If one radio station has hit the headlines more than any other in the past few years, it has to be Virgin Radio. Ever since it was bought out by Chris Evans’s Ginger Media group, barely has a week gone by without Evans or Virgin, where he presented the breakfast show, turning up in the tabloids.
Evans is long gone – though the legal wrangling over his departure still rumbles on – and new owners SMG have presided over one of the worst slumps in advertising in recent memory. Standing in the middle of all this is finance director Mark Donnelly, but despite the trials and tribulations, he wouldn’t want to be anywhere else.
‘This is a small company, you get to know everyone here,’ says Donnelly.
‘We have a compact management team and you’re involved in every key decision regarding the direction of the company. But it’s a relaxed atmosphere.
The radio’s blasting all day and the likes of Paul Weller and Richard Ashcroft wander around the building. There’s a good vibe to the company, it’s young, there’s a lot going on and everyone likes to have fun. There’s a big social culture, and this comes across in how people react to each other in their day-to-day dealings.’
Donnelly came in as a financial controller at Ginger in 1997 after spotting an advert for the job while working for KPMG at another part of the Virgin group. A chance meeting with the then financial director of Virgin revealed a shared passion for football (Donnelly is an avid Southampton fan) and helped him secure an interview.
They were exciting times for both Donnelly and the Ginger group. Evans was pulling in the listeners with his zoo-style show and the company was in advanced discussions to buy the Daily Star. The deal didn’t come through due to some last minute hitches, and the company realised it was too small to carry on without buying or being bought.
Discussions started with the Scottish Media Group in the second half of 1999 and concluded with the sale of Ginger to SMG in March 2000. The group promised a ‘hands’ off’ policy when dealing with Virgin Radio and has pretty much kept to it, although there were some differences.
‘SMG gave us a pretty free hand, but private companies have less reporting responsibilities so many of the processes and controls had to be tightened up,’ says Donnelly.
The introduction of a new owner was also to set a tighter rein on its star act, explains Donnelly.
‘In December of 1999 Chris Evans went on air one morning and said that the station was going to give away #2m live on air. As a private company with Evans as one of the major shareholders you just had to go with it. This wouldn’t happen now, not without going through the proper financial channels.’
This lack of control evidently frustrated Evans and eventually led to his departure. Following reports of the DJ being spotted on heavy drinking sessions while apparently off sick, the company felt it was left with little choice but to release its star. Donnelly explains that he cannot comment on these events, or how they affected the company due to the ongoing legal ramifications, but admits that it was a ‘tough time’.
By this time Donnelly had moved over to become solely responsible for Virgin Radio, where, as he explains, his duties in the role of finance director remain quite fluid.
‘(In my role) there isn’t really an average day,’ he says. ‘There are certain things you have to do at certain times of the month such as providing information to SMG and comparing how we are doing in the market to our competitors. I get involved with the sales team quite a lot in terms of managing expectations, both up and down. I also have quite an operational hat nowadays and get involved in key strategic decisions, such as what digital platforms we want to be on. Apart from that I seem to get everything that no-one else wants.’
One side of the job that Donnelly has so far avoided though is an actual on-air appearance. ‘I’ve not actually been roped into the radio side yet although (the finance department) has been moaned about a few times on air if we haven’t always given someone what they’re after.’
It’s not been all fun and games at Virgin Radio though, despite the apparent joviality displayed in the building and on air. The last two years have seen one of the worst ever slumps in advertising, with radio hit just as badly as television, online and print media. This has hit the company hard at a time when the DJ line-up and music policy was in a state of flux. Recent figures have shown that the number of listeners for the station has dropped by 20% in the last year.
‘The whole business has undergone quite a lot of change in the last 18 months and the revenue side of that has just made it tougher,’ says Donnelly.
‘There is less money coming in and there is a lot of scrutiny in making sure we get money in quickly and manage it as much as we can. This includes more frequent forecasting because the market changes so much from week-to-week.
‘In our relationship with SMG it is important to manage their expectations and make them aware of exactly how we’re trading because they have to meet City expectations. They still don’t get involved in day-to-day policy but … you would expect them to ask tough questions and to be very interested in what’s going on,’ he adds.
Donnelly expects the industry to be in upheaval for some time to come and there are likely to be big changes on the way and the company has to be ready for them.
‘There’s going to be consolidation at some point in the next 12 to 18 months. I think if you spoke to every FD of a radio company they would see themselves as a consolidator rather than as someone who will be taken over but that’s not going to be the case for everyone. But there are opportunities there for Virgin Radio and SMG,’ he says.
Virgin believes it is in a strong position, not only because of the backing of SMG, but also because of changes in musical taste.
‘We’re beginning to see a backlash against manufactured pop,’ says Donnelly.
‘Boy and girl bands are coming toward the end of the road. We’ve never been a pop station and a lot of the new music coming out suits our playlist.
There are some fantastic new bands around like Nickelback, Stereophonics, Coldplay and Travis. If you look at album sales they are consistently the biggest selling acts.’
And as for the future of the station: ‘We are aware that if we don’t do something we are still vulnerable (to takeover). We are not big enough to exist just as Virgin Radio. That’s not a long-term position. We need to keep moving the group forward over the next 12 to 18 months. There are deals to be done … and it’ll be quite interesting to see who’ll be holding all the cards at the end.’
DONNELLY ON …
AUDITOR ROTATION: ‘Our auditor at SMG was Andersen so now they’re Deloitte & Touche. I’m interested to see differences. I believe there is an issue with a lack of choice with only four large firms. By the time you have discounted those who are conflicted or who audit your competitors you may be left only one or two. If this is the case I don’t see how compulsory rotation will work. Also I think fees will increase.’
SELF REGULATION: ‘I think there is a credibility and confidence issue with the perception of the accountancy profession and with audits in particular. I would be surprised if self-regulation continues in its current form – something needs to be done to restore faith in the industry.’
NON-EXECUTIVE DIRECTORS: ‘I think that non-execs have an important role to play but they need to be truly independent and strong enough to challenge the management of the company. Again I think there is a credibility issue at the moment as a result of the well-publicised corporate governance issues and business failures.’