Christmas Eve sees Chris Evans present his last Radio 2 breakfast show. Then he takes a few weeks off, before he reappears in brand new studios over in The News Building, just under The Shard by London Bridge station. There he’ll begin his new Virgin Radio breakfast show from the 21st January 2019.
When I took a first look at the news that Evans was leaving Radio 2 to “return” to Virgin Radio, I said that it was a big financial gamble by News UK. And that’s still the case.
But now comes news that Virgin Radio is going to run his breakfast show “with no ad-breaks.” Instead we learn that Sky is going to be sponsoring the breakfast show, and that promotions for Sky will be integrated into Evans’ show.
Now I’ll confess that I’ve always wondered if it was possible to run a full-service commercial radio station without any ad breaks, instead relying on sponsorship, promotions and other means to support the business. This isn’t quite that, as the rest of the schedule will continue to have ad-breaks, but it’s an unusual move as I’ll explain. However for the first few months of the new show, it does make some kind of sense.
Stations going ad-free during the launch phase aren’t an unknown thing. A number of digital stations, like Union Jack, have done it during their first months, in part because they don’t have any data to trade from at first. While Virgin Radio does have current data, Evans joining them makes January a new year-zero and creates a set of circumstances for going ad-free as I’ll explain below.
At the time of the Evans announcement, former radio executive Phil Riley tried to run the numbers on the deal. While these are definitely “back of the fag packet” calculations, they bear looking at, because it’s tricky to make the sums add up.
For a station the current size of Virgin Radio, there’s absolutely no chance that a Sky sponsorship would cover the costs of Evans (and his team), unless either they were taking a pay cut from what they were getting at the BBC, or Sky was paying massively over the odds for its sponsorship.
Neither seems likely to be the case. I don’t see Evans taking a pay cut – you expect Sky will definitely be paying a premium for exclusivity in the show, and there’ll be an expectation that Evans’ show will grow substantially beyond where the current Virgin Radio breakfast show is. But paying massively above the market rate?
Of course Sky and Virgin Radio owners News UK were related within the Rupert Murdoch empire previously. But Comcast has just bought Murdoch’s controlling interest in Sky, and completed that acquisition in October, with the departure of James Murdoch amongst others from Sky’s board. You feel that the recent announcement that Sky would cease to sponsor its spectacularly successful cycling team suggests that Comcast is definitely in control of the business and making its own sponsorship decisions
While it’s possible that some kind of “sweetheart” deal was signed prior that final acquisition, I still really don’t see Sky paying over the odds for a sponsorship property like that.
You would imagine that there’s still room for promotional activity beyond Sky’s involvement in the new show – i.e. sponsored competitions. These remain big business in the radio industry (And that’s why we’re more likely than not to see networked breakfast shows on stations like the Capital Network in the near future. You can do bigger and better promotions with greater creativity and impact if you have a single show).
Between those two revenue sources, perhaps the sums will lead to a break-even situation (if we exclude other costs like marketing). But going ad-free definitely means turning away spot-airtime money which is still the bulk of any commercial station’s revenues. And not having those spots has a wider impact on the station.
Ordinarily, you wouldn’t allow an advertiser to only buy spots in a big name breakfast show. You would limit those spots carefully, requiring advertisers to buy packages of spots across the whole station. If you want a couple of breakfast show spots, you’ll need to buy daytime, afternoon, evening drive and overnight spots as well. Those spots get packaged up, and you buy the whole package (Without these packages, there would be barely any advertisers overnight at all!).
By doing away with any breakfast spots, there’s less of an incentive for advertisers to bother buying slots elsewhere on the station.
I had assumed that Virgin would also invest in other parts of the schedule, perhaps picking up a few other high-profile names, but that doesn’t seem to have happened, and that potentially means that spot advertisers aren’t going to want to come to the station as much.
However the real reason to go ad-free – at least for the first three months until they get a set of RAJAR results that incorporate Evan’s listening figures – is because the current data is so low that there’s no significant loss. With just 1.3m listening hours across the station in the most recent RAJAR results – listening hours is the most important measure from a trading perspective – the loss of spot advertising revenue just isn’t that significant.
You may as well go out of your way to incentivise as many current Radio 2 listeners as possible to follow him across with the promise of no ad breaks, and accept what is a relatively small loss.
However, although they’ve not announced it as such, you would strongly suspect that once those first Chris Evans listening figures come through with the mid-May RAJARs, and start being traded on from early June, that ad breaks will duly make their appearance on Evans’ show. That would be my bet.
(As a side note, it would also be in most radio groups’ interest to lower their current ad loads as streaming music services become more mainstream, but that’s another blog for another time.)
In the meantime, I await an upcoming marketing blitz!