NOT LONG along, Capital Radio seemed to have Britain dancing at its feet. Now it is being talked about as the "ITV" of the radio world, suggesting it's in steep, structural decline.
In a shocking admission for a company that owns London's biggest music- based station, Capital 95.8 FM, it has owned up to playing the wrong sort of tunes. Its key breakfast show has seen a collapse in audience. On top of a debilitating recession in advertising, which has hurt all media companies, this is bad news for Britain's leading radio group. But it has now come out fighting, taking a risk with a new music policy and a new breakfast show in an effort to win back listeners.
Howard Bareham, the head of radio at the media buying agency Mindshare, says: "The first three months of this year are the most important [quarter] for Capital in a long time."
Capital FM used to be the gateway, in London and the surrounding areas, to the youth audience craved by advertisers. But the Chris Tarrant breakfast show's audience in London (measured by listener hours) dropped 23 per cent during the past year and its audience share dropped to 8.8 per cent for the first time - it used to be well into double digits.
It was the official Rajar listening figures for the third quarter of 2002 that showed a shock fall in audience and the fourth quarter failed to show any improvement. However, Capital FM is still the market leader by a long way and Xfm, one of its other London stations, is proving increasingly popular.
London's leading station, which provides an estimated 40 per cent of Capital's group revenues, is facing some of the same problems as ITV: fragmentation of audience and a resurgent and populist BBC. The question is whether Capital shows signs of a terminal illness - with the share price hitting a new low in recent weeks - or is it just passing through a rough patch?
David Mansfield, Capital's chief executive, says: "There has been a problem in London, we think it's fixable and we're going out to fix it."
Capital enjoyed a virtual monopoly in London, for the commercial sector, 10 years ago. That can't last forever and we have seen an inevitable erosion of a commanding position.
Phil Riley, the chief executive of rival Chrysalis Radio, says: "They [Capital] tried to own the waterfront. Over a period of time, you can't sustain that.... I'd say that 75 per cent of it [the loss in market share] was beyond their control."
Unsurprisingly, Mr Mansfield hates the unflattering comparison with ITV's situation and he has a point. Whereas the two main ITV companies, Carlton and Granada, have reached the end of the road and are stitching together a defensive merger, Capital has plenty of room for expansion. And while ITV's management is universally panned, Mr Mansfield and his team are generally well regarded.
But over the past six months the Capital Radio plc story has been clouded by its twin problem in the London market: the issue of star DJ Chris Tarrant leaving 95.8 FM and a realisation that it has been playing the wrong sort of music.
The Tarrant affair was badly handled. The "is he staying or going?" debate was a distraction and the desperation of Mr Mansfield to keep him appeared to show up a startling lack of depth of talent at the company. The 55- year-old DJ has been doing the show for a remarkable 15 years.
Tarrant finally agreed to renew his contract for another year at the end of 2002 but gossip has it that despite the pounds 1.5m he will pocket for another stint on the breakfast show, he will only work six months in effect, because he has so much time booked off. One rumour is …