Media companies making an impact
Article Date: Jun 03 2005Media is easily one of the most dynamic, highly rated and important sectors in the UK. It’s also on something of a roll.
Over the past few years it has detached itself from the technology and telecommunications sectors it used to be lumped with, (the ‘TMT’ moniker proved a massive drag for investors and entrepreneurs alike), witnessed a resurgence in crucial advertising income, worked out how to extract solid profits from the internet, and enjoyed the very welcome attention of investors big and small, all of whom are intent on exploiting the next upward curve.
That activity is rising is easy for all to see. For instance, last year alone there were no less than 430 M&A media deals in the UK, worth a cool £9.8 billion.
On the London Stock Exchange, media is the sixth highest rated sector and almost 30 companies have floated in the last 12 months, raising close to £350 million.
Future growth will obviously depend on the continuing health of UK plc, but the upshot for ambitious leaders in this area is that if you have the right plan in the right niche, you should be able to take advantage of sentiment in the sector.
Orca Interactive
CEO – Haggai Barel
‘Our market could be worth $17 billion and we have a unique position’
Technological changes always throw up opportunities for media ventures. For Orca Interactive, it is the changes in communications technology.
Quite simply, Israeli-based (but London- listed) Orca is betting its house on consumers in many countries choosing IPTV (internet protocol television) as their preferred means of entertainment delivery. Why? Because IPTV can deliver television, video-on-demand, digital video recording, and all manner of data and communication services down your phone line.
Says Barel, 'it is a fantastically exciting and proven technology. The consumer gets better service, more control, wider choice, and all the content providers have another distribution channel for their content.' But more importantly, he adds, IPTV allows the telecommunications providers (especially the fixed-line behemoths like BT) to get back to the cutting edge of the communications game at a time of crucial technological convergence. For the first time, he argues, they have a product to take on the cable suppliers, those redoubtable operators that have stolen a march on them in recent years by bundling telephone and broadband services with cable TV services.
Orca's USP is that it has a prime position in the middle of this IPTV industry, supplying the 'middleware' product. This is basically the system integration solution that enables the content providers, encoders and video server companies to connect to a consumer's newfangled set-top box via the phone network/internet.
The other unique feature, according to Barel, is that his company is the only middleware venture of any scale. It has signed deals with leading global partners such as Nortel, ZTE and (most impressively) IBM. It also has a clutch of companies using its products; either selling subscriptions to consumers or trialing its technology in many territories. More importantly though, Orca has proved that its product has the ability to handle seriously large numbers of subscribers. In a recent simulation it connected 500,000, the biggest successful global test to date.
With the support of IBM, a strong order backlog and a total of 25 trials or tenders worldwide, Barel remains convinced of his firm's future success. 'In the next three years this industry could be worth $17 billion. It could be much, much bigger thereafter and we are ready.'
The Local Radio Company
CEO – Richard Wheatly
‘The small local radio stations are neglected by the big players, they’re not regarded as sexy enough’
Richard Wheatly, Local Radio’s ebullient chief executive, is putting his experience in the radio and advertising industry to good use. Credited for reinventing Jazz FM, which went from being on its knees in 1994 to being sold to the Guardian Media Group for £45 million in 2002, he believes he can apply an innovative model to local radio stations to make them as successful and profitable as national ones.
‘I believe it’s good to be [contrary and counter-intuitive], as it offers more opportunities,’ he comments. ‘The bigger players only look on a national level. The small local radio stations were – and still are – neglected, they’re not regarded as sexy enough.’
Floating on AIM last May, the company has acquired 28 local radio stations and won two new radio licences.
Each station retains its local content, but a number of processes, such as programming procedures and accounting have been centralised, creating cost savings.
Local Radio has also established a national sales division, which represents all the company’s stations as well as 70 other local radio channels, simplifying the process for advertisers by producing a single invoice – and of course, giving them national scope. Moreover, utilising proven income-generating ideas from his Jazz FM days, Wheatly is organising live music events and CD/DVD sales to bolster revenues and support for Local Radio’s stations.
Wheatly anticipates further consolidation in radio but is positioning the company as a unique, powerful second tier radio group capable of competing with the big nationals. Few would bet against him blazing a second groundbreaking trail in this medium.
Electric Word
CEO – Julian Turner
‘By creating a network of peers in niche subject matters, the cross-selling opportunities are immense’
Electric Word is a highly specialised and peerless publishing outfit. Rather than depending on the advertising market to survive, the company, led by enthusiastic chief executive Julian Turner, has built a business that almost wholly relies upon subscription income from its target audience.
Through a mixture of organic growth and choice acquisitions, Turner has built up a portfolio of newsletters, books, websites and conferences that target professionals working in the health, fitness, education and local government sectors. In many instances, the publications keep their target audiences up to date with legislative, legal, policy and product changes, and are thus pitched as ‘must have’ products.
‘Building a subscription business in this arena is the perfect model. It provides substantial revenue streams, we get high repeat sales and, by effectively creating a network of peers in niche subject matters, our cross selling opportunities are immense,’ says Turner.
Currently 75 per cent of Electric Word’s revenues are derived from the educational field. This division grew from a turnover of £65,000 in 2000 to £3.9 million in 2004 thanks largely to the PfP Publishing acquisition in 2003, which added nine new products to the portfolio.
The company is profitable, but Turner has ambitious plans for the future. ‘We’re seeking further prospects in specialist consumer publishing and want to do more online and more globally, though I wouldn’t count out an acquisition that would offer an add-on service.’
