweigh the costs of running the business, producing the sort of profit to make the deal worthwhile. Costs, on this basis, seem unlikely to go up.

Bauer may also have its eye on building up other revenue streams that can offset advertising market decline. In the UK, it has recently turned to the delights of “premium” services, launching products that offer a modicum more control than that available to a traditional radio listener, if nothing like the control provided by a streaming service such as Spotify.

Its stations Jazz FM (jazz, soul and blues), Planet Rock, Kerrang! Radio (a slightly more alternative rock than Planet Rock) and Scala Radio (classical) now have subscription options, with listeners able to avoid ads, skip tracks and access various streams and programming dedicated to their chosen musical genre in exchange for £3.99 (€4.60) a month.

‘Music passions’

For Bauer Media Audio president Paul Keenan, these services are about helping listeners "further explore their music passions" and an experiment in which the group will "explore how significant of a revenue stream this can be".

But if attempts to build subscription revenue make sense at all, they will do so for clear musical niches with ageing fan bases, not stations with more general contemporary playlists.

Such explorations would surely be a stretch in the Irish market, where the stations Bauer is buying are either aimed at younger listeners (Spin and Spin Southwest), operate in the broad mainstream (98FM, much of Today FM) or are not in the music game at all.

Yes, among all the Irish radio stations Bauer is set to inherit, Newstalk is the one that sticks out as awkwardly expensive. This was true before Bauer’s arrival on the scene – it is five years since O’Brien tried to offload Newstalk on to Independent News & Media – and will become even truer after May 31st.

The talk radio station – together with Communicorp’s contract to provide news bulletins to local and regional stations – does not obviously fit in with the rest of Bauer’s music-dominated holdings.

If the future of all Communicorp stations is somewhat up in the air pending the revelation of Bauer’s plans, Newstalk’s position is even further away from solid ground than most.