The joint is jumpin' in radio land

As Guardian Media Group bids for Jazz FM, Heather Tomlinson reports on regulatory reforms that will change the face of the wireless

Observers of the media industry might wonder why a few large, powerful companies have been allowed to dominate television while, in radio, tough regulations have led to odds and bods all over the place.

Feelings run high on the issue. "Why has the radio industry been neglected compared to TV?" rants one radio executive. "Because politicians want to get their mugs on the telly to push through their policies, so they care about TV."

Whether it is the Wireless Group's Kelvin MacKenzie raving about the unfairness of the method used to measure audience figures, or the more common complaint about how the mighty, state-funded BBC throws its weight around, radio generates strong opinions.

Last week, the industry had something to smile about. Antiquated and complex, the current regulations – with a points-scoring system that few understand – are to be scrapped. The draft Communications Bill will allow TV and newspaper companies to buy into radio more freely. As if to prove a point, the Guardian Media Group, which owns The Guardian newspaper and has numerous small investments in radio, launched a surprise bid for Jazz FM on the very day that the Bill was announced.

Even under the current regulatory regime, GMG is not prevented from buying Jazz. But the move indicates the kind of posturing that companies will be doing to get the industry ready for when the Bill becomes law towards the end of next year.

In essence, buyers could come in and snap up tiny, independent companies to consolidate them into a position where hungry US companies can then buy them, when they are allowed to.

"The biggest positive of the Bill is that it gives a green light for venture capitalists to put together a new local radio group," says Jonnie Goodwin, head of media corporate finan-ce house LongAcre Partners.

US companies like AOL Time Warner, Clear Channel Communications and Walt Disney are the favourites to dip their toes in when the time is right.

"I welcome the regulations that allow the US in because you have more cultural empathy with America than you do with Europeans," says Richard Huntingford, chief executive of Chrysalis, the multi-media company which owns Heart FM and the various Galaxy radio stations.

"They could eat most of the UK industry for breakfast," adds Ralph Bernard, chairman of GWR, a large radio company controlling numerous local radio stations, as well as the classical music station Classic FM.

Although advertising is depressed across the media, radio is becoming increasingly attractive as an outlet. Last Thursday, figures from Radio Joint Audience Research, the industry's audience measurement company, revealed total listening hours in the first quarter of this year up 5 per cent compared to the same period last year.

"Advertising revenues are showing signs of picking up again. Radio also has a growing audience, and creatively there's a better quality of advertising," says Richard Wheatley, chief executive of Jazz FM.

Another of the industry's selling points is that a new age in "digital radio" is looming. Although digital TV is proving to be a bit of a mess, the benefits of the new type of radio will be more obvious. Better sound quality with fewer hisses and crackles will entice car manufacturers to put it in their vehicles, while companies like UBC Media are developing ways of putting out website-style material via radio and so undercutting telecoms companies' nascent 3G services.

At present, however, the digital receivers required are expensive and hard to come by. Manufacturers can't find economies of scale and so have been slow on the uptake. But digital radio stations are broadcasting at the moment – around 50 in London alone, according to Mr Bernard – even if there are few listeners.

Radio station owners are also excited at the prospect of being owned by a large media company able to compete with the BBC, which has more than half of the listening market. "The BBC is a big organisation that cross-promotes," says Chrysalis's Mr Huntingford. "Clearly if one can create [other] big cross-media groups, that will be good for the media as a whole."

At the moment the top prize is Capital Radio, which runs London's popular Capital FM and has other strong stations around the country, such as Century FM. The other larger companies are Emap, with the Magic and Kiss brands; Chrysalis; GWR; and the regional operators SMG and Scottish Radio Holdings.

Despite the consolidation frenzy predicted in the industry, GWR's Mr Ber- nard thinks small independent stations will survive. "There will always be lots and lots of smaller companies that won't be hugely profitable, but will serve specific interests," he says.

Mr Bernard knows all about the hostility a large company can face when taking over an independent. "The vitriol they get is extraordinary sometimes," he says, speaking from his own experience when buying the Breeze and Essex FM stations in 2000.

Addressing the House of Commons at the time, Christine Butler, the local Labour MP, described how devotees "shed tears". But Ms Butler has since lost her seat, and Mr Bernard can have the last laugh: the two stations now have a 19.3 per cent share of listening in the local area, compared to 18.1 per cent just before the takeover.

When the large US companies start a passionate romp among the UK's radio stations, there are bound to be more than a few lovers' tiffs.