An application to Ofcom for the FM
Independent Local Radio licence
for Warwick

October 2005
General Information
Description of applicant
(a)

Name of Applicant, Address, Telephone and Fax nos., E-mail address:
Name...
Section 105(a):
Ability to maintain proposed service
a)

Board of Directors

1. Ownership and control of company
which wil...
Section 105(a):
Ability to maintain proposed service

a)

Board of Directors

1. Ownership and control of company
which wi...
Section 105(a):
Ability to maintain proposed service

a)

Board of Directors

1. Ownership and control of company
which wi...
Section 105(a):
Ability to maintain proposed service

a)

Board of Directors

1. Ownership and control of company
which wi...
Section 105(a):
Ability to maintain proposed service

a)

Board of Directors

1. Ownership and control of company
which wi...
Section 105(a):
Ability to maintain proposed service

a)

Board of Directors

1. Ownership and control of company
which wi...
Section 105(a):
Ability to maintain proposed service

a)

Board of Directors

1. Ownership and control of company
which wi...
Section 105(a):
Ability to maintain proposed service

a)

Board of Directors

1. Ownership and control of company
which wi...
Section 105(a):
Ability to maintain proposed service

a)

Board of Directors

1. Ownership and control of company
which wi...
Section 105(a):
Ability to maintain proposed service

a)

Board of Directors

1. Ownership and control of company
which wi...
Section 105(a):
Ability to maintain proposed service

a)

Board of Directors

1. Ownership and control of company
which wi...
Section 105(a):
Ability to maintain proposed service

b)

Proposed Investors and
Shareholding Structure

1. Ownership and ...
Section 105(a):
Ability to maintain proposed service

b)

Proposed Investors and
Shareholding Structure

1. Ownership and ...
Section 105(a):
Ability to maintain proposed service

b)

Proposed Investors and
Shareholding Structure

1. Ownership and ...
Section 105(a):
Ability to maintain proposed service

c)

Involvement of the Applicant in
Specified Activities

1. Ownersh...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
a) Overall Financial Strategy

Provid...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
a) Overall Financial Strategy

Warwic...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
a) Overall Financial Strategy

The br...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
a) Overall Financial Strategy

When a...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
a) Overall Financial Strategy
The fol...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
a) Overall Financial Strategy
5.

Nec...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
a) Overall Financial Strategy

•
•
•
...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
b) Funding
Detail the sources of fina...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
c) Financial Projections
The purpose ...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
c) Financial Projections
From 2001 Ce...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
c) Financial Projections
Employment i...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
c) Financial Projections
The Royal Le...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
c) Financial Projections
Under John B...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
c) Financial Projections

The results...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
c) Financial Projections

250

MERCIA...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
c) Financial Projections
HEART FM: DI...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
c) Financial Projections
demographic....
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
c) Financial Projections
Although, li...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
c) Financial Projections

M ercia
Cla...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
c) Financial Projections
This section...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
c) Financial Projections

•

2005
200...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
d) Audience Projections
Provide the f...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
d) Audience Projections
(iii)

The ex...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
d) Audience Projections
A benchmark w...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
d) Audience Projections
•
•

The exis...
Section 105(a):
Ability to maintain proposed service
2. Financial and business plans
d) Audience Projections

In Column #5...
Section 105(a):
Ability to maintain proposed service
3. Transmission Proposals
(i)

Provide details of the transmission si...
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard
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'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard

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Application to Ofcom for a local commercial FM radio broadcast licence for Warwick by Warwick Local Radio, written by Grant Goddard in October 2005 for Laser Broadcasting Limited .

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'An Application To Ofcom For The FM Independent Local Radio Licence For Warwick By Warwick Local Radio' by Grant Goddard

  1. 1. An application to Ofcom for the FM Independent Local Radio licence for Warwick October 2005
  2. 2. General Information Description of applicant (a) Name of Applicant, Address, Telephone and Fax nos., E-mail address: Name: Warwick Local Radio Limited Address: Powers Court Russell Street Leamington Spa Warwickshire CV32 5QA Telephone: 024 7671 3080 Fax: 024 7671 6108 E-mail: stuart@warwicklocalradio.com Certificate of Incorporation (Company 05222587) attached as Appendix 1. (b) Main Contact (For Public Purposes): Name: Stuart Linnell MBE Telephone (day): 024 7671 3080 07939 520247 (mobile) Fax: 024 7671 6108 Email: stuart@warwicklocalradio.com Address: (c) No. 63 Craven Street Coventry CV5 8DS Proposed Station Name (if decided): Warwick Local Radio (d) Brief Description of Programme Service: A genuinely local radio station for 35 to 64 year olds, focused on Warwick, Leamington Spa, Kenilworth and the surrounding area, with significant speech content such as local news, interviews and community information forming an essential part of the output. (e) Main Contact (For Ofcom Purposes): This is to be found in Confidential Appendix 2. Page 1
  3. 3. Section 105(a): Ability to maintain proposed service a) Board of Directors 1. Ownership and control of company which will operate the licence (i) Provide the name, occupation, other directorships, other media interests, background and relevant media experience of each director (executive and non-executive), including the proposed chairperson. “Warwick Local Radio will provide grown-up radio for grown-up people.” This statement is no idle rhetoric. It encapsulates the Board’s plans to create a genuinely local radio station that will respect its audience as the educated, relatively affluent, economically secure listeners that our research shows us they really are. Warwick Local Radio will be a station that prides itself on maintaining the core values of public service broadcasting – to inform, to educate, to entertain – whilst involving its audience in as many ways as possible in its programme output. This is undeniably a tall order for an independent station in a relatively small coverage area, but the Board’s intimate knowledge and experience of this part of Warwickshire tells us that it is the only route that will make the business successful. Time and time again, the potential listeners for a new local station in Warwick, Leamington Spa and Kenilworth have told us that cheap “pop and prattle” is precisely not what they want. I must admit that I have not been completely surprised by the results of our extensive market research, which has shown clearly that the people living in the county town of Warwick and the county’s commercial centre, Leamington Spa, feel overshadowed by the nearby cities of Coventry and Birmingham. I feel exactly the same way too, having lived here for more than 25 years. Neither am I surprised that local people like me are actively demanding more from a new local radio station than simply the same old hit songs, the same mindless DJ talk, and no more than token coverage of the issues pertinent to their lives. For far too long, the people living in the heart of Warwickshire have been denied their own communication medium to talk and listen to each other’s voices and opinions. While Birmingham and Coventry have been blessed with their second, third, fourth and fifth local stations, our neighbourhood has not yet been granted its first. The huge circulation of the local weekly newspaper, The Courier, is testament alone to the people’s hunger to know what is going on around them. This desire to build a profitable local radio station is my, and my fellow Board members’, sole motivation for making this application. Having launched one of the UK’s most consistently successful local commercial radio stations from Day One in neighbouring Coventry, nothing would please me more than to be able to achieve that same kind of success on my home patch. Mercia Sound’s triumph was based largely upon the old-fashioned Independent Local Radio notions of “localness” and community involvement. Within a short time, our audience felt that the station truly belonged to them, and from that intangible goodwill came the listener loyalty that Mercia FM still benefits from today. These are the same values that the Board wishes to imbue in Warwick Local Radio. On the other hand, the Board is very aware that the radio landscape of today is very different from that of 1980. Warwick Local Radio will have to fight for its audience tooth and nail against six existing local commercial stations, the BBC’s recently re-launched local service, successful national networks, and all the other options that are increasingly competing for our limited leisure time. Because we understand the difficulties we face in launching a station into an already crowded marketplace, our application explores at some length the characteristics of the audiences of our competitors, and explains how Warwick Local Radio plans to “fit” into the market by being deliberately and assertively different. Neither do we underestimate the economic challenge of building a new, independent local business, which is why our audience projections are cautious and based upon empirical evidence of recent station launches in similar markets, rather than simply on our own personal experiences. Page 2
  4. 4. Section 105(a): Ability to maintain proposed service a) Board of Directors 1. Ownership and control of company which will operate the licence In order to maximise the potential success of this venture, we have assembled a Board that provides the company with the requisite skills and necessarily detailed local knowledge. Both Stuart Linnell and myself have extensive radio management and programming experience at Board level within radio groups, having first worked together 25 years ago. In addition to our own intimate knowledge of Warwickshire, fellow Board members John Spencer and Nigel Robinson add even more local expertise and an in-depth knowledge of the local business landscape gained from their many years' experience in enterprise development and public relations. Nigel Reeve provides us with radio sales experience at both national and local level, while Sue Hall imparts the financial expertise and the experience of accounting practices in small local radio stations that are essential to our success. Together, the Board is confident that its plans for Warwick Local Radio are appropriate for the area, reflecting the tastes and interests of local people as voiced in our market research, and are realistic for the creation of a successful, local commercial radio station. The involvement of emerging radio group Laser Broadcasting provides us with the financial resources and industry expertise to be certain we can transform our proposals into reality. On a personal note, having been the first voice to be heard on Mercia Sound in 1980, nothing would please me more than to be the first voice on a new radio station for my own neighbourhood, were we to be awarded the licence. Ian Rufus Chairman Warwick Local Radio Limited PS – I should explain that “Warwick Local Radio” is merely the working title of the station. The Board recognises that further market research and brand name testing will be required to ensure that an appropriate on-air name is identified that will embrace ALL the towns the station will be serving, without being unwieldy. Page 3
  5. 5. Section 105(a): Ability to maintain proposed service a) Board of Directors 1. Ownership and control of company which will operate the licence Ian Rufus (Chairman) Occupation: Company Director Other Directorships: Hearts of England Limited, Midland Cornish Foods Limited Other Media Interests: None Brings to Warwick Local Radio Board: Unrivalled commercial radio experience at senior management level Background and relevant media experience: Ian Rufus is an experienced and respected commercial radio executive who has worked in the industry since it began in 1973. He has lived and worked in the Midlands for more than 25 years and his home is in the heart of Warwick Local Radio’s transmission area. Ian began his broadcasting career with the BBC in Birmingham, after originally training as a newspaper journalist. With the advent of commercial radio in 1973, he became a member of the original editorial team that launched LBC in London. The following year, he moved to Sheffield to recruit and head the news team of the newly opened Radio Hallam. Five years later, he joined Mercia FM as launch Programme Director and achieved the highest listening figures obtained by an English radio station – a record that still stands. In 1986, he was appointed Managing Director of BRMB Radio in Birmingham. He instituted a radical overhaul of its programming and sales operations, which resulted in a dramatic upturn in the station’s commercial fortunes. During his time at BRMB, it was also named Station of the Year in the prestigious Sony Radio Awards. Ian instigated and oversaw BRMB’s takeover of Mercia FM in 1987, the first occasion that two financially sound radio companies had been allowed to merge by the regulator. In 1989, he led the team that created XTRA-AM, one of the country’s first “split frequency” stations and widely regarded as the best exponent of the gold music format. The following year, Ian again instigated and led his stations’ merger with the Trent Group of stations to form Midlands Radio. As Deputy Group Chief Executive of the new company, he was a key member of the team responsible for the Group’s successful stock market flotation. Page 4
  6. 6. Section 105(a): Ability to maintain proposed service a) Board of Directors 1. Ownership and control of company which will operate the licence In 1994, following Capital Radio’s acquisition of Midlands Radio, Ian joined the GWR Group, initially as Special Projects Executive and later as Regional Managing Director for the Midlands, where he had overall responsibility for the successful and profitable operation of the company’s radio stations in Nottingham, Wolverhampton, Coventry, Leicester, Northampton, Derby and Worcester. In 1998, Ian was appointed to the group-wide post of Development Director in charge of Corporate Community Investment and worked to strengthen individual stations’ links with the communities that they served. In September 2002, Ian left GWR to pursue his own private business interests, which include the development of a Midlands-wide chain of bakeries and coffee shops. Ian has made a major contribution to the commercial radio industry through his Chairmanship of the Association of Independent Radio Contractors’ Programming Committee during the 1980s, which oversaw the introduction of a number of industry-wide initiatives including the Network Chart Show and the Programme Sharing Unit. He also served on the board of Independent Radio News at the time of the introduction of Newslink. For the last three years, Ian has served as a magistrate on the Warwickshire bench sitting mainly in Leamington Spa. Over the last twelve months, Ian has worked tirelessly to develop the proposals for Warwick Local Radio and, as its Chairman post-award, he is committed to spending half a day a week working at the radio station. Page 5
  7. 7. Section 105(a): Ability to maintain proposed service a) Board of Directors 1. Ownership and control of company which will operate the licence Stuart Linnell MBE, Hon MA (Non-Executive Director) Occupation: Company Director Other Directorships: Shrewsbury Local Radio Limited Other Media Interests: None Brings to Warwick Local Radio Board: 35 years of commercial radio experience, with Sony Awards for local radio programming. Background and relevant media experience: Stuart Linnell has worked in broadcasting and the media for 35 years. Before the advent of commercial radio, he was a team member of BBC Radio Birmingham when it was the only local radio station in the West Midlands. Since then, he has worked for local commercial radio stations in Sheffield, Coventry, Birmingham, Leicester and Derby. Stuart was Sports Editor at Radio Hallam in Sheffield when the station launched in 1974. In his six years at Hallam, he also became a regular contributor to Yorkshire Television’s Sunday afternoon football highlights programme. In 1980, he returned to his native West Midlands for the launch of Mercia Sound in Coventry, where he was afternoon presenter and sports editor. He spent 15 years at Mercia Sound, where he became Programme Controller, and later Managing Director, before the company was taken over by the GWR Group in 1994. Whilst at Mercia, he was a founder of the Snowball Charity, promoted jointly with the Coventry Evening Telegraph newspaper. Now, more than 20 years later, Snowball has raised in excess of £2m for chronically sick and handicapped local children. During the 1980s, Stuart also presented programmes for the local Coventry Cable Television. When Mercia Sound merged with Birmingham’s BRMB to form Midlands Radio, Stuart was appointed Operations Director of the new group. Soon afterwards, further expansion occurred to merge the two West Midlands stations with the Radio Trent Group in the East Midlands. During the next two years, Stuart became Programme Controller and Managing Director at Leicester Sound, as well as holding those same positions at Mercia. During that time, both stations won programme format awards at the International Radio Festival of New York. The merged group of West and East Midlands stations were later acquired by Capital Radio and then, with the exception of BRMB, were sold to the GWR Group. Some six months after that sale, Stuart was appointed launch director of RAM FM in Derby, hitherto a relay service of Radio Trent in Nottingham, and saw the station through its pre-launch phase and into its first few months on-air. Page 6
  8. 8. Section 105(a): Ability to maintain proposed service a) Board of Directors 1. Ownership and control of company which will operate the licence In 1995, Stuart returned to front-line programme presenting with BBC radio and television in the Midlands. He won three major awards, including the prestigious Sony Gold Award for Best Speech-Based Breakfast Show for his BBC WM Breakfast Show in 1997, having won the Silver Award in the same category the previous year, the first presenter to win Silver and Gold in the same category in successive years. He was also part of the BBC WM on-air team that won the Sony Gold Award for Regional Radio Station Of The Year In 1998. For BBC television, he presented three series of “The Midlands at Westminster” (BBC2) and weekend editions of Midlands Today (BBC1). On national radio, he has been a presenter, producer and reporter for BBC Radio Five Live. Stuart now continues his broadcasting career, in combination with work as one of the UK’s leading conference moderators and facilitators. His consultancy, 1st Principles Media Services, provides a range of services, including media training and PR. One of his current contracts involves leading the mediatraining module for football managers enrolled in the business management course at Warwick Business School, based at the University of Warwick. He is also a freelance television reporter for Sky Sports News and, for the past three seasons, he has reported on Premiership football in England for the Irish national commercial radio station, Today FM. This season (2005-2006), he is covering Premiership matches for the recently launched Irish service of Setanta Sports TV, and he is the match-day corporate hospitality host for Coventry City Football Club. Stuart was awarded an MBE for services to broadcasting in the New Year Honours in December 1994. He was further recognised when Coventry University conferred on him an Honorary Master of Arts Degree in 1999, citing his work as a broadcaster and his wider contribution to the community in Coventry and Warwickshire. Stuart is Deputy Chair of the Coventry Branch Council of the Coventry & Warwickshire Chamber of Commerce and will succeed to the Chair for a twoyear period starting July 2006. He was a member of the Millennium Forum, overseeing Coventry’s inner city regeneration project “The Phoenix Initiative”, and continues to be a member of the Chancellor’s Forum at Coventry University and the Coventry Ambassadors group. Stuart is also co-Chair of the Belgrade Theatre Development Trust, President of the Coventry Savoy Opera Society, a patron of the Jaguar (Coventry) Band, a patron of the Circle Light Opera Company and a VicePresident of the charity Baby Lifeline. Stuart is Project Director for Warwick Local Radio’s licence application. Post-award, he will be actively involved as part of Laser Broadcasting’s contract to provide a minimum of 30 hours a month management support services to Warwick Local Radio. His role will be to oversee all aspects of the station’s programming. Page 7
  9. 9. Section 105(a): Ability to maintain proposed service a) Board of Directors 1. Ownership and control of company which will operate the licence Nigel Reeve (Non-Executive Director) Occupation: Company Director Other Directorships: Laser Broadcasting Limited, Banbury Local Radio Limited, Chorley Local Radio Limited, Exeter Local Radio Limited, Fresh Broadcasting Limited, Hereford Local Radio Limited, Harmony Radio Ltd, Humberside Local Radio Limited, Ipswich Local Radio Limited, Oxford Local Radio Limited, Shrewsbury Local Radio Limited Other Media Interests: Chief Executive & shareholder in Laser Broadcasting Limited Brings to Warwick Local Radio Board: 35 years of media experience, including 30 years in radio advertising sales Background and relevant media experience: Nigel Reeve brings more than 35 years of media experience to the Board. He began his career with the local newspaper in Ipswich in 1969, transferring to the fledgling Radio Orwell in 1975. After six years, Nigel joined 2CR in Bournemouth as Sales Manager. In 1983, he became Sales Director at County Sound, before moving to Invicta Sound in 1985. Later, as Managing Director of Invicta, he helped deliver a £1m profit and subsequent stock market flotation. During the same period, Nigel was Chairman of the Commercial Radio Advertising Awards, where he championed improvements in the standard of radio commercials. In 1991, Nigel joined the launch team of Classic FM, the UK’s first national commercial radio station, with responsibility for all sales and marketing at the station. After a very successful five years, Nigel was approached by London News Radio and became Chief Executive there in 1996, transforming a loss-making station into a profitable business by 1999. At the end of 1999, Nigel established Fusion Radio Holdings, purchasing two radio stations in London and a third in Oxford. In September 2001, Nigel merged Fusion with Milestone Radio Limited, giving the new company controlling interests in additional stations in Newbury, Rugby and Basingstoke. Nigel formed Laser Broadcasting Limited in 2002, to bid for local FM radio station licences and acquire minority holdings in existing commercial radio businesses, as part of the company’s long-term strategy to build interests in a group of locally focused radio stations. Nigel is an experienced media sales trainer, having set up the UK’s first radio sales training company in 1986. He brings this expertise, and over 30 years of radio-based knowledge, to the Board of Warwick Local Radio. Page 8
  10. 10. Section 105(a): Ability to maintain proposed service a) Board of Directors 1. Ownership and control of company which will operate the licence Post-award, Nigel will be actively involved as part of Laser’s contract to provide a minimum of 30 hours a month management support services to Warwick Local Radio. He will be responsible for providing advertising sales training and revenue development, working closely with Chairman Ian Rufus. Page 9
  11. 11. Section 105(a): Ability to maintain proposed service a) Board of Directors 1. Ownership and control of company which will operate the licence Sue Hall (Non-Executive Director) Occupation: Financial Director Other Directorships: Laser Broadcasting Limited, Banbury Local Radio Limited, Chorley Local Radio Limited, David Hall Aero Consulting Limited, Exeter Local Radio Limited, Hereford Local Radio Limited, Humberside Local Radio Limited, Ipswich Local Radio Limited, Oxford Local Radio Limited, Shrewsbury Local Radio Limited, Sums Accounting Services Limited, Swansea Local Radio Limited Other Media Interests: Finance Director & shareholder in Laser Broadcasting Limited Brings to Warwick Local Radio Board: 20 years accountancy experience in the media business Background and relevant media experience: Sue Hall started her career at Bourne Publicity Limited, where she worked for sixteen years, progressing to the role of Finance Manager. She left Bourne Publicity after being approached by an American-owned multinational IT Company, and joined its team with responsibility for reporting financial statements for the UK operation into the US head office. Sue’s radio experience started in 2001 when she joined Fusion Radio Holdings Limited as Group Financial Controller. She worked on the flotation of the company on the AIM market in June 2003. In January 2004, Sue joined Laser Broadcasting Limited as Finance Director, with a brief to oversee all aspects of company business. Subsequently, Sue has worked on the financial aspects and has managed accounts for the fourteen applicant groups Laser is working with. Sue has been responsible for producing all financial projections for the Board of Warwick Local Radio. Post-award, Sue will be actively involved as part of Laser’s contract to provide a minimum of 30 hours a month management support services to Warwick Local Radio. Sue will be responsible for producing all aspects of the company’s financial reporting, working closely with Chairman Ian Rufus. Page 10
  12. 12. Section 105(a): Ability to maintain proposed service a) Board of Directors 1. Ownership and control of company which will operate the licence John Spencer OBE (Non-Executive Director) Occupation: Company Director Other Directorships: Lanemark International Limited (Chairman), Clayton Spencer Limited Other Media Interests: None Brings to Warwick Local Radio Board: Unrivalled small to medium size business expertise Background and relevant media experience: John Spencer was a School Governor in Kenilworth for 18 years and Chairman of Governors for six years. He was Musical Director of Coventry Savoy Opera Society until December 2003, and Governor of Etone Community School & Technology College until September 2004. He is currently an Associate Fellow of the University of Warwick and Lecturer at the Warwick Manufacturing Group on Strategic Planning in Small Companies. He is also a Board member of the Coventry & Warwickshire Chamber of Commerce and Chairman of the International Trade Advisory Committee and the International Trade Forum for Coventry & Warwickshire Chamber of Commerce. He was awarded an OBE in the 2004 New Year’s Honours List for services to business and international trade. His business interests, in addition to Lanemark International, are the development of strategy in small companies, encouraging the spread of an entrepreneur culture and assisting SME’s to develop through international trade. John is an internationally renowned expert in small to medium sized businesses and will bring this expertise to Warwick Local Radio, helping to guide and develop the new business into a profitable local company. Page 11
  13. 13. Section 105(a): Ability to maintain proposed service a) Board of Directors 1. Ownership and control of company which will operate the licence Nigel Robinson (Non-Executive Director) Occupation: Company Director Other Directorships: Newsline Press & Public Relations Limited Other Media Interests: None Brings to Warwick Local Radio Board: Local business experience Background and relevant media experience: Nigel Robinson has been involved in the media industry for the past 40 years. He began as a journalist on the Warwick Advertiser and has worked for the Leamington Spa Courier, the Coventry Evening Telegraph and the Birmingham Post. After spells working on newspapers in the United States and South Africa, he returned to the UK in 1977 and was appointed Account Director with a Leamington firm of public relations consultants. In 1980, Nigel launched his own agency, Newsline Press & Public Relations, which now has offices in Leamington Spa and Coventry. As Managing Director, he has spent the last 25 years working with both the local and national media on behalf of a wide range of local businesses and organisations. Locally, he is Chairman of the Old Warwickian Association, Vice-Chairman of the NSPCC Warwickshire Business Group, and a member of Leamington Rotary Club and the Warwick School Development Campaign. Nigel has an in-depth perspective of the local business community, having spent 25 years running a local PR company. This, combined with his thorough knowledge of the local media landscape, makes him a key member of the Warwick Local Radio Board. (ii) If there are firm plans to appoint any further directors, provide information (with details of any specific individuals in mind). This information may be submitted in confidence. One further Director will be appointed once the Station Manager is in post. Page 12
  14. 14. Section 105(a): Ability to maintain proposed service b) Proposed Investors and Shareholding Structure 1. Ownership and control of company which will operate the licence Full details of the shareholding structure should be provided, including: (i) Names and addresses (the latter may be submitted in confidence) of all existing or proposed shareholders. Names and addresses of shareholders are listed below: Shareholder Laser Broadcasting Limited Ian Rufus Address Crowther Road, Washington, Tyne & Wear NE38 0BW 1 Wilkins Close, Barford, Warwickshire CV35 8EX Stuart Linnell 63 Craven Street, Coventry CV5 8DS Malcolm Crump Anthony Duffield Avonstone, Long Marston Road, Welford-Upon-Avon, Warwickshire CV37 8EG 16 Brookside Avenue, Kenilworth, Warwickshire CV8 1ET Seascape Hotel, Polzeath, Cornwall PL2 7SX Nigel Robinson 21 Leam Road, Leamington Spa CV31 3PA Sally Carrick Sheilagh Moffat Spring Gardens, Upper Spring Lane, Kenilworth CV8 2JR 17 Newbold Terrace, Leamington Spa CV32 4EG Ian Dunwoody 230 Warwick Road, Kenilworth CV8 1FD Chris Goodrem Limecrest, Marton Road, Birdingbury CV23 8EH Michael McCaffrey Elliot’s Farm, 14 Bridge Street, Barford, Warwickshire CV35 8EH Avon Cottage, Wasperton, nr. Warwick CV35 8EB John Spencer David Derbyshire (ii) Total number, class/classes of shares and issue price of shares (specify voting, non-voting, preference, other etc). A total of 200,000 ordinary voting shares will be issued at an average price of £2.63. Page 13
  15. 15. Section 105(a): Ability to maintain proposed service b) Proposed Investors and Shareholding Structure 1. Ownership and control of company which will operate the licence (iii) All voting shareholders and holders of 5% or more non-voting shares and loan stock should be named. State the number, class/classes and price of shares to be issued to each investor. Name Laser Broadcasting Ltd Total Shares 140,000 Price £2.46 Value £343,700 % 70.00 Ian Rufus 10,400 £3.05 £31,720 5.20 Stuart Linnell 10,400 £3.05 £31,720 5.20 Malcolm Crump 8,400 £3.05 £25,620 4.20 John Spencer 8,400 £3.05 £25,620 4.20 Anthony Duffield 3,312 £3.05 £10,102 1.66 Nigel Robinson 1,656 £3.05 £5,051 0.83 Sally Carrick 1,656 £3.05 £5,051 0.83 Sheilagh Moffat 1,208 £3.05 £3,685 0.60 Ian Dunwoody 1,656 £3.05 £5,051 0.83 Chris Goodrem 4,800 £3.05 £14,640 2.40 Michael McCaffrey 3,312 £3.05 £10,102 1.66 David Derbyshire 4,800 £3.05 £14,640 2.40 200,000 £2.63 £526,700 100.00 TOTAL (iv) Outline any shareholders agreements or arrangements which exist. A shareholder agreement is in place, ensuring any shares that become available must be offered to all other shareholders. A copy of the document is available on request. (v) Where a corporate body other than a current Ofcom licensee will be providing 30% or more of the required funding, details should be given of its directors and main shareholders, and of its activities. Laser Broadcasting Limited is the only corporate shareholder with a holding of more than 30%. Laser Broadcasting Limited was established in 2002 to bid for local FM radio station licences and acquire minority holdings in existing commercial radio businesses, as part of a long-term strategy to build interests in a group of locally focused radio stations. Warwick Local Radio would be pleased to provide more information upon request. Page 14
  16. 16. Section 105(a): Ability to maintain proposed service b) Proposed Investors and Shareholding Structure 1. Ownership and control of company which will operate the licence The main shareholders of Laser Broadcasting Limited are (Directors are marked with an asterisk): Full Name Capital North East No. 1 Limited Partnership * Nigel Reeve * Charles May * John Roberts Keith Rawlings Tim Jones Hugh Morgan Williams * Susan Hall * miscellaneous shareholders TOTAL Holding 36.56% 18.25% 13.42% 8.69% 6.20% 4.58% 1.90% 0.50% 9.89% 100.00% (vi) Ofcom may request additional information (e.g. a banker’s letter, statutory/management accounts) regarding the shareholders, or any other providers of finance, listed in the application. Warwick Local Radio would be pleased to provide any additional information that is required. Page 15
  17. 17. Section 105(a): Ability to maintain proposed service c) Involvement of the Applicant in Specified Activities 1. Ownership and control of company which will operate the licence Details are required of the involvement by the applicant and its participants (including shareholders or other subscribers of more than 5% of the applicants total funding requirements) in any of the activities listed below, and the extent of the interest. For these purposes, the applicant includes associates of the applicant (i.e. directors and their associates and other group companies). (a) Advertising agencies: None (b) Newspapers: None (c) Other broadcasting interests: Laser Broadcasting Ltd was established in 2002 to bid for local FM Radio Station licences and acquire minority holdings in existing commercial radio businesses, as part of a long-term strategy to build interests in a group of locally focused radio stations. It is involved with 14 applicant groups around the UK. Laser Broadcasting Limited is a 25% shareholder in Fresh Broadcasting Limited, Ofcom radio licensee for the Yorkshire Dales. (d) Bodies whose objects are wholly or mainly of a religious nature: None (e) Bodies whose objects are wholly or mainly of a political nature: None (f) Local authorities: None (g) Other publicly-funded bodies: None *Applicants should note that this information is required for the purposes of checking compliance with the ownership rules, and is not relevant to an applicant’s ability to maintain its proposed service. If none of the categories above apply to the application this should be clearly stated. Page 16
  18. 18. Section 105(a): Ability to maintain proposed service 2. Financial and business plans a) Overall Financial Strategy Provide a concise summary of how the applicant considers it is able to establish and maintain, throughout the licence period, its proposed service, and how this licence fits in with the investors’ strategy. 1. The Broadcast Area The proposed broadcast area [see answer to Question 3] will reach a population of 103,703 adults and is almost coincidental with the boundary of Warwick District Council. The population of the district is projected to increase by 15% during the life of this licence, and by 23% by 2021. It is the only district within Warwickshire where the number of 30 to 49 year olds is expected to increase over this timeframe (20% increase by 2021) [source: Warwick District Council]. The area’s central location in the UK has influenced the development of an excellent transport system. London is only an hour away by road or rail, and nearby Birmingham International Airport provides links to the rest of the world for tourists and business people alike. The area can also boast an extensive canal network, developed 200 years ago, which now provides a wealth of recreational opportunities. There are many other leisure facilities catering for all tastes - including first class golf courses, racecourses, theatres, country parks, museums and local leisure centres. The leading sectors of employment within the district are distribution/hotels/restaurants (26%), finance/IT (24%), the public sector (21%), manufacturing (11%) and tourism (9%). Between 1998 and 2002, employment in the retail sector grew by 21%, education by 30%, computing by 75% and construction by 29%. However, employment in manufacturing industries fell by 39%, public administration by 24% and financial/banking services by 28%. The Warwick district combines a modern manufacturing base with a strong service sector. There is a high concentration of jobs in business services, public administration, education and health. In recent years, a number of ICT companies have moved into the area, such as Codemasters, a global computer games developer and publisher, based in Leamington Spa. Unemployment in the district is low at 1.1%, compared with the West Midlands average of 2.6% and UK average of 2.2%. The highest unemployment in Warwick district is in the Brunswick ward (covering the Old Town part of Leamington Spa) at 2.2% [source: Claimant Count with rates and proportions, December 2004]. Tourism makes a significant contribution to the local economy, with Warwick Castle being recognised as one of the finest attractions in the country. The University of Warwick, although partly based in Coventry, has a student population of over 16,000 and is highly regarded as one of the UK’s leading research establishments, forging strong links with local businesses. Many leading companies are based within Warwick district, including Ford, Conoco, Volvo Trucks, IBM, Calor Gas, Ricardo and Cheltenham & Gloucester Building Society. The area covers three key centres: Warwick, Leamington and Kenilworth. Page 17
  19. 19. Section 105(a): Ability to maintain proposed service 2. Financial and business plans a) Overall Financial Strategy Warwick Warwick is a delightful town steeped in history. It is perhaps best known for its magnificent castle, one of the finest in the UK. However, Warwick also has many other buildings of historic interest. Even though the Great Fire ravaged the town in 1694, many important mediaeval buildings survived. The commercial centre of Warwick has a large selection of antique, china and gift shops. There are also a wide variety of small, specialised shops located around the Market Square, Swan Street and Smith Street. Warwick has a growing reputation for dining out because of its good selection of pubs, wine bars and fine restaurants, while the nationally acclaimed Warwick Racecourse is situated just outside the town centre. Royal Leamington Spa Royal Leamington Spa is a fashionable and elegant town in the heart of South Warwickshire. The Georgian and Victorian architecture, tree-lined avenues and squares and glorious gardens give it a distinct character and personality. Leamington has a deservedly good reputation for shopping, ranging from small independently run shops offering unusual and exciting goods to larger stores offering a wide range of products, and from boutiques selling designer labels to high street fashion favourites. Like Warwick, Leamington Spa has many high quality places to eat and drink, from wine bars, pubs and cafés to bistros and restaurants. The magnificent Royal Pump Rooms have been converted to a culture and tourism complex, housing the town’s Museum, Art Gallery, Library and Tourist Information Centre. Leamington has benefited from investment in a £4.3 million restoration project for Jephson Gardens, which includes a sensory garden, a temperate glasshouse, a refurbished boathouse and children’s play area. Stoneleigh Park, owned by the Royal Agricultural Society of England, is being transformed into a “Home of Rural Excellence” that will include an innovation centre and park, international-quality equine facilities, and major exhibition and conference facilities. The Leamington Spa Cultural Quarter is home to over eighty creative industries, magnificent regency architecture and spectacular parks. Development plans include incubator and grow-on spaces for creative industries and a new venue for performance and rehearsal. Kenilworth From the earliest of times, Kenilworth has been strategically important. In 1119 AD, Henry I gave land to Geoffrey de Clinton to build a castle from local sandstone beside an ancient ford. From those beginnings, Kenilworth Castle became one of the most impressive castles of Elizabethan England. Around the castle and the St Mary's Abbey ruins, there are lovely walks, delightful old houses and thatched cottages in “Little Virginia”, said to be named after the planting of potatoes brought there by Sir Walter Raleigh. Like Warwick and Leamington, Kenilworth is known for its shops and restaurants. [Sources of information: Warwick District Council; Nomis Database of Labour Market Statistics; Office of National Statistics; Nomis Official Labour Market Statistics; Labour Market Profile, Warwick District; Warwickshire Economic Profile, Warwickshire County Council, September 2004; Warwickshire County Council Census 2001 County & District Profile; Welcome to Warwick District, Warwickshire Investment Partnership.] Page 18
  20. 20. Section 105(a): Ability to maintain proposed service 2. Financial and business plans a) Overall Financial Strategy The broadcast area has: • a high proportion of local businesses to support a new radio station; • a population that is relatively affluent (60% in socio-economic class ABC1); • a population that is well educated (29% have a degree qualification or higher); • a population with a high proportion of managers and professionals (34%); • a population that is growing considerably (11% from 1982 to 2002); • a population whose age structure is very close to the UK average; • a population whose average weekly earnings are above the regional average (£429, compared to £417); • an economy that is prospering because of its lack of dependence on manufacturing and its high proportion of jobs in professional and management services. Warwick Local Radio is fully committed to the area and has no doubt it is able to support its own independent local radio station. 2. A Gap in the Market Despite the existence of six local commercial radio stations audible in the market, research commissioned by the Board [see Research Project #5] showed that none of these stations include more than cursory mentions of the towns of Warwick, Leamington Spa or Kenilworth. This will make Warwick Local Radio totally unique for its audience. Because so many existing stations are broadcasting variations of similar pop music formats, the results of research [see Research Projects # 3 and 4] showed that people in the broadcast area want and expect something different from a new local radio station. This is why the programming proposals for Warwick Local Radio [see answer to Question 4] describe a music format that offers its listeners a more varied and innovative mix of familiar hits and less familiar album tracks that will differentiate the station from its competitors. The target audience of 35 to 64 year olds was very carefully selected by the Board after having conducted a full analysis of the audience profiles of stations audible in the market and an exploration of the changing dynamics within the local radio industry [see answer to Question 2(c)]. Warwick Local Radio will be the only station to “super serve” the key 44 to 54 year old demographic, but will have sufficiently broad appeal to attract considerable listening outside of that demographic. The experience gained from Warwick Local Radio’s trial broadcast earlier in the year [see answer to Question 7] and the feedback obtained both informally from listeners and from followup market research [see Research Project #1] provided the Board with conclusive evidence that demand exists in the broadcast area for a new local radio station. Page 19
  21. 21. Section 105(a): Ability to maintain proposed service 2. Financial and business plans a) Overall Financial Strategy When a specific description of the proposed radio station was tested in market research [see Research Projects # 3 and 4], the results endorsed the viability of the Board’s proposals. The description offered to respondents was: A local radio station focused specifically on Warwick, Kenilworth, Leamington Spa and the surrounding area with: well-know hit songs from the 1960s to the present day presenters who know and understand the area hourly local news bulletins during daytime regular local weather, travel, entertainment and what’s on information community information and daily interviews or features involving local people regular publicity for community organisations and their events 64% of the 35 to 64 year old target audience said they would be “very likely” or “likely” to listen to such a station. This response included 72% of 35-44 year olds, 64% of 45-54 year olds and 57% of 55-64 year olds. Warwick Local Radio believes that it has identified a viable gap in the radio market and, as a result, it has carefully produced a viable business plan and a set of programme proposals that will satisfy the demand of local people for a new local radio station that considers their particular tastes and interests. 3. Skills & Experience to Maintain the Service The Board of Warwick Local Radio Limited and the staff of major shareholder Laser Broadcasting Limited bring together an unrivalled range of radio management skills and long term commitment to the industry, both in the Warwick market and elsewhere, to ensure that the station will maintain the highest standards during the entire twelve-year period of its licence. In addition to the directly relevant experience of its Directors [see answer to Question 1(a)], the Board is able to draw upon a wider range of skills and services. The Board has agreed to contract Laser Broadcasting Limited to supply Warwick Local Radio Limited with a full accounts service, commercial traffic system, commercial production, sales training, IT support and a minimum of 36 hours per month of management time during the launch period, and then 30 hours per month thereafter. The contracted provision of these essential back-office services will ensure that Warwick Local Radio can concentrate its efforts on delivering the local radio station that the people of Warwick, Leamington Spa and Kenilworth really want. Page 20
  22. 22. Section 105(a): Ability to maintain proposed service 2. Financial and business plans a) Overall Financial Strategy The following key executives with substantial radio experience will ensure that Warwick Local Radio Limited has the ability to successfully launch and maintain the service throughout the duration of the licence: Ian Rufus (Chairman) 33 years radio experience, including former Managing Director of BRMB and Mercia Sound. Stuart Linnell (Laser Broadcasting and Non-Executive Director) 33 years radio experience, including 20 years senior radio management and programming experience. Former MD of Mercia Sound. Sue Hall (Non-Executive Director) 20 years media accounting experience, including four years in commercial radio. Nigel Reeve (Non-Executive Director) 30 years radio sales and management experience. Grant Goddard (Laser Broadcasting) 20 years radio programming, management and research experience in the UK, Europe and Asia. David Mortimer (Laser Broadcasting) 10 years radio management and programming experience. As with any radio station, the launch period is critical, which is why Warwick Local Radio has assembled an experienced launch team to ensure that the station achieves the highest possible standards during the first twelve months after the award. 4. Board Structure The Board of Warwick Local Radio Limited has been structured to ensure that the company benefits from an appropriate balance of radio experience and business experience. The Directors represent 85% of the share issue of Warwick Local Radio Limited. The decision was taken to structure the Board with only seven Directors to ensure that the decision making process is kept simple and easy to manage, and so that Warwick Local Radio can react quickly to changes in the market. It is the Board’s policy to aim to pay the first dividend after five years of trading, which will further ensure that long-term retention of shareholdings remains attractive to the investors. The stability of this corporate structure enables the Board to plan and develop the company over the twelve-year period of the licence. Page 21
  23. 23. Section 105(a): Ability to maintain proposed service 2. Financial and business plans a) Overall Financial Strategy 5. Necessary Funding The shareholders and board members of Warwick Local Radio have gone far beyond simply offering their skills and experience to develop the business plan for the proposed radio station. They have spent time and money investing in a trial broadcast, awareness building, research and consultations [see answers to Questions 6 and 7]. Over the last 18 months, they have invested over £90,000 in the project. Post-award, existing shareholders have committed a further £490,000 in order to launch the station and maintain it for the full period of the licence. Based on the projections detailed in the profit and loss account, these sums will be sufficient to avoid requiring an overdraft facility, even when a sensitivity test is applied that reduces projected revenues by 20%. However, the company’s banker, Lloyds TSB, has indicated that an overdraft facility could be arranged, if required post-award. A copy of this letter can be supplied on request. As an emerging radio group, Laser Broadcasting Limited’s substantial shareholding provides the company with the financial support and long-term commitment requisite for a radio station launch in a relatively small local market. In addition, Laser has agreed to underwrite any required funding, if shares in Warwick Local Radio were to be made available. As per the shareholders’ agreement, any shares in Warwick Local Radio that become available must be offered to the existing shareholders in the first instance. There exists a clear commitment from the shareholders to finance the company to the level required. 6. Accounting Policies The Board of Warwick Local Radio Limited has produced a realistic business plan that is based on the following assumptions: • • • 2005 2006 2007 2008 Conservative audience forecasts, with a projected weekly reach in Year One of 17%, rising by Year Three to 19%, based upon empirical evidence of recent local station startups of comparable size [see answer to Question 2(d)]; Conservative revenue projections based upon a static Total Survey Area of 103,703 adults, rather than including allowances for the area’s projected population growth; The historical benchmark industry average revenue of £31 per 1000 hours per annum listened was used to produce the financial forecasts, with a year-on-year growth progression applied using the average values of Advertising Association projections for UK radio revenues [see table below]; RADIO REVENUE: Year-On-Year Growth Projections (%) High option Low option 3.0 7.7 2.7 2.0 9.3 2.2 9.2 4.7 Average 5.4 2.4 5.8 7.0 source: Advertising Association forecasts, November 2004 Page 22
  24. 24. Section 105(a): Ability to maintain proposed service 2. Financial and business plans a) Overall Financial Strategy • • • • Realistic expenditure projections for the station launch that include £6,000 to be spent on local promotions and advertising in Year One and £15,000 for marketing in the pre-launch period; A projected operating profit in Year Three; Projections that require no overdraft, even if revenue records a shortfall of 20%; The first dividend to be paid to shareholders after five years. These are the policies on which the Warwick Local Radio Limited business plan is based. It is the Board’s stated intention to deliver a profit in Year Three, not to have to resort to any form of borrowing, and to pay a dividend to shareholders after five years. The financial planning involved in Warwick Local Radio’s business plan has been rigorous, detailed and based on reasonable assumptions. 7. Investor Strategy The strategy of the company’s investors has been discussed and agreed upon by both the Board and shareholders. The main points of Warwick Local Radio Limited’s investor strategy to date are: • • • • • • • • • • • The focus of the enterprise is to build a successful local radio station in Warwick for the residents and business community of Warwick; The company will remain focused on long-term growth and the integrity of its product; Shareholder Laser Broadcasting Limited has a long-term commitment to developing interests in an emerging group of genuinely local radio stations; Investors are involved for the potential long-term returns rather than immediate short-term gains; The company should remain fully funded with no borrowing requirement; A shareholder agreement requires that any shares for sale are offered, in the first instance, to existing shareholders in proportion to their existing holdings; Dividends will be returned to shareholders after Year Five; Shareholders are committed to the establishment and maintenance of the business for the full duration of the permanent licence; Simulcast opportunities via internet and cable streaming are important ways to extend the station’s potential audience; Opportunities to increase the radio station’s penetration through DAB (Digital Audio Broadcasting) in the Warwick area will be pursued when multiplexes become available; An ongoing programme of market research will ensure that the station remains relevant and focused on the listeners and advertising community in Warwick at whom it is aimed. Page 23
  25. 25. Section 105(a): Ability to maintain proposed service 2. Financial and business plans b) Funding Detail the sources of finance that will be used to fund the licence, under the following headings: (i) Share capital Post-award, 200,000 shares will have been issued in the company, raising a total of £526,700. (ii) Loan stock Warwick Local Radio has no plans to issue loan stock. (iii) Leasing/HP facilities (capital value) Three company vehicles with a capital value of £30,000 will be leased. (iv) Bank overdraft Warwick Local Radio Limited’s business plan does not anticipate the need for an overdraft. However, the company’s banker, Lloyds TSB, has indicated that such a facility would be made available. (v) Grants and donations None (vi) Other (please specify) None Where relevant, provide information on: (i) Loan terms (e.g. interest rate, repayment terms, redemption/conversion terms) Not applicable (ii) Assets leased Warwick Local Radio Limited will lease three company vehicles over a three-year period. A written quote is available upon request. All of the funding above should be confirmed to the applicant. Explanation should be provided if this is not the case. Page 24
  26. 26. Section 105(a): Ability to maintain proposed service 2. Financial and business plans c) Financial Projections The purpose of this question is to allow the applicant to demonstrate its understanding of the market. The forecasts should be based on reasonable assumptions, that are logically applied and justifiable. Understanding The Market The population & economy The Warwick District local authority area is almost identical to the planned broadcast coverage area of Warwick Local Radio and it includes all three main towns of Warwick, Leamington Spa and Kenilworth. Warwick District coverage area POPULATION COMPARISON BY AGE 0-14 15-24 25-44 45-64 65+ 21,603 15,961 36,837 30,888 20,642 21,968 15,226 36,731 31,151 20,595 total 125,931 125,671 15+ 104,328 103,703 source: 2001 Census, Arqiva The District has an adult (15+) population of 104,328 [2001 Census] that has grown tremendously in recent years. Between 1982 and 2002, the population grew by 10.7%, compared to an increase of 2.4% in the West Midlands region as a whole. The population density is 453 persons per square kilometre, compared with an average of 408 for the region. The average age of the population is 39.4 years, compared to the average for England & Wales of 38.6 years [National Statistics]. Bordered by Coventry to the north, Stratford-upon-Avon to the south, Solihull to the west and Rugby to the east, Warwick is a considerably more affluent and economically secure area than much of the West Midlands region. Out of the 34 districts in the East Midlands, Warwick has: • The highest proportion of residents with a degree qualification or higher (29% compared to the 16% regional average); • The lowest proportion of residents with no qualifications (22% compared to the 34% regional average); • The second lowest proportion of residents with limiting long-term illness (15% compared to the regional average of 19%); • The third lowest proportion of adults who are permanently sick or disabled (3% compared to the regional average of 6%); • The fifth highest proportion of one-person households (31% compared to the 29% regional average); • The second highest proportion of post-16 students (3% economically active and 7% economically inactive, compared to the regional averages of 2% and 5% respectively); • The fourth highest proportion of single people (31% compared to the 29% regional average). In the 2001 Census, 72% of residents described their health as “good”, compared to 67% in the West Midlands region; while only 7% described their health as “not good”, compared to 10% in the region. The death rate in Warwick, as indicated by the Standard Mortality Ratio, was only 89 in 2003, compared to the UK average of 100. In 2001, full-time employees comprised 44% of adults, compared to the regional average of 40%; while self-employed persons accounted for 9%, compared to the 7% regional average. Between September 1999 and September 2004, the number of young people aged 18 to 24 who were claiming work-related benefits fell by 63% in Warwick, compared to the UK average of 31%. Page 25
  27. 27. Section 105(a): Ability to maintain proposed service 2. Financial and business plans c) Financial Projections From 2001 Census data, the average household size in Warwick is 2.3 people, compared to the average of 2.4 for England & Wales. Only 11% of households are rented from the local authority, compared to the regional average of 14%; while 42% of households are mortgaged, compared to 39% across the West Midlands region. In 2002, the average price of a semidetached house in Warwick was £149,613, compared to the West Midlands average of £95,664 and the England & Wales average of £119,748. This data illustrates how Warwick district is comparatively more affluent and far less economically deprived than surrounding areas in the West Midlands. Based on its economic and social characteristics, the government officially classifies Warwick in its “Prospering Small Towns” group of districts (in “Sub-Group A”), the most typical example of which is Stockport. Through detailed analysis of a range of data, the Statistics Office has declared that the districts to which Warwick is “extremely similar” are Bath & Northeast Somerset, Chester and Cheltenham, all considered to be “highly desirable” areas. These comparisons highlight why local residents are so vociferous in distancing themselves from Coventry and Birmingham [see Research Projects #3 and 4] which, though geographically close, are cities a world away from their own existences and that face the difficulties of post-industrialisation economics. WARWICK DISTRICT - POPULATION STRUCTURE Age 0-14 15-24 25-34 35-44 45-54 55-64 65+ total 35-64 2001 Census UK Warwick % % no. 19 17 21,603 12 13 15,961 14 14 18,115 15 15 18,722 13 14 17,143 11 11 13,745 16 16 20,642 100 100 125,931 39 39 49,610 2003 estimates Warwick % no. 16 21,600 14 18,200 15 19,700 15 20,200 13 16,900 11 15,100 16 21,100 100 132,800 39 52,200 2028 estimates +/- 2003 to 2028 Warwick Warwick % no. % 16 28,100 30 11 18,900 4 13 23,200 18 15 25,300 25 13 21,700 28 12 20,400 35 20 35,100 66 100 172,700 30 39 67,400 29 source: 2001 Census, National Statistics Analysis of the age structure of the population shows that it is very close to the UK average. Government projections show that the population is expected to increase by 30% between 2003 and 2028, continuing the rapid growth already witnessed over the previous two decades. The age structure will change significantly with an increasingly elderly population, as is the case throughout the UK, although the 35-64 year old target audience for Warwick Local Radio is expected to remain at 39% of the total population, just as it is today. While manufacturing remains the most significant employment sector in Warwickshire as a whole, in the Warwick district it is computing, business and professional services that provide a significant proportion of the district’s 69,230 jobs. The County Council has noted that the area’s business profile “has begun to look rather dissimilar to the rest of the West Midlands and has taken on some of the characteristics of the economy of Southeast England” and concludes that such trends are most evident within the Warwick district [“Warwickshire Economic Profile”, September 2004]. Page 26
  28. 28. Section 105(a): Ability to maintain proposed service 2. Financial and business plans c) Financial Projections Employment in knowledge-based industries is becoming increasingly important, buoyed by businesses related to Warwick University, which has a student population of more than 16,000 and is highly regarded as a research establishment. In Warwick district, employment in computer and related activities increased by 75% between 1998 and 2002, compared to the national average of 29%. Tourism also makes a significant contribution to the economy, typified by the 793,300 visitors to Warwick Castle in 2000. Business tourism is an equally important contributor to the economy, with business events held in the area because of its excellent communication links by road and rail to the rest of the UK. Warwick district has a much higher proportion of jobs in business services, health and social work than surrounding areas. Conversely, it has the smallest proportion of employment opportunities in the construction, transport and communications sectors. In April 2003, the average weekly pay of jobs in Warwick district was £429, compared to the West Midlands average of £417 [New Earnings Survey, 2003]. Interestingly, the average weekly pay of Warwick residents was £529, indicating that many people commute to higher-paying jobs outside of the immediate area. This is also a reflection of the high educational qualifications of many Warwick district residents, who can only find appropriately specialised jobs in cities such as Coventry or Birmingham. The local newspaper market In market research, 71% of respondents mentioned local newspapers as their main source of information for finding out what is going on in Warwick, Leamington Spa and Kenilworth [see Research Projects #3 and 4]. The biggest challenge for a new local radio station serving these towns is to develop the same kind of loyalty that their citizens have developed over more than a century for their local newspapers. [All data below is sourced from JICREG 2005 and TNS 2004.] The Coventry Evening Telegraph, founded in 1891 as the Midland Daily Telegraph, is the dominant regional daily, and is owned by Trinity Mirror plc, the UK’s largest local newspaper group. The Telegraph has a 15% penetration in Kenilworth, but only a 6% penetration in Warwick and Leamington Spa, which are more distant from Coventry. Circulation in these three towns is 4,180, out of a total daily circulation of 58,217. The Leamington Spa Courier (founded in 1828), and its sister publications - The Warwick Courier and The Kenilworth Weekly News - are weekly paid-for newspapers published by Johnston Press. They have a penetration of 38% in Leamington Spa, 34% in Kenilworth and 22% in Warwick, selling a total 10,850 copies per week in these three towns out of a total circulation of 20,808. The Courier was by far and away the most frequently mentioned newspaper in the market research commissioned by Warwick Local Radio [see Research Projects #3 and 4], and is undoubtedly people’s main source of local information. When The Courier started life as a four-page broadsheet on Saturday 9 August 1828, it had the longest title of any newspaper in the country, and possibly the world: “The Leamington Spa Courier, and Alcester, Atherstone, Coleshill, Henley-in-Arden, Kineton, Kenilworth, Knowle, Nuneaton, Rugby, Solihull, Southam, Stratford-upon-Avon, and Warwick Borough and County Gazette”. The Leamington Spa Review is the free weekly version of The Courier, launched in 1962, with a combined circulation of 27,074 in Warwick, Leamington Spa and Kenilworth, where it achieves 75%+ penetration. Page 27
  29. 29. Section 105(a): Ability to maintain proposed service 2. Financial and business plans c) Financial Projections The Royal Leamington Spa Observer, another free weekly launched in 1988 and now owned by Observer Standard Newspapers of Redditch, has a combined circulation of 27,920 in Warwick, Leamington Spa and Kenilworth, where it achieves 70%+ penetration. In February 2005, Trinity Mirror launched The Kenilworth Citizen, a free weekly that was to be delivered to 87% of homes in an area the company described as a “lucrative market” where “71% of the adults are in the ABC1 socio-economic group”. The paper’s Advertisement Director, Debbie Davies, explained: “There are so many local businesses in Kenilworth…. Kenilworth also has great appeal to businesses in the surrounding towns and cities. Companies want to target people in Kenilworth because of the attractive demographics – they are very good customers.” In fact, the success of The Kenilworth Citizen in attracting advertising has been so immediate that, in September 2005, Trinity Mirror announced the launch of two further free weekly papers in neighbouring areas. The Warwick Times and The Royal Leamington Spa Times will be delivered to 85% of homes in the area, as a direct challenge to The Courier’s lucrative penetration in the market. Debbie Davies said: “There are so many local businesses in Warwick and Leamington Spa, and the Times series will provide them with a way to reach over 40,000 homes in the town.” The Kenilworth Citizen will be re-branded as The Kenilworth Times as part of the marketing strategy. The Local Radio Market From the very beginnings of local radio, the towns of Warwick, Leamington Spa and Kenilworth have suffered from being on the fringes of other larger towns’ coverage areas, but never having had a radio station themselves. When Mercia Sound launched in 1980 in Coventry, it had simulcast its radio service on AM and FM. The station was only audible in Warwick, Leamington Spa and Kenilworth on the AM frequency because of the geography of the area. In 1988, Mercia Sound and BRMB Radio in Birmingham were merged into a new company, Midland Radio plc and, the following year, the two stations launched a separate station on their AM transmitters called XTRA AM playing oldies for an older audience. Because the main Mercia service (now renamed Mercia FM) would no longer be audible to residents of Warwick, Leamington Spa and Kenilworth, the Independent Broadcasting Authority approved the installation of a 50-watt transmitter on 102.9 FM at Newbold Comyn in Leamington Spa to relay the FM service to the local area. Initially, the Leamington Spa FM transmitter merely carried identical programming to the Coventry service but, once a landline was installed to link it directly to the Coventry studio, it started to broadcast separate programmes and separate commercials for the area. In 1990 and 1991, Rob Jordan presented a daily afternoon show for Leamington Spa, and Mercia opened a contribution studio in Leamington Spa Town Hall. This local programming was dropped by 1993 when Midland Radio was bought by Capital Radio plc, who subsequently sold the two Coventry stations to GWR plc in 1994. The BBC’s commitment to local radio in the area has been just as intermittent. In 1988, the Corporation identified several areas across the UK that were underserved by its local radio services, including Warwickshire. In 1990, the new station BBC CWR (standing for Coventry & Warwickshire Radio) opened with two transmitters, one on 103.7 FM serving the south of the county, including Warwick, Leamington Spa and Kenilworth. Producing 18 hours a day of programming from its main studio in Coventry and several contribution studios, including one in Leamington Spa Town Hall and another in Warwick, the station provided a comprehensive local Page 28 radio service.
  30. 30. Section 105(a): Ability to maintain proposed service 2. Financial and business plans c) Financial Projections Under John Birt’s tenure as Director General, the BBC made considerable cutbacks in local radio provision, and BBC CWR was closed as a result. In 1995, it was achieving only a 12% weekly reach, compared to Mercia FM’s 32% reach. From February that year, the station became merely an opt-out from BBC WM in Birmingham and was renamed BBC Coventry & Warwickshire. Within a few years, the opt-out shows disappeared and the station simply became a relay of the Birmingham service with no separate branding. Then, in 2003, Birt’s successor, Greg Dyke, announced that the local station in Coventry would be re-opened and admitted that the closure of BBC CWR eight years earlier had been a mistake. Initially, six hours a day of local programmes were reinstated on the BBC WM relay. Then, on 3 September 2005, BBC Coventry & Warwickshire was launched as a full-time station, with contribution studios in local libraries throughout its broadcast area. Although no RAJAR data is available for the Warwick, Leamington Spa and Kenilworth area on its own, the Board of Warwick Local Radio commissioned an analysis of the last five year’s ratings data for the larger Coventry market, in which these towns fall. RAJAR data for the Coventry market [Research Project #2] shows that the BBC not only has the highest-ranking station in the market (BBC Radio Two), but also takes five of the six top stations. Despite six local/regional commercial stations being audible within the Coventry market, the BBC still accounts for 57% of radio listening, compared to the UK average of 54%. To ensure that the data from the Coventry market would yield information relevant to the smaller Warwick, Leamington Spa and Kenilworth market, a comparison was made between the results of the latest RAJAR survey for Coventry and the results of two separate market research projects commissioned by the Board within the smaller local area for this licence: WEEKLY REACH COMPARISON (%) Source Market Sample size Demographic BBC Radio Two Mercia FM BBC Radio One BBC Radio Four BBC Radio Five Live BBC WM Classic FM Heart FM RAJAR 2005 Q2 Coventry 1369 15+ 28 32 27 22 16 11 14 15 Research Project #1 Research Project #4 Warwick Warwick 505 431 15+ 25+ 33 42 27 22 29 22 23 45 17 24 12 21 14 27 10 19 Page 29
  31. 31. Section 105(a): Ability to maintain proposed service 2. Financial and business plans c) Financial Projections The results of Research Project #1 match quite closely with the RAJAR data. The results of Research Project #4 match less closely because only respondents aged 25 and over were interviewed. As would be expected, in this latter survey, stations aimed at older demographics such as BBC Radio Two and BBC Radio Four scored better with this 25+ demographic, while youth stations such as BBC Radio One scored worse. The conclusion is that that Coventry data bears useful examination for this licence application, because the Warwick, Leamington Spa and Kenilworth market is not so dissimilar. The most noteworthy characteristic of the Coventry radio market is the decline in local/regional commercial radio’s listening share from 32% to 30% over the last five years, despite the launch of two new regional commercial stations during that period [Research Project #2]. Substantial cannibalisation of local/regional commercial radio audiences has happened during that time, combined with the substantial decline of oldies station Classic Gold 1359, which has lost more than half its hours listened [all references to hours have been indexed for changes in population and station survey areas] and which now has only a 2% share. During a period when heritage stations in many UK local radio markets have suffered substantial audience decline as a result of increased competition in their market or poor programming, Mercia FM is a remarkable success story. Its weekly reach (32%) remains unchanged from ten years ago, just after Heart FM had launched as the first regional station in the West Midlands. Hours listened to Mercia FM have increased by 7% over the last five years, and its share of listening has barely changed [Research Project #2]. This is partly due to the quality of Mercia’s programming, but also partly due to the station’s willingness to adapt in the marketplace. Because Mercia FM dominates the local radio market so effectively, a closer examination of its audience profile is worthwhile. In February 2005, Mercia FM changed its on-air “tag line” from “today’s best mix” to “playing the best mix of the 80s, 90s and today”. At the same time, it introduced more songs from the 1980s and 1990s into its music mix. The recent monitoring report commissioned by Warwick Local Radio shows that, outside of the breakfast and drivetime shows, the station is now playing three or four hit songs from the 1980s and 1990s in each hour [Research Project #5]. This represents a substantial change from a format that had previously been dominated by current and recurrent hits. To understand how this is changing the audience profile of Mercia FM, it is necessary to look at the constituent age groups of the station’s listeners, and what proportion each age group accounts for of the total hours listened. To explain these issues easily, it will be necessary to display the information graphically (whilst understanding Ofcom’s guidance to minimise the inclusion of graphs and tables within licence applications). All data has been indexed against the proportion of different age groups in the population, so as to exclude the effects of the ageing population and differences between the demographic breakdown of local markets. Page 30
  32. 32. Section 105(a): Ability to maintain proposed service 2. Financial and business plans c) Financial Projections 250 MERCIA FM: DISTRIBUTION OF HOURS LISTENED BY AGE [indexed] 2000Q2 INDEX: 100 = normal distributio 2005Q2 200 150 100 50 0 15-24 25-34 35-44 45-54 55-64 65+ An index value of 100 shows that the proportion of hours listened to the station by an age group is exactly proportionate to its size relative to the whole adult population. A value above 100 shows that the station’s listening is skewed towards that age group. It can be seen that, five years ago, Mercia FM’s listening was dominated by 15-24 year olds attracted to its contemporary chart music. Although the format change only took place in February this year, the effects have been immediate. In the latest quarter (April to June 2005), Mercia FM’s listening is now dominated by 35-44 year olds, whilst the residual 15-24 audience continues to record an index value above the 100 mark. Mercia FM’s “Format” contained in its Ofcom licence continues to define the station’s target audience as “under-40s” and its format as “contemporary and chart music” (following Ofcom’s Change of Control review when GWR was merged into GCap). Whereas, five years ago, only 50% of hours listened to the station accrued from 35+ listeners, already the audience has aged significantly enough that 69% of hours derive from that 35+ demographic. Mercia FM’s shift towards an older audience was confirmed by owner GCap Media in its May 2005 submission to Ofcom (“Response by GCap Media plc to Ofcom on the proposed change to the Format of Kix 96”): “From its heritage ILR broad position, Mercia FM has experienced declining market share, with specialist services targeting demography, geography and genre-based music interest eroding its audience share. As a result, Mercia FM now concentrates on superserving the 25 to 44 year old audience…….” The GCap Media submission also confirmed that the “30 to 50 year old demographic is significant for Mercia FM”, as the graph clearly shows. Original market research was attached to the submission showing that, amongst the people sampled in Coventry, “for Mercia FM, it shows widespread understanding in the market for their music position of the 80s, 90s and today.” These findings are essential to understanding the dynamics of the local radio market because of the existence of Heart FM as a competitor to Mercia FM. An analysis of Heart FM’s listening hours shows that the station is similarly focused on the same 35-44 year old demographic. Page 31
  33. 33. Section 105(a): Ability to maintain proposed service 2. Financial and business plans c) Financial Projections HEART FM: DISTRIBUTION OF HOURS LISTENED BY AGE [indexed] 200 2000Q2 INDEX 100 = normal distributio 2005Q2 150 100 50 0 15-24 25-34 35-44 45-54 55-64 65+ Heart FM’s key demographic has changed little in five years. What has changed is Mercia FM’s decision to fight Heart FM head-on for the same demographic. Already, after only a few months, Mercia FM has had a substantial impact on Heart FM in its local market. Heart FM’s share of listening dropped to 4.3% in the last quarter, down from a peak of 7.3% two years ago, while Mercia’s share has risen from 11.5% to 13.2% in the last year [Research Project #2]. It is interesting to note that Heart FM’s “Format” defines its target audience as “25 to 44 year olds”, although the above graph shows it becoming more narrowly focused over the last five years on 35-44 year olds. The net result of two stations moving towards the same demographic target is the audience cannibalisation that was documented earlier, and the resultant diminution of local/regional commercial radio’s share of listening in the market. Such “in-fighting” has allowed the BBC to continue to dominate the market, because its most popular stations succeed in reaching very different demographics from either Mercia FM or Heart FM. To illustrate this phenomenon, it is worthwhile examining the demographics of the two dominant BBC stations in the market (ranked first and third by audience share). BBC RADIO TWO: DISTRIBUTION OF HOURS LISTENED BY AGE [indexed] INDEX 100 = normal distributio 200 150 100 50 2000Q2 2005Q2 0 15-24 25-34 35-44 45-54 55-64 65+ BBC Radio Two’s audience is completely different from that of Mercia FM or Heart FM, and is dominated by 45 to 64 year olds. The station has become slightly younger over the last five years, with more 30 to 40 year olds attracted by younger presenters and a more contemporary music policy that has, simultaneously, lost the station some of its impact within the 65+ Page 32
  34. 34. Section 105(a): Ability to maintain proposed service 2. Financial and business plans c) Financial Projections demographic. BBC Radio Two’s audience profile is similar to that of Saga FM, which is another of the regional stations available in this market. 250 BBC RADIO ONE: DISTRIBUTION OF HOURS LISTENED BY AGE [indexed] 2000Q2 INDEX: 100 = normal distributio 2005Q2 200 150 100 50 0 15-24 25-34 35-44 45-54 55-64 65+ At the other end of the age spectrum, BBC Radio One’s hours listened are dominated by 15-24 year olds although, over the last five years, more 25-34 year olds are listening, as both the station’s presenters and listeners begin to age. BBC Radio One’s audience profile is similar to that of Kerrang!, which is the third regional station available in the market. Given the existence of three pairs of stations in the market targeting similar demographics: • • • Mercia FM + Heart FM BBC Radio Two + Saga FM BBC Radio One + Kerrang! It is the contention of Warwick Local Radio that it would prove counter-productive to propose a further station in the same market that tried to target too narrow a demographic. To understand how a new local station could fit into an already crowded radio market, the audience profiles were analysed of 28 “full-service” local stations launched since 1999, using the latest RAJAR data [2005 Q2] with performances indexed against the population in each station’s survey area to eradicate the demographic differences between different markets. The average full-service station has this audience profile: INDEX 100 = normal distributio 200 FULL SERVICE STATIONS: DISTRIBUTION OF HOURS LISTENED BY AGE [indexed] 150 100 50 0 15-24 25-34 35-44 45-54 55-64 65+ Page 33
  35. 35. Section 105(a): Ability to maintain proposed service 2. Financial and business plans c) Financial Projections Although, like Mercia FM and Heart FM, the peak of the audience is in the 35-44 demographic, the graph is much more shallow and extends across a much wider age range in the important area above the 100 index value, demonstrating broad audience appeal. This empirical evidence demonstrates that recently launched full-service stations (the majority entering markets dominated by heritage stations) succeed in attracting a wide range of ages with their programming, not dissimilar to the audiences of most local commercial radio stations in the 1970s and 1980s. A pertinent example from the local area of a typical station attracting a similarly diverse audience is FM 102 The Bear in Stratford-upon-Avon, whose audience profile is: FM 102 THE BEAR: DISTRIBUTION OF HOURS LISTENED BY AGE [indexed] 250 INDEX 100 = normal distributio 2000Q2 2005Q2 200 150 100 50 0 15-24 25-34 35-44 45-54 55-64 65+ Like the previous graph, the peak of the 2005 data falls in the 35-44 demographic, and the area above the 100 index value extends from the late 20s up as far as the early 60s, showing the station’s success at attracting a diverse audience. This was not always the case and the graph shows that, five years ago, before present owner CN Group purchased the station, it was much more sharply focused on the 35-44 demographic. Like Mercia FM, The Bear now faces competition from the three regional stations in Birmingham (though only across the northern part of its survey area) but, unlike Mercia FM, CN Group has decided not to try and compete headon for Heart FM’s 25-44 year old target audience. This brief analysis of the shifting demographics of radio stations within this local market demonstrates how important it is to consider existing competitive forces when planning a new radio station for the area. Although Warwick Local Radio will undoubtedly be unique in the market by providing listeners with editorial coverage directly relevant to Warwick, Leamington Spa and Kenilworth, it is nevertheless in competition for listeners with stations that have considerable strengths and loyalties. It is enlightening to look at the demographics of all the local/regional commercial radio stations audible in the market on a single graph: Page 34
  36. 36. Section 105(a): Ability to maintain proposed service 2. Financial and business plans c) Financial Projections M ercia Classic Gold Heart Saga Kerrang Bear INDEX 100 =normal distributio 300 DISTRIBUTION OF HOURS LISTENED BY AGE [indexed by population] MARKET GAP 0 15-24 25-34 35-44 45-54 55-64 65+ Although the resultant graph is over-crowded with data, it is clear to see that a market gap exists in the 45-54 demographic because this age group is not “super served” by any particular local commercial station. This age group will be the cornerstone of the plans for Warwick Local Radio whilst, at the same time, the station is anticipated to attract substantial numbers in the age groups directly above and below. As noted above, it is imperative for the station to have as broad a listener base as possible, which is why the Board decided to define Warwick Local Radio’s target audience as 35 to 64 year olds, and the station’s programming [see answer to Question 4] is designed to have wide appeal to this entire demographic. The Board believes that, by formulating its business plan using empirical evidence from the specific local market to be served, and using empirical data derived from similar station launches across the UK, its proposals are made both realistic and feasible. The applicant should provide financial projections on an annual basis for the licence. The projections must include: (i) Profit and loss accounts (ii) Balance sheets (iii) Cash-flow forecasts The period covered is at the discretion of the applicant, but should be justified. The forecasts should be supplied on an Excel spreadsheet or similar, with any accompanying guidance notes. The applicant must also complete and submit the spreadsheet entitled ‘Financial Template’ located at www.ofcom.org.uk/radio/ifi/rl/commer/ar/lapr/ftap.xls using information from its business model. All financial projections, plus the “Financial Template”, are included as Appendix 3. In addition to profit and loss accounts, balance sheets and cash flow forecasts for the first three years, also included are full details of all workings, the sensitivity analysis, depreciation, staff costs, revenue calculations and pre-operational expenditure. The projections are based on the first three years of trading. Warwick Local Radio Limited has decided to submit projections for the first three years, as this takes the company through to its first year of projected profits. Page 35
  37. 37. Section 105(a): Ability to maintain proposed service 2. Financial and business plans c) Financial Projections This section must include a full listing of the underlying assumptions on which the financial projections are based, relating such assumptions clearly to other parts of the application (e.g. proposed format, extent of coverage area) Underlying assumptions are as follows: • • • • • • • • • • • • • Warwick Local Radio will broadcast to an adult population of 103,703; Warwick Local Radio’s programming of local news, information and music will appeal to all adults in the area, but have particular appeal to both sexes aged 35 to 64; Warwick Local Radio will launch no later than six months post-award; Tangible assets will be purchased outright prior to broadcast. The asset depreciation policy is defined in the attached financial information at Appendix 4; Revenue projections have been based on rationale acquired through trial broadcasts, industry standards, market research and knowledge of existing advertising rates in the local marketplace; Royalties are calculated on the current published percentages; Sales commission is calculated as 3% of revenue; A management services contract has been agreed with Laser Broadcasting Limited to supply Warwick Local Radio Limited with back-office services such as accounting, sales training and commercial traffic scheduling; Vehicle leasing for the sales executive cars is based upon a written quote from a local supplier; The vehicle to be purchased outright is to be used by the news team for outside broadcasts and brand awareness; Premises will be leased and the cost is based on a similar property available at the time of application; Bad debt provision in based on 1% of budgeted revenue. It is the intention of the Warwick Local Radio Limited Board to operate a strict debt collection policy that requires new customers in Year One to pay for commercials before they are broadcast. Credit facilities will be offered subsequently as the debtor profile becomes apparent; The transmission facilities will be supplied by Arqiva under a Total Broadcast Contract. Arqiva will design, procure, install, commission and maintain the system, as well as be responsible for any necessary replacement equipment, repairs and emergency callouts. This arrangement requires no capital outlay from Warwick Local Radio Limited, as payment for this service is made by monthly Direct Debit for the contracted period of the licence. It is intended to site the transmitter at Arqiva’s recommended location at Warren Heath [see answer to Question 3]. The applicant should detail how revenue figures were derived, distinguishing between local, national and sponsorship revenue. The response to this question may be submitted in confidence. Revenue figures were derived as follows: • • Projected weekly reach in Year One of 17%, rising by Year Three to 19%, and projected average hours have been benchmarked against empirical evidence of recent local station start-ups of comparable size [see answer to Question 2(d)]; Conservative revenue projections are based upon a Total Survey Area of 103,703 adults; Page 36
  38. 38. Section 105(a): Ability to maintain proposed service 2. Financial and business plans c) Financial Projections • 2005 2006 2007 2008 The benchmark historical industry average revenue of £31 per 1000 hours per annum listened was used to produce the forecasts, with a year-on-year growth progression applied using the average values of Advertising Association projections for UK radio revenues [see table below]; RADIO REVENUE: Year-On-Year Growth Projections (%) High option Low option 3.0 7.7 2.7 2.0 9.3 2.2 9.2 4.7 Average 5.4 2.4 5.8 7.0 source: Advertising Association forecasts, November 2004 • • • • • National revenue has been assumed to be 1.5% of total revenues; Local revenue has been assumed to be 73.5% of total revenues; Sponsorship income has been assumed to be 20% of total revenues; Income from promotions has been assumed to be 5% of total revenues; Commercial production costs have been assumed to be 7% of total revenues. Page 37
  39. 39. Section 105(a): Ability to maintain proposed service 2. Financial and business plans d) Audience Projections Provide the following information: (i) The projected adult (aged 15+) population of the Total Survey Area (TSA) within which it is intended to measure the listenership of the service. The projected adult population (aged 15+) is 103,703. This has been derived from 2001 Census data and the coverage prediction supplied by Arqiva [see answer to Question 3]. The population count has been calculated against a signal strength of 54 dBuV/m. According to Arqiva’s analysis of data from the 2001 Census, the population within the Total Survey area comprises: • 51% females; • 93% of the population describe themselves as “white”; • 4% of the population describe themselves as of Indian origin, the most numerous ethnic minority; • 60% of the adult population are within ABC1 socio-economic class and 40% are C2DE; • 18% of the employed adult population are “managers & senior officials”; • 16% of the employed adult population are “professionals”; • 73% of households own their own home. (ii) Projections for listenership ratings (e.g. weekly reach, average weekly hours of listening) over the first three years of the service, with detailed demographic breakdowns as appropriate. The Board’s analysis has determined that the station’s projected performance will be: Adult (15+) TSA Weekly reach % Reach # Average hours/week Total hours YEAR ONE 103,703 17 % 17,630 7.0 hrs 123,410 YEAR TWO 103,703 18 % 18,667 8.0 hrs 149,336 YEAR THREE 103,703 19 % 19,704 9.0 hrs 177,336 Extensive market research [see answers to Question 6] has demonstrated the wide appeal of the proposed radio station to a substantial proportion of the potential audience between the ages of 35 and 64. This age group comprises 48% of the adult population of Warwick, Leamington Spa and Kenilworth. Additionally, there is likely to be some overlap of the station’s appeal to 30-34 and 65-70 year olds, who comprise a further 15% of the adult population. The Board expects the demographic breakdown of the station’s audience to be similar to that of other “full-service” locally focused stations targeting older audiences that have launched in markets with existing heritage stations. In the answer to Question 2(c) earlier in this document, a graph was included that showed the average demographic breakdown of 28 “full-service” local stations launched since 1999. Warwick Local Radio’s audience is expected to have a broadly similar distribution of hours listened across the range of age groups. Page 38
  40. 40. Section 105(a): Ability to maintain proposed service 2. Financial and business plans d) Audience Projections (iii) The expected impact of the proposed service on existing services, in listenership terms. The impact of Warwick Local Radio on existing services within its Total Survey Area at the end of Year One is summarised in the table below: IMPACT ASSESSMENT OF WARWICK LOCAL RADIO ON WARWICK RADIO MARKET (103,703 TSA) - YEAR ONE ALL BBC RADIO RADIO 2 MERCIA BBC BBC FM RADIO 1 RADIO 4 WARWICK L.R. BBC RADIO FIVE LIVE BBC WM CLASSIC HEART SAGA CLASSIC FM FM 105.7 FM GOLD 1359 KERRANG! pre-launch WEEKLY REACH (000) % REACH TOTAL HOURS (000) AVERAGE HOURS 28 27% 361 13.0 34 32% 305 9.1 29 28% 296 10.2 23 22% 294 12.6 17 16% 124 7.5 12 11% 119 10.1 15 14% 110 7.4 16 15% 101 6.4 6 6% 56 8.8 6 6% 53 8.3 7 7% 40 5.8 100.0% MARKET SHARE 96 93% 2317 24.1 15.6% 13.2% 12.8% 12.7% 5.3% 5.1% 4.8% 4.3% 2.4% 2.3% 1.7% 119 109 107 92 51 52 38 5.1% 4.6% 4.5% 3.9% 2.2% 2.2% 1.6% end of Year One WEEKLY REACH (000) % REACH TOTAL HOURS (000) AVERAGE HOURS MARKET SHARE 2359 346 294 291 289 100.0% 14.7% 12.5% 12.4% 12.3% 18 17% 123 7.0 5.2% The launch of Warwick Local Radio will increase hours listened to all radio by almost 2% in Year One to 2,359,000 hours. Warwick Local Radio will rank fifth in the market with a 5% share of listening in Year One, a performance that is projected to improve by more than 40% by Year Three. The launch of Warwick Local Radio is projected to reduce listening hours to these stations by these amounts within the station’s Total Survey Area in Year One: • • • • • • • • • • • • • • • BBC Radio Two (15,291 hours per week less) Mercia FM (11,024 hours per week less) BBC Radio WM (9,957 hours per week less) Heart FM (8,535 hours per week less) FM 102 The Bear (8,535 hours per week less) BBC Radio One (4,979 hours per week less) BBC Radio Four (4,979 hours per week less) BBC Radio Five Live (4,623 hours per week less) Saga FM (4,623 hours per week less) Classic FM (3,556 hours per week less) Classic Gold 1359 (1,778 hours per week less) Kerrang! (1,422 hours per week less) Virgin Radio (1,066 hours per week less) Talksport (356 hours per week less) Other (1,422 hours per week less) (iv) The basis on which the estimates above have been calculated, and any assumptions taken into account. Audience Projections: The Board’s projections for the performance of the station in its first three years have been derived from statistical analysis of empirical data from RAJAR ratings reports [1999Q2 to 2005Q2]. Page 39
  41. 41. Section 105(a): Ability to maintain proposed service 2. Financial and business plans d) Audience Projections A benchmark was provided by the start-up performances of all 21 local (not regional) commercial radio stations with Total Survey Areas of between 100,000 and 300,000 that have commenced broadcasting since 1999 and have participated in RAJAR. Their average performance at the end of each of their first three years on-air was as follows: Weekly reach % Average hours/week YEAR ONE 17.2 % YEAR TWO 18.4% YEAR THREE 18.6% 9.4 hrs 8.7 hrs 9.7 hrs Warwick Local Radio’s programme format is comparable to the stations included in this analysis, and its target audience, like those stations, is by no means a niche demographic. These figures were rounded and revised with a more natural year-on-year progression to arrive at the projections for the station’s performance in the first three years. The year-on-year increase in hours listened has been approximated to 20% for Years Two and Three, a rate of growth observed in start-up stations in similarly sized markets. Impact on existing services: The Board’s projections for the impact of the new station on existing broadcasters have been derived from quantitative market research [see Research Project #4] in which respondents who indicated they would listen to the new local radio station were asked how they would make time to listen. Some respondents answered that they would listen to the radio longer, while others said they would listen to existing stations for less time or not at all. Because existing RAJAR data is not available for the market the station will serve, several assumptions have been made in calculating the impact on existing stations: • The Total Survey Area of Warwick Local Radio is assumed to have the same listening characteristics as the larger Mercia FM area in which it is included. This assumption is supported by the results of market research [see Research Reports #1 and 4] that shows the same stations to have similar popularity in the Warwick market as they do in the Coventry market [see Research Report #2]. The results of Research Project #4 were skewed more towards stations with older appeal (BBC Radios Two, Four and WM) because the sample was aged 25+ rather than 15+, as shown below: Source Market Sample size Demographic BBC Radio Two Mercia FM BBC Radio One BBC Radio Four BBC Radio Five Live BBC WM Classic FM Heart FM WEEKLY REACH COMPARISON (%) RAJAR 2005Q2 Research Project #1 Coventry Warwick 1369 505 15+ 15+ 28 33 32 27 27 29 22 23 16 17 11 12 14 14 15 10 Research Project #4 Warwick 431 25+ 42 22 22 45 24 21 27 19 Page 40
  42. 42. Section 105(a): Ability to maintain proposed service 2. Financial and business plans d) Audience Projections • • The existing listenership to FM 102 The Bear in the Warwick market cannot be accurately quantified because the station is not available within most of the Coventry market; Listening to Warwick Local Radio is assumed to replace listening to an existing station on an hour-for-hour basis, a simplification of the real situation where listeners are more likely to add a station to their listening menu and share time between them (if anything, this results in an overestimation of the impact on existing services, and an underestimation of the new listening added to the market). CALCULATION OF IMPACT ASSESSMENT Col #1 Col #2 Col #3 Col #4 % % no. % Listen to the radio for longer 32 33 Spend less time listening (or stop altogether): 64 67 ……….. Mercia FM 31 13 Classic Gold 1359 5 2 The Bear 24 10 Heart FM 24 10 Saga FM 13 6 Kerrang! 4 2 BBC Radio WM 28 12 BBC Radio 1 14 6 BBC Radio 2 43 19 BBC Radio 3 0 0 BBC Radio 4 14 6 BBC Radio 5 Live 13 6 Classic FM 10 4 Virgin Radio 3 1 Talksport 1 0 other 4 2 Don't know 3 Total 100 100 231 100 Col #5 % 33 Col #6 hours 41264 9 1 7 7 4 1 8 4 12 0 4 4 3 1 0 1 0 11024 1778 8535 8535 4623 1422 9957 4979 15291 0 4979 4623 3556 1067 356 1422 100 123410 In Column #1, the results of Research Project #4 are tabulated, in which 32% of respondents who said they would listen to the new local stations then stated they would listen to the radio for longer; 64% said they would sacrifice listening to existing stations; and 3% said they did not know how they would make time. In Column #2, the 3% who “don’t know” are removed and redistributed proportionately to the other two categories. In Column #3, the 231 mentions of stations that respondents said they would listen to less (or not at all) are tabulated. In Column #4, these mentions of stations are converted into percentages of those respondents who would listen less to existing stations. Page 41
  43. 43. Section 105(a): Ability to maintain proposed service 2. Financial and business plans d) Audience Projections In Column #5, these preferences are converted to percentages of all respondents who said they would listen to the new radio station. In Column #6, these percentages are applied to the total hours listened per week to Warwick Local Radio to determine the impact on existing stations. The results show that: • 41,264 hours per week listening to Warwick Local Radio is “new listening” that has been added within the market; • the remainder of the total 123,410 hours per week listening to Warwick Local Radio in Year One is derived from listeners replacing former listening to existing stations. These changes in hours listened to different stations have then been applied to the “pre-launch” snapshot of the Warwick market. Although recognised to be a simplification of the complex radio listening dynamics, and to be based on assumptions about the Warwick market, the results nevertheless give some indication as to the anticipated impact of Warwick Local Radio on existing radio stations and its projected position in the market after its first year on-air. (The figures within the above tables may not sum precisely to totals, because they are rounded from spreadsheet formulae.) Page 42
  44. 44. Section 105(a): Ability to maintain proposed service 3. Transmission Proposals (i) Provide details of the transmission site you propose to use, under the following headings: (a) Name and National Grid Reference of site Site Name: National Grid Reference: (b) Leamington Spa SP 329 663 Height of site above Ordnance datum (in metres) 91 metres (c) Height of transmitting aerial above ground level 39 metres (d) Radiated power in either or both planes of polarisation, and aerial radiation pattern (if no aerial radiation pattern is submitted, it will be assumed without exception to be omni-directional). Radiated Power: Pattern: 100 watts vertical + 100 watts horizontal Antenna pattern is Directional. A copy of the radiated pattern is included as Appendix 5. The applicant should confirm whether he believes that his intended mast aperture will be available, and whether, where required, planning permission can be obtained. Where appropriate, evidence to support this belief should be provided. Details of any negotiations which have been entered into with the site owner should also be provided. Arqiva has informed Warwick Local Radio that it owns the Leamington Spa site and the existing antenna system used by Mercia Radio. This can be made suitable for sharing. Planning permission is not required for the changes required and can be accommodated within the present building. The site provides excellent coverage for Warwick, Leamington Spa, Kenilworth and the surrounding area. The information provided above must take into account any requirements set out in Section 2 of this Notice. In the event of minor non-compliance, Ofcom may revisit an applicant’s proposals with a view to modest adjustment following award and closer scrutiny. Significant non-compliance may render the application liable to disqualification. (i) Please provide a detailed computer predicted map (in colour) of the coverage anticipated using the transmission site and parameters described above. Arqiva Coverage Predictions for the area are attached as Appendix 6. Page 43

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