CAP Clean Air

RNS Number:7185N
Capital Radio PLC
12 July 2000


                                       
                            CAPITAL RADIO PLC
     CAPITAL INTERACTIVE ONLINE MUSIC ENTERTAINMENT PLANS ANNOUNCED
                                       
Capital Radio plc, Britain's leading commercial radio group, today announces
its online music entertainment strategy for new media division Capital
Interactive.

Highlights

* Three narrowcast web radio stations will be launched by Autumn 2000 to
  provide music to valuable niche audiences.
* A new online music brand, kikido, has been created and will appear as a
  standalone brand as well as on all sites including the three key Capital
  sites: 95.8 Capital FM, Capital Gold, and Xfm, and the narrowcast stations.
* Deals have been signed with record companies BMG, Universal, EMI-Chrysalis-
  Virgin, Jive, and AIM (representing the independents) who together account
  for around two-thirds of UK album sales. Capital Interactive is the only UK
  online music provider to have such online rights with major and independent
  record labels.
* Technology deals have been signed with RCS, Microsoft, eHNC, IBM and Open
  Market.
* A partnership deal has been struck with Handbag.com, Microsoft and
  Sports.com, and further distribution deals are under discussion.

David Mansfield, Chief Executive of Capital Radio, commented: "Capital Radio
is in a unique position to succeed on the Internet. We can draw on many years'
experience in the radio business, our trusted brands, close relationships with
artists and record labels, and cross-promotional opportunities to ensure that
we have an unbeatable offer for consumers and advertisers."

Mark Frost, Managing Director of Capital Interactive, said: "Capital
Interactive has combined Capital Radio's 27-year knowledge of music radio with
an in-depth understanding of the Internet to create a new way of delivering
music entertainment."

Enquiries:
David Mansfield/Peter Harris, Capital Radio PLC   020 7766 6288
Mark Frost, Capital Interactive                   020 7766 6052
James Leviton, Finsbury                           020 7251 3801/07771 88797
Caroline Abbott/Rory Steel, The RED Consultancy   020 7465 7700/0410 740759


Overview

The three central strengths of Capital Interactive are:
* The quality of its components: Capital Interactive will offer the best
  online music entertainment through a seamless combination of world-class
  editorial, efficiently delivered retail, unparalleled web radio products
  and powerful brands, all with a personalised element.
* Strong marketplace position: an ability to attract the best suppliers, form
  new partnerships and create business to business opportunities.
* Clear revenue streams: from advertising, sponsorship, retailing, and
  distribution partnerships.


Online music entertainment: radio with a buy-it button

At the heart of Capital Interactive's plans is its integrated online music
entertainment service. This will combine web radio with high-quality editorial
and easy-to use retail.

Unlike other online sites where retail and editorial exist separately, Capital
Interactive's seamless integration of these elements online with web radio
encourages impulse buying. People can buy music as they read about or hear it
- effectively creating 'radio with a buy-it button'.

Capital Interactive will operate three types of web radio: simulcasting,
narrowcasting and unicasting. Capital Radio's programming expertise in
creating soundscapes (sequences of songs that keeps the listener listening)
will be used - no other online radio service has a similar programming
element.

1.   Simulcasting
This offering is provided through the websites of Capital plc's 'power brands'
- 95.8 Capital FM, Capital Gold and Xfm. It will also potentially be available
through other third party distributors.

2.   Narrowcasting
Narrowcasting, halfway between simulcasting (listener has no control) and
unicasting (listener has considerable control), provides music to targeted
audiences which would not be economically viable in the broadcast environment.
Capital Interactive will launch its first wave of three narrowcast stations in
the Autumn: Diva  (women's anthems and ballads); Rage (music for computer game
players); and Urban Grooves (R&B, Soul). These are working titles.

3.   Unicasting
Later this year Capital Interactive will launch a unicast web radio service
housed by its new online brand kikido.  Artificial intelligence technology
will be used to create the personalised experience. The more feedback the
listener gives, the more personalised the service becomes: every user has a
unique online radio station.

As well as being a standalone site where users can sign up for unicast web
radio, kikido will be the brand name for all Capital Interactive online
activity. Its technology will power other Capital Interactive sites which will
carry the kikido logo.


Strong marketplace position: suppliers, partnerships, business to business
opportunities

The co-operation of record companies, who control access to music, is
essential for the success of web radio. Capital Interactive is the only UK
online music provider to have secured play-out rights with major and
independent record labels. Partnership deals have been signed with BMG,
Universal, EMI-Chrysalis-Virgin, Jive, and AIM (representing the independents)
who together account for around two-thirds of UK album sales.  Negotiations
are well advanced with other labels. Capital Interactive is the first web
radio company to secure such online agreements outside the US.

Capital Interactive has also struck deals with five best of breed technology
companies to provide key services:

* RCS - radio programming technology
* Microsoft - Windows Media Player
* eHNC - for personalisation technology
* IBM - hardware and database technology
* Open Market - content production


Revenue Opportunities

Capital Interactive activity will generate three revenue streams: advertising,
distribution, and retail, primarily CD sales. In addition the online business
will add value back to Capital's core radio business.

1.   Advertising/Sponsorship
The Capital Interactive team has redesigned all Capital Interactive web pages
to encourage people to visit more areas of the sites.  The pages also carry
more advertising slots with a wider variety of formats, increasing the number
of advertising opportunities available to advertisers.

Capital Interactive's own sales team will sell advertising for the sites.
Personalised advertising (delivering the right advertisements to the right
people) allows the sales team to deliver targeted audiences to advertisers,
resulting in higher response rates and a better return on investment for the
client.

2.   Distribution
Most elements of the offering will be available for distribution on partner
sites. To date, Capital Interactive has signed a partnership deal with
Handbag.com, to distribute a narrowcast web radio station. Capital Interactive
also has distribution deals with Microsoft and Sports.com, and plans to
establish a number of distribution relationships to involve the sharing of
advertising retail revenues or licence fees.

3.   Retail
Retail is an essential element of the online music entertainment experience
and Capital Interactive has integrated retail opportunities throughout all
areas of its sites.  However the most important part of retail for the
division to own is the relationship with the customer.  Therefore, Capital
Interactive will manage its own in-house customer service operation, while
physical distribution has been outsourced to EUK.


Financial position

As announced at the time of Capital Radio plc's results in November 1999, the
company will invest #5.5m in its online division this financial year.  Details
of investment for next year will be given in November 2000. Capital
Interactive expects to be cash flow positive by 2003, and to break even in
2005.

Mark Frost, managing director, Capital Interactive said: "What we are
announcing today is the only web radio offering that combines in-depth
editorial and impulse buy mechanisms with innovative web radio.  Our
understanding of the market is such that we are confident that we have
developed a robust, profitable revenue model to make Capital Radio plc the
leader in online music entertainment."



Notes to editors

About Capital Interactive

Founded in 1996, Capital Interactive, part of Capital Radio plc, was developed
to build the UK's premier music entertainment sites, reflecting Capital's
radio industry skills in the online market place. Capital Interactive received
#5.5million investment from Capital Radio plc in 1999.  Mark Frost was
appointed as Managing Director to develop and steer the Interactive group
through a five year growth plan.

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