Andy Parfitt leaves BBC Radio 1 on a high: separating the man from the myth

Andy Parfitt’s departure from the station controller job at BBC Radio 1 after thirteen years marks a significant event for the UK radio sector. Parfitt’s accomplishments during his tenure were many, but did not extend to significantly turning around the station’s audience ratings.

At the time Parfitt took on the controller job in March 1998 at Radio 1:
• its share of listening was 9.4%, compared to 8.7% in Q1 2011
• its adult weekly reach was 20%, compared to 23% in Q1 2011
• its average hours per listener per week were 8.1, compared to 7.8 in Q1 2011.

One metric did demonstrate a healthy increase – Radio 1’s absolute weekly reach was up from 9.7m adults in Q1 1998 to 11.8m in Q1 2011. However, part of that increase is attributable to the UK adult population having grown by 9% in the interim. Certainly, more adults listen to Radio 1 now than in 1998, but for shorter periods of time, and so the station’s share of total radio listening has declined.

Given this impasse to the improvement of Radio 1’s ratings, I was surprised to read in the BBC press release announcing Parfitt’s departure that:
“Appointed Controller, BBC Radio 1, in March 1998, Andy has led Radio 1 and 1Xtra to record audience figures …”

… and surprised to read Parfitt’s boss, Tim Davie, declaring that:
“Andy has been a fantastic Controller and leaves Radio 1 in rude health – with distinctive, high quality programmes and record listening figures …”

The one person still working at Radio 1 who should know for sure that “record audience figures” had not been achieved during the last quarter, last year, the last decade or during Parfitt’s entire tenure is Andy Parfitt. Why? Because, between 1993 and 1998, Parfitt had been chief assistant to then Radio 1 controller Matthew Bannister, a turbulent period during which the station’s audience was decimated by a misguided set of programme policies that failed miserably to connect with listeners.

Between the end of 1992 and March 1998, when Parfitt took over from Bannister (whom the BBC had promoted to director of radio), Radio 1’s:
• share of listening fell from 22.4% to 9.4%
• adult weekly reach fell from 36% to 20%
• average hours listened per week fell from 11.8 to 8.1
• absolute adult reach fell from 16.6m to 9.7m.

Radio 1 lost an incredible 58% of its listening, and 7m listeners, within that five-year period, a calamitous disaster from which the station has never recovered [see graph above]. Since then, Parfitt has kept the ship relatively steady, having been appointed in 1998 as a safe pair of BBC hands for Radio 1 after the tragedy of Bannister (who had come from Capital Radio via BBC GLR and had a fantastic track record in news radio, but not in music radio).

Never again will Radio 1 achieve a weekly audience of 17 million adults, as it had done in 1992. Those days are long gone. In recent years, fewer young people are listening to broadcast radio, and they are listening for shorter periods of time. Sadly, radio does not prove as exciting for them as the internet, games or social networking.

Of course, it would have been nice for any incumbent to leave the Radio 1 job on a ‘high.’ But, unfortunately, it was never going to happen with Parfitt, or probably with any successor. Radio 1’s ‘golden age’ was wilfully destroyed twenty years ago. Nevertheless, somewhere, somebody in the BBC must have decided to invoke the notion of Parfitt’s “record audience figures,” regardless or not of whether they were a fact.

What surprises me is that every BBC press release must have to pass through endless approvals – within the originating department, in the press office and in the lawyers’ office – before it reaches the public. Did nobody out of the dozens of people that must have checked this particular press release ask the simple question: can you substantiate this “record audience figures” claim?

RAJAR radio audience data are publicly available for all to see. Anyone from the BBC could have checked and found that, using every radio listening metric known to man, Radio 1’s “record audience figures” were all achieved two decades ago, rather than at any time during Parfitt’s tenure. Maybe they didn’t check. Or maybe they did, but pressed ahead anyway.

The ability to play fast and loose with numbers and statistics, particularly those that can be said to be at an ‘all time high,’ might appear to be endemic within the UK radio industry. I have highlighted similar instances of the industry’s abuse of statistics in other claims. Now that the consumer press only seems interested in ‘radio’ stories involving celebrities, and now that the media trade press has been reduced to recycling radio press releases, ‘myth’ can quite easily be propagated as ‘fact.’

I am reminded of a passage in my new book about KISS FM when, two decades ago, I had asked my station boss why an Evening Standard profile of him and his car had featured a vehicle that was not the one he owned or drove.

“It seemed to make a better story,” he told me.

UK commercial radio revenues Q3 2010: still no sign of “renewed growth”

2008 had been a bad year for commercial radio revenues, down 6% year-on-year. 2009 was a worse year, when revenues fell a further 10% year-on-year. So how is 2010 shaping up? Radio Advertising Bureau data for Q3 2010 demonstrate that, although revenues are likely to be up marginally for the calendar year, they have yet to regain the substantial losses suffered during those previous two years.

Why? Because commercial radio’s falling revenues are largely the result of structural decline, something that the ‘credit crunch’ of 2008/9 merely exacerbated. Adjusted for the impact of inflation, commercial radio revenues peaked in 2000 and, by 2009, were down 32% in real terms. The single-digit improvements we might see in 2010 will claw back only a tiny part of these enormous losses.


Q3 2010 TOTAL REVENUES
* Up 3.2% year-on-year to £124.1m, but remember that Q3 2009 had been the sector’s second lowest this millennium.

In May 2010, the Radio Advertising Bureau had told us that “the [commercial radio] sector has turned a corner and not only halted [revenue] decline, but moved into renewed growth …”

Industry data has yet to validate this assertion. The last two quarters produced the third and fourth lowest revenue totals of the decade, showing that the radio sector is certainly not out of the woods yet. More than anything, the industry’s revenues still seem to be bumping along the bottom. “Renewed growth” is not on the horizon yet.



Q3 2010 NATIONAL REVENUES
* Up 5.0% year-on-year to £62.8m.

Q3 2010 LOCAL REVENUES
* Up 3.1% year-on-year to £36.8m.

Q3 2010 BRANDED CONTENT REVENUES
* Down 1.2% year-on-year to £24.5m.


The revenue data for the long term [see graph above] illustrate clearly the transformation of the commercial radio sector from a healthy growth industry in the 1990s to one that stagnated after 2000, and which has subsequently moved into decline. Whilst revenues from local advertisers have simply stalled in recent years, revenues from national advertisers seem unlikely to ever recover from substantial declines suffered since their peak in 2000. This has necessitated significant restructuring of the commercial radio sector in recent years.

For those larger commercial radio stations that depend upon national advertisers the most, the outlook continues to look bleak. Data from Nielsen estimated that advertising spend by the government’s Central Office of Information [COI] fell by 47% in 2010 year-on-year. COI expenditure has been a greater proportion of commercial radio revenues than of any other medium, making radio particularly vulnerable. In May 2010, in my blog I had predicted:

“A 50% budget cut to COI expenditure on radio would lose commercial radio £26m to £29m per annum, 6% of total sector revenues. A 50% budget cut to all public sector expenditure on radio would lose commercial radio £44m to £48m per annum, 9% of total sector revenues.”

Not only have these cuts been realised, but the Cabinet Office is continuing to pursue a plan for the BBC to carry public service messages for free, rather than pay commercial broadcasters for airtime [also predicted in my blog in May 2010]. This could lose commercial radio a further 6% to 9% of revenues.

In 2009, even before these drastic cuts to government expenditure on advertising, commercial radio was attracting only 4% of total display advertising expenditure in the UK, one of the lowest proportions globally [see Ofcom report]. What is UK radio doing so wrong that Ireland, Spain and Australia achieve more than double that amount? And why was that percentage already falling before the COI cuts, demonstrating the radio medium’s comparative lack of appeal to potential advertisers?

There could not be a worse time to be a commercial radio station dependent upon national advertising. Yet now is the precise time when several large commercial radio owners are busy transforming their local and regional stations into national ‘brands.’ As a response to the sector’s structural challenges, this is tantamount to cutting off your nose to spite your face. ‘Localness’ has consistently been shown to be the most important Unique Selling Point of local commercial radio, according to Ofcom research. Throw that localness out the window and all that remains is a music playlist which can be generated by any computer application.

UK commercial radio has always been good at making ‘cheap and cheerful’ local radio, but has been rubbish at making national radio that could compete with the BBC’s incredibly well resourced national networks. The recent decisions of commercial radio owners to switch from production of local radio services with a track record of success to production of ‘national’ ones that have a history of relative failure create massive risks for an industry already in decline.


History tells its own story. The launch of the UK’s first three national commercial radio stations between 1992 and 1995 had much less of an impact on radio listening than had been anticipated. By 1997, Richard Branson had decided to sell Virgin Radio (for £115m) – it was obvious that national commercial radio was not going to be a massive money-spinner. In 1997, Virgin Radio’s listening share had been 2.6%. Last quarter (Q3 2010), it had fallen to 1.2% (renamed Absolute Radio after another sale in 2008 for £53m), while the combined share of the three national stations was 6.8%. [source: RAJAR]


BBC national networks account for almost half of all radio listening. The only time that their share has not exhibited long-term growth was during the early 1990s, when Radio 1 self-destructed under the management of Matthew Bannister. Since that disaster, the BBC’s national networks have been successfully clawing back listening year-on-year.

The current scenario in which the owners of commercial stations that were licensed to serve local audiences have decided to subvert that purpose to take on the might of the BBC national networks is either brave, or madness, depending upon your viewpoint. What I see is a monolithic BBC that has existed continuously for nearly a century, and then I see three national commercial radio stations that have had a succession of at least three owners each during their almost twenty-year struggle to attract listeners.

National commercial radio. Just why are parts of the commercial radio industry so eager to emulate an idea that has only led to well documented failure?

GERMANY: planned 2011 re-launch of national DAB “solved a problem that did not exist”

On 15 December 2010, five commercial radio stations in Germany – New Wave Radio, Lounge.fm, ERF Medien, Radio Energy in Hamburg and Regiocast Digital – signed contracts with transmission provider Media Broadcast to broadcast on the new national DAB+ platform, scheduled for launch in 2011.

One week earlier, British company Frontier Silicon, “market leading supplier of digital radio technology worldwide”, had announced that, in order to persuade four commercial radio broadcasters in Germany to persevere with DAB, it had promised them it would purchase an unspecified amount of their advertising airtime for the next four years.

Anthony Sethill, Frontier Silicon CEO, put a positive spin on an act that some might perceive as little more than legalised bribery in the face of desperation to sell DAB hardware in Germany: “We are delighted that our innovative approach to supporting the roll out will help everyone working on this new radio service to bring their efforts to fruition.”


For years, German transmission provider Media Broadcast has been eager to put into action its masterplan to lock new DAB+ broadcasters into minimum 10-year contracts, for which it will be charging €2m per annum per station by 2021. The combination of Media Broadcast’s enthusiasm for the financial returns from DAB transmission contracts, and Frontier Silicon’s enthusiasm for the potential sales in Germany of DAB receivers that incorporate its technology, plus the offer of an amount of cash, persuaded a few commercial broadcasters to take on the risk of using the DAB+ platform.

Helmut Egenbauer, CEO of Media Broadcast, said: “Having introduced Frontier Silicon to the commercial broadcasters, we are delighted to see that their discussions have led to this important commitment to DAB+ radio services.”

Those five German commercial broadcasters should understand that even Frontier Silicon’s subsidy might not prevent them losing money hand over fist for the entire ten years of their transmission contract with Media Broadcast. The evidence is already there from the UK market. Not one commercial digital-only radio station has yet made an annual operating profit from the DAB platform in the UK, even after eleven years, let alone come close to recouping its investment.

Research commissioned by RadioCentre in 2009 found that the average annual revenues of a digital radio station were around £130,000 per annum. By then, 10 million DAB receivers had been sold in the UK. Yet Germany is still at Year Zero with DAB+ radio penetration. The same report for RadioCentre had noted that the “annual negative cash flow impact of DAB” on the UK commercial radio industry was around £27m per annum, or 5% of sector revenues. Can German commercial radio afford to deplete its profitability by that sort of amount, year-on-year, for the next decade?

Frontier Silicon’s press release quoted Helmut G. Bauer as a “representative of the commercial broadcasters,” saying what a fantastic deal it was and promising that “2011 will be year that DAB+ is successfully launched in Germany.” However, Bauer is not associated with the German commercial broadcasting trade body, VPRT, which has been outspoken in its condemnation of plans for digital radio switchover in Germany. Bauer is a Cologne-based lawyer who has long made pro-DAB presentations at media conferences, and pro-DAB statements to the press, as a ”consultant.”

In fact, VPRT had
commented: “As we know, DAB failed in the market. Against this background, plans for the closure of FM – originally scheduled for as early as 2015, but now postponed – are absurd from an economic and social perspective and are therefore unacceptable.”

Noting the developments in Germany this week, Berlin-based Christoph Lemmer wrote in Radioszene magazine:

“With this decision, DAB will now actually be introduced by those who have succeeded, smelling a quick buck, in selling Germans a new sort of equipment, with millions to be sunk into to a new transmission network. Our old radios will be useless for DAB. Those who want to continue listening to the radio will need a new receiver.“

“It does not take a prophet to suspect that the private radio industry has shot itself in the foot by agreeing to sign the DAB contracts. A few shekels subsidy from a chip manufacturer who wants to install as many of its chips in DAB receivers – that is what has led to this. You, dear people, were not considered in the end. Do you really believe that devices with DAB will ever be as numerous as FM radios are today?”

“No one will understand what [DAB] is and why it is good. Because, with DAB, you have solved a problem that did not exist. The existing technological distribution of radio programmes is excellent and widely used. You did not have to change anything. The argument that DAB will create new radio channels with lower entry barriers is specious, as long as media regulators continue not to award licences for technically available [analogue] frequencies because they do not want additional competition in the market.”

This week, World DMB, the body marketing DAB radio globally, was so excited by developments in Germany that its web site posted seven news stories about it on the 15th, nine on the 16th and a further four on the 17th. The overkill speaks volumes. Lacking any upturn in DAB receiver sales, the only positive news that DAB lobbyists can muster is this second attempt in Germany to launch a DAB technology that was first developed in 1981.

It is hard to recall a comparable technology whose proponents were still pushing for its launch three decades after its invention. DAB proponents argue that, simply because DAB is ‘digital’, it is inevitable that it will replace analogue radio. History indicates otherwise.

Digital Audio Tape. Introduced 1987. Abandoned 2005.
Digital Compact Cassettes. Introduced 1992. Abandoned 1996.

NORWAY: “Yes to radio!” But no to DAB?

In July 2010, a marketing campaign was launched in Norway with the tagline “Yes to radio!” It used 18 celebrities to promote awareness of DAB radio through advertisements in radio, TV, newspapers and social media. The campaign was funded by Digitalradio Norge AS, the lobby group (owned by broadcasters NRK, P4 and SBS) working for a transition from FM to DAB radio in Norway.
Dagsavisen newspaper
commented: “For many years, the major radio companies have attempted to get Norwegians to replace FM radios with digital ones. It has been slow work so far. During the last decade, about 8 million radio sets were sold. Of these, between 300,000 and 400,000 were digital radios, according to figures from the Electronics Industry.”

Rainer Frost of Radio Nero
commented: “’Yes to radio!’ is totally misleading. It gives the impression that the entire radio industry is behind the campaign. In reality, it is only the major players who broadcast on DAB and who are engaged in fierce lobbying. They want to impact public opinion in connection with the white paper on the future of radio published by the Ministry of Culture this autumn. This campaign is the latest initiative from the embattled NRK, P4 and SBS in an attempt to gain support for the Norwegian DAB project, which has been running for 29 years.”

Andreas Reitan, chairman of the Norwegian Association of Local Radio (Norsk Lokalradioforbund),
said: “The Association has not taken a formal position but, as chairman, I am sceptical of the campaign. I am somewhat surprised. I understand the criticisms. The key question for us is the cost issue. The majority of our members are small stations. They have said ‘no’ to digital because of their finances. None of the small stations have the funds to finance a digital radio launch.”

Per Morten Hoff, general secretary of of IKT-Norge,
said: “It’s a vague attempt at lobbying from NRK, P4 and SBS in anticipation of the white paper, it wants people to say ‘yes’ to radio, without saying what it is all about. It is trying to lead the audience towards the light.”

Kristian Aartun, chairman of Radio 3,
said: “We believe the campaign is misleading as it is not clear what the ‘yes to radio!’ really means. In our opinion, this is deliberate deception to further their own interests, not the radio industry’s or society’s interest.”

Rainer Frost
again: “Digital radio’s future as a whole is in the balance. The biggest problem is the costs associated with the DAB radio network. A new DAB network for local radio would have to be financed by us. That is something we cannot afford. The DAB network will not be built. A decision on digital switchover has not been taken. The money is not there. People increasingly prefer FM radio over DAB at home. But this campaign argues, however, that everything will be fine with DAB. The reality is much more complicated than that.”

Ole Jørgen Torvmark, head of Digitalradio Norge,
responded to criticisms of its campaign: “[We] believe it is important for all parties concerned to put in place a clear plan for the transition to digital radio, particularly for listeners who buy new radio receivers. Such a plan, which we believe will be 6 to 7 years, must lead to the shutdown of analogue radio broadcasts, perhaps with exceptions for smaller stations in the least populated areas, such as in the UK.”

Online news source Nettavisen commented: “IKT-Norge has been one of the strongest critics of the DAB initiative in Norway. They believe that Norway is now struggling to implement DAB, because NRK [the state broadcaster] has invested too much money in an outdated technology that more and more European countries are walking away from.”

Per Morten Hoff, general secretary of IKT-Norge,
added: “NRK refuses to state how much money they have spent on DAB but, based on figures from Sweden, I have assumed that they have spent around 400 million [krone] on that system in Norway.”

Writing in daily newspaper Dagbladet, one commentator
said:

“Does this summer’s ‘Yes to radio!’ campaign, organised by lobbying group Digitalradio Norge, really want us to believe that anything other than a wholehearted embrace of digital radio is a kind of betrayal of radio? And that a ‘no’ to the introduction of DAB technology and the closure of FM networks is also a ‘no’ to all the voices, moments, images and insight that radio gives us?

Dear Digitalradio Norge and the owners of NRK, P4, Radio 1, The Voice and Radio Norge. Do not insult us. We love radio. We say ‘yes’ to radio. It is DAB that we are lukewarm to.

Yes, we know that digital radio also includes internet radio and radio delivered by digital TV, but the political battle is about the closure of FM radio and DAB. Fifteen years after trial broadcasts began, more than ten times as many FM radios are still sold as DAB radios. There are probably between 20m and 25m FM radio receivers in Norwegian homes, compared to a few hundred thousand DAB receivers.”

[with thanks to Eivind Engberg]

David vs Goliath: commercial radio spends £27 per hour on programmes, BBC Radio 2 spends £4,578

There has been an abundance of fighting talk from the commercial radio sector in the press in recent weeks. Commercial radio seems determined to pick another fight with BBC Radios 1 and 2, two of the three most listened to radio stations in the UK.

Guardian Media Group Radio announced that “by broadcasting on National DAB, Sky, Freeview and Freesat, Smooth Radio will provide a strong commercial alternative to BBC Radio 2.” Chief executive Stuart Taylor said:

“We are still at war with the BBC and we still compete for listeners tooth and nail, as we always will.”

The press headlines affirmed:
* “New national network makes a Smooth attack on Radio 2” (Telegraph);
* “Forget Radio 2: in five years’ time, we’ll all be going Smooth” (
Independent);
* “Smooth Radio takes on Radio 2 in national rollout” (
Marketing Week);
* “Radio Two faces fight, warns new Smooth news chief” (
Press Gazette).

Then, Global Radio announced that its local FM stations will be re-branded ‘Capital Radio’ in 2011. Chief executive Ashley Tabor said:

“With the launch of the Capital network, there will now be a big national commercial brand seriously competing with Radio 1.”

The press headlines responded:
* “Capital Radio will go national in bid to challenge Radio 1” (Evening Standard);
* “Capital Radio set to rival BBC Radio 1 in move to broadcast nationally” (
Daily Mail);
* “Global to take on Radio 1 with Capital Network” (
Marketing Week);
* “Capital Radio to form first national commercial radio station” (
ITN).

Both the GMG and Global Radio statements achieved the intended sabre-rattling headlines in the press though, for me, these sentiments are remarkably hollow. This ongoing phoney war between the BBC and commercial radio is like a war between a one-eyed giant and an over-exuberant mobile phone salesman. The giant will win every time. Commercial radio can huff and puff all it wants, but the BBC knows it is perfectly safe in its house built from Licence Fees. It can afford to chuckle loudly at every challenge like this lobbed at it by commercial radio. Why?

Firstly, you could only ever hope to seriously compete with the existing formats of BBC Network radio stations if you had access to their same abundance of resources. This is something that Channel 4 belatedly realised after having promised for two years that it would invent a new commercial radio station to compete with BBC Radio 4. Then it scrapped its radio plans altogether.


The huge gulf between the funding of commercial radio content and BBC Network Radio content makes direct competition simply pointless. In a recent report for the BBC Trust, I noted that commercial radio spends an average £27 per hour on its content, while BBC Radio spends an average £1,255 per hour. There is no way that commercial radio can make programmes that will sound like Radio 2 on a budget that is 170th of the latter’s £4,578 per hour.

Secondly, what sort of message do these press headlines send to consumers? To me, they say ‘we realise that Radios 1 and 2 are fantastically successful, so we want a slice of their action’. Or maybe even ‘you really like Radios 1 and 2, don’t you? Try us, because we want to be just like them.’ So where is the Unique Selling Point [USP] for your own product? Don’t you have enough faith in it to tell us why it is so good, rather than comparing it to your much bigger, much more successful rival? Or is this the Dannii Minogue method of marketing?

I had always been taught that the cardinal sin of radio was to mention your competitors to your audience. Every reference to your competitor tells the audience how much you respect them and their success. Ignore them! Pretend your competitor does not even exist! Plough your own furrow and concentrate on making a radio station that is genuinely unique. Then you will create a brand that has a genuine USP, rather than being merely a pale imitation of Radio 1 or 2 without their big budgets. ‘I can’t believe it’s not Radio 2’ is not a tagline to which to aspire.

Thirdly, neither Capital Radio nor Smooth will be genuinely ‘national’ stations, as in capable of being received on an analogue FM/AM radio from one end of the country to the other. So why pretend to consumers and advertisers that they are ‘national’? In the case of Capital, its proposed FM network presently covers 57% of the UK adult population. In the case of Smooth, RAJAR tells us that DAB receiver penetration is presently 35%. Just how little of the UK population can you cover and yet still describe yourself as ‘national’?


Fourthly, don’t keep looking at Radio 1 and 2’s huge audience figures and dreaming of how much money you could make if only you could monetise their listenership. Part of the reason older listeners probably like Radio 2 is because there are no advertisements. Accept the fact that Radios 1 and 2 together account for a quarter of all radio listening in the UK. Compared to those mammoths of radio, both Capital and Smooth are mere termites. Live with that fact and, instead, seek out commercial clients who are not merely frustrated because they cannot advertise on BBC Radio, but who actively want to use your radio station because your audience is intrinsically valuable to them.

Finally, invest the time and money to develop your own on-air talent rather than simply hanging on the coattails of others’ successes. Whatever his next gig might be, Chris Moyles will forever be remembered as ‘the saviour of Radio 1’, just as Chris Evans will always be remembered for his Radio 1 breakfast show, not for his subsequent time at Virgin Radio. Find new people who are good at radio and put your faith in them. Why does Smooth’s schedule have to resemble Frankenstein’s monster, stitched together with a bit here from Radio 1 in the 80s, and a bit there from Radio 2 last month?

What your radio station should be doing is not competing with Radio This or Radio That for listeners, but competing directly for consumers to spend time with you because you are ‘you’. Radio is not like selling soap powder or yoghurt pots, where your business model can be built upon undercutting the price of a competitor’s product, however low-quality your own cheapo version might be. There is no price of admission in radio. Your content needs to be ‘different’ rather than ‘the same’ and it needs to create its own unique place in the market.

You should not think of your market competitors as radio stations, but as each and every opportunity a consumer is presented with to pass their leisure time. A winning station must be able to convince a consumer to listen to it, rather than watch television, read a book or simply sit in silence. Because radio is ‘free’, the competition for radio is everything else that is also free to consumers at the point-of-use.

To offer a practical example, when I worked on the launch of India’s first commercial radio network, Radio City, the advertising agency produced an excellent marketing campaign that extolled the virtues of the station over other radio stations. But the campaign had to be rejected and the agency briefed in more detail. Why? Because we were launching the very first radio station on the FM dial in a city such as Bangalore, so the overriding challenge was to persuade people to use ‘radio’ at all, or to persuade people to buy an FM radio for the first time, or to persuade people to switch off their television and turn to radio instead.

This philosophy seems to be a million miles away from the current UK commercial radio strategy which seems to focus on berating BBC radio for being too successful, whilst wanting to somehow achieve part of that success through osmosis. If only half this war effort was put into developing policies to make the commercial sector’s stations successful on their own account, the BBC would soon cease to matter.

Instead, RadioCentre is now demanding that commercial radio be allowed to re-broadcast old Proms concerts recorded by BBC Radio 3. But how many of our 300 commercial radio stations play classical music? One. And which Proms concert do you recall that would fit into Classic FM’s playlist of short musical extracts? What next? Will Capital FM be asking the BBC for the rights to re-broadcast some old Zoe Ball Radio 1 breakfast shows?

In September 2010, the government’s Consumer Expert Group criticised RadioCentre for having proposed a policy for the BBC’s Strategy Review that, it felt, would have “bullied” listeners.

Trying to bully listeners? Trying to bully the BBC? This is the war of the playground, not of a mature media industry that has a strategy of its own making, a plan, a roadmap for its future success. “It’s not fair. Your willy is bigger than mine.” No, it probably isn’t fair, but life deals you a hand, you have to stop whining, get on with it and make the best of what you’ve got.

Just accept this reality: commercial radio’s willy is never going to be as big as the BBC’s. So competing directly on size alone is a complete waste of time when, instead, you should be developing your own individual ‘technique’.

UK commercial radio: Q2 2010 national revenues down 40% since 2003

It seems like only yesterday that the Radio Advertising Bureau [RAB] was telling us that:

“The [commercial radio] sector has turned a corner and not only halted [revenue] decline, but moved into renewed growth …”

In fact, it was 20 May 2010 and the reason for the RAB’s optimism was the sector’s 2009 revenue performance. Yes, revenues in 2009 were down 10% year-on-year and yes, back in 2008, they had already been down 6% year-on-year. But, as I noted at the time, mere numbers never seem to get in the way of the trumpeting of a “terrific achievement.”

Fourteen days prior to the RAB pronouncement, a general election had ousted the Labour government and introduced a new Conservative/Liberal coalition. The writing was clearly on the wall that tougher times were ahead for the commercial radio sector. At the beginning of May 2010, I had
spelled out emphatically the dire implication for commercial radio revenues of an incoming Conservative government:

“The Conservative Party pledged in its manifesto to reduce advertising expenditure by government departments, if elected. The planned cuts would be significant, 40% of the COI 2008/9 budget of £540m, according to one press report. … A 50% budget cut to COI expenditure on radio would lose commercial radio £26m to £29m per annum, 6% of total sector revenues.”

And so it came to pass, even though the Radio Advertising Bureau was still insisting in June 2010:

“We are optimistic that radio’s strengths will be recognised as COI budgets come under ever greater scrutiny.”

But budget cuts of 50% cannot be executed that recognise the radio medium’s strengths. Since May 2010, public funding of commercial radio has fallen sharply from 18% of sector revenues and will not be bouncing back anytime, at least not while the Conservative Party holds the public purse strings. The largest commercial radio owners have been hit the hardest, whilst the smaller local stations (that rely much more on local advertisers) have been little impacted.

As a result, it was no surprise that commercial radio revenue data for Q2 2010 were released quietly without fanfare or further pronouncements about “renewed growth.” The notion that commercial radio revenues had “turned a corner” looks even more hollow now, a mere four months after the Radio Advertising Bureau had uttered those words.


Q2 2010 TOTAL REVENUES
* Up 1.9% year-on-year, but remember that Q2 2009 had been the sector’s most disastrous;
* Q2 2010 total revenues are the third lowest this millennium (after Q2 and Q3 in 2009).


Q2 2010 NATIONAL REVENUES
* No change year-on-year, but remember that Q2 2009 revenues were already down 16.1% year-on-year and, before that, Q2 2008 had been down 15.9% year-on-year;
* Q2 2010 national revenues are the second lowest this millennium (after Q3 2009).

Q2 2010 LOCAL REVENUES
* Up 1.7% year-on-year, but remember that Q2 2009 was already down 6.0% year-on-year and, before that, Q2 2008 had been down 8.4% year-on-year;
* Q2 2010 local revenues are the lowest since Q2 2009 and, before that, Q1 2002.

The most frightening facts about the Q2 2010 data are:
* National revenues have fallen 40% since Q4 2003;
* National revenues have fallen to a level the sector had attained in 1998 (earlier, if inflation is considered) when there were about eighty fewer commercial radio stations.

If Q2 2010 was bad for commercial radio, then the following quarters are likely to be worse, as the impact of government expenditure cuts will have wreaked havoc across complete quarters of commercial radio’s national revenues. The outlook for the commercial radio sector looks anything but “terrific”, though trade body RadioCentre was still peddling eternal optimism in its September 2010 newsletter:

“Whilst revenue for Q1 2010 was up 7.3% year on year, the best performance and highest growth for 2 years, Q2 proved more of a challenge with the election and subsequent cuts in government expenditure. However, the RAB is working with a wide range of advertisers to bridge the gap, and the current outlook for quarter three is that we’ll see a modest growth, even despite COI cutbacks.”

And, after this week’s Radio Advertising Awards (where, ironically, “government departments and campaigns scooped the most awards,” wrote Marketing Week), the RAB was still proclaiming “… the outstanding work which has seen our [commercial radio] sector return to growth …”

Suffice to remind you that Q2 and Q3 in 2009 witnessed the commercial radio sector’s lowest recorded revenues this millennium, so that any year-on-year increase will have been achieved from a base of absolute ‘rock bottom’. To add to the gloom, Minister for the Cabinet (and the government’s Paymaster General) Francis Maude
told The Times last week:

“We are looking at whether we should be expecting the BBC — when people are paying their Licence Fee — to carry some public information advertisements. It wouldn’t be a propaganda operation but this is public service broadcasting. The taxpayer might say, ‘Should I be paying out my taxpayer’s money for the Government to pay ITV to carry public information advertisements?’”

So the worse news for commercial radio is that it could be about to lose whatever remaining government advertising has survived, if public service announcements are to be switched to BBC Radio. After all, not only would such a policy save the government a further £30m per annum, but BBC Radio reaches 67% of the UK adult population per week, greater than commercial radio’s 64%.

In May 2010, I had predicted that the government could adopt just such a policy:

“If a government were to return to the post-War COI policy of using public broadcasters to air its Public Service Announcements, rather than paying commercial rates for airtime, up to 18% of commercial radio revenues would disappear at a stroke.”

I am sufficiently ancient to remember the intriguing, but rather bizarre, Public Information Films that used to grace BBC television. I also remember the Public Service Announcements that local commercial radio stations were required to broadcast for free when the Independent Broadcasting Authority was the sector regulator. So such a policy would be nothing new and should have been anticipated by the sector.

But what can commercial radio do? The key is the word ‘commercial’. The industry was foolish to have ever considered public expenditure on radio advertisements anything more than an ‘extra’ that was bound to disappear some time at the whim of politicians. That time is now. The same way that the government is mounting a war on ‘benefit scroungers’ who are said to have become too reliant on public handouts, the Conservatives are effectively waging a war against ‘COI scroungers’ … commercial broadcasters whose sales teams knew they could rely on government advertising handouts to meet their revenue targets and earn their bonuses.

How did the industry let itself get into this state? ‘Commercial radio’ was always meant to be ‘commercial’, not publicly funded. In exactly the same way, ‘local commercial radio’ was always meant to be ‘local’. It is the very point at which you begin to lose sight of who you really are that you set off down a rocky road that leads to inevitable oblivion.

Local Commercial Radio, know thyself.

Having DAB cake and eating it: temper tantrums in the Global Radio playpen

Most of us mere mortals spend our lives trying to persuade people to give us what we want. We have to persuade our parents to buy us a new toy, persuade a potential employer to offer us a job, persuade the bank manager to give us a business loan. To make these things happen, we are taught to always be careful what we say – “Mind your P’s and Q’s”, our parents told us.

For the wealthy, there is little need for self-control over what comes out of their mouths. Whereas our only power derives from what is in our head, the power of the wealthy derives from what is in their offshore bank accounts. “P’s and Q’s” are barely a necessity when a platinum credit card can be flashed. Money obviates the need for persuasion. So the wealthy can pretty much say what they like, knowing that ‘money talks’ on their behalf, and it certainly seems to talk more loudly than any persuasion that the rest of us can muster.

This week we saw an outburst in The Guardian that would have done any rich, spoilt brat proud. But no, this was the founder and CEO of Global Group, Ashley Tabor, which owns Global Radio, the UK’s largest commercial radio group, demanding that the BBC “put their money where their mouth is” and invest more in DAB radio:

“Tabor said his company, which owns Heart, Classic FM, Capital and LBC, would not invest in new digital services until the DAB signal was sufficiently strong and widespread to match that currently provided by FM. He said the cost of the rollout of DAB and the strengthening of the signal in areas which can already receive it – estimated at between £150m and £200m – was the sole responsibility of the BBC. […]

‘Global has stepped up and said we are absolutely doing it, we have great new ideas of things we could do on digital but we are not going to bloody do it until our listeners can hear it in decent quality and that is something that we have been clear from the start the Beeb will need to do,’ said Tabor, the Global Group founder and chief executive. ‘They have always said yes [and] now is the time to do it. A lot of pressure is building on them to now actually put their money where their mouth is. It’s not actually a lot of money because it’s amortised over 10-12 years. I think it will happen’” [The Guardian removed he word ‘bloody’ from later editions].

Was I the only one baffled by Ashley’s line of argument? Although commercial interests own the lion’s share of DAB in the UK, the largest commercial radio group is insisting here that the cost of fixing DAB to make it work properly is the “sole responsibility” of the publicly funded BBC. Furthermore, Global Radio will only launch new commercial digital radio stations, from which it must expect to make a profit, once the BBC has underwritten the huge cost of making the DAB system fit for purpose using public funds. I remain baffled.

This was by no means the first time, and will probably not be last, that Global Radio has talked rubbish publicly about DAB radio. In its PR, Global paints itself as a driving force behind digital radio and is constantly demanding that DAB switchover be implemented as quickly as possibly. However, in practice, Global has shown no interest in developing DAB as a replacement for FM, having sold off the majority of its DAB licences. This hypocrisy has been documented on previous occasions in this blog, during which time Global’s attitude towards the BBC has shifted from ‘carrot’ to ‘stick’. History speaks volumes.

In October 2007, Global Radio cancelled the contract with Sky inherited from its acquisition of Chrysalis Radio that would have created a national Sky News Radio station on DAB. A Global spokesperson said then that “Global was not prepared to make the necessary investment in this project.”

In December 2007, Global Radio dropped live presenters from the digital radio station The Arrow which it had also acquired from Chrysalis Radio. The Arrow was removed from DAB in London in May 2008, removed from DAB in Scotland in February 2009, removed from satellite and cable TV in June 2009, and removed from DAB in the West Country in February 2010. It is now available over-the-air on only 5 local DAB multiplexes.

In January 2008, Global Radio dropped dedicated shows from the digital version of its Galaxy Radio brand, replacing them with simulcasts of local FM output.

On 31 March 2008, the day after Global Radio’s offer to acquire GCap Media had been accepted, the latter’s two remaining national DAB radio stations Capital Life and TheJazz were closed. GCap had already closed another national DAB station, Core, in January 2008.

In March 2009, Global Radio dropped digital-only station Chill from DAB multiplexes in Leicester, Nottingham and West Wiltshire. Chill was then removed from further local DAB multiplexes in July 2009, and from cable TV in July 2010. It is now available over-the-air on DAB only in London and Birmingham.

However, in April 2009, Ashley said that he appreciated that the BBC had the capacity to make a significant contribution to facilitate Digital Britain from a radio perspective, and that Global Radio was prepared to play a leading role. Confusingly, this was the same month it was announced that Global Radio had agreed terms to sell the majority of its DAB multiplex licenses.

In May 2009, in an interview bizarrely headlined ‘Global evangelist for digital radio: Ashley Tabor has a clear vision for his group…’, he said:

“I am really confident now that all the right things are happening that will get us to where we need to go. We are in favour of [analogue radio] switch-off, so can we do it quickly please?”

That same month, Ashley’s right-hand man at Global Radio, Stephen Miron, told a radio conference:

* “The future of our sector is intrinsically linked to the successful implementation of the government’s digital strategy and to the successful migration to DAB”;
* “We need more of this in the coming weeks and months. Not just words, but action”;
* “We need to get our act together to make the best possible case for consumers to switch to digital”;
* “Global is up for the challenge and, as the largest commercial player, we are prepared to lead this charge.”

In July 2009, Global announced the completion of the sale of its DAB licences, the largest ever transaction of its type, which drastically shifted the dominant ownership of the UK’s commercial radio DAB system from the commercial radio sector itself to transmission specialist Arqiva.

Global Radio sold:
* its 63% shareholding in Digital One, the sole national DAB multiplex for commercial radio;
* its 100% shareholding in Now Digital Ltd and Now Digital (Southern) Ltd, its local DAB multiplexes;
* 12% of MXR Holdings Ltd.

These transactions left Global Radio with a 51% shareholding in MXR, owner of five regional DAB multiplexes, a half-stake in 3 CE Digital local multiplexes and a minority stake in Digital Radio Group, owner of one London multiplex. At a stroke, Global’s role in DAB had been reduced from the dominant player to an also-ran. However, this did not prevent Ashley from stating in the press release announcing these disposals:

“As a company we are leading the commercial radio industry in its drive to digital.”

Neither this press release, nor the Annual Accounts, revealed how much Global Radio commanded for its sale of these assets. All we know is that the last, shortlived chief executive at GCap Media, Fru Hazlitt, was so disenamoured of DAB that she had planned to sell the company’s controlling stake in the DAB national multiplex licence for £1 in January 2008 (the transaction was halted by Global’s offer for GCap).

None of these closures and disposals seemed to change Global Radio’s public enthusiasm for DAB radio. In July 2010, a government press release on digital radio included a quote from Ashley saying:

“We look forward to working with the government and other partners to bring the benefits of digital radio to a growing group of listeners.”

So what precipitated the change of heart in Ashley’s previously collaborative noises to the BBC from a ‘carrot’ into the ‘stick’ evident in his interview this week? Well, less than 24 hours earlier, the government had published a report on DAB radio switchover that was critical of many radio sector stakeholders for the lack of progress that had been made during the last decade. Those criticised included commercial radio, its trade body RadioCentre, the Digital Radio Development Bureau and its successor, Digital Radio UK. Some people can take measured criticisms like this in their stride. But others cannot.

Not only does Global Radio account for 38% of UK commercial radio listening, but the group funds a substantial portion of RadioCentre (£2.8m in subscriptions between September 2007 and March 2009) and of the Digital Radio Development Bureau and Digital Radio UK. Even so, why did this new government report exercise Ashley so much? Because:
* Global Radio needs DAB switchover to succeed for the company to hang on to its valuable analogue radio licences;
* The responsibility for making DAB switchover happen now lies elsewhere, so Ashley has decided to pin the tail on the BBC.

Maybe Ashley is a graduate of the Malcolm McLaren and Stevo school of negotiation. This is the strategy where you make the most outrageous demands and the other person caves in for fear of not being invited to your party. This might work in the unregulated music business, where excess is viewed as a virtue, but in the radio industry there are laws and rules governing large parts of the business.

What would be the response of record companies if a radio owner were to march in and tell them that they should pay radio stations for playing their music, rather than the other way around? Or if you were to tell record companies that your radio stations would no longer play ‘hit’ records that line their coffers but, instead, would deliberately play unpopular songs that they did not want on the radio. Record company bosses would probably laugh in your face and ask their legal department to show you a filing cabinet full of royalty agreements with commercial radio dating back to 1973.

Getting your own way, all the time, only works when you have been given absolute power over your fag. Ashley phoning a journalist, stomping his feet at the BBC and demanding that it do this or that will have no effect whatsoever. His demands about DAB must have had BBC radio managers laughing their socks off on Wednesday morning. As Scott Taunton, the straight-talking managing director of UTV Radio, said of Ashley in 2009:

“He is a guy who is used to getting his own way. He isn’t from the same school of business, the same school of negotiation, that I am.”

So why exactly does Global Radio need DAB switchover to happen? Because:
* Global Radio was created by Ashley’s millionaire father for a son who is a radio obsessive (“I would literally have a radio in my [school] bag and the second I was allowed to put it on I would actually phone [presenter] Pat Sharp in the studio at whatever time, 10.30, 11.30, just to say hello and develop a relationship with him. He thought I was nuts,” said Ashley);
* Global Radio overpaid to acquire GCap Media in June 2008 for £375m, a mis-managed company whose performance was dropping like a stone, and whose market capitalisation had fallen from £711m in 2005 to £200m by year-end 2007;
* Global Radio has already had to write down its assets by £194m in March 2009, reducing the group’s net book value to £351m from the total £545m it had paid for Chrysalis and GCap in 2007 and 2008 respectively;
* Global Radio “is primarily funded by debt”, its accounts state, and external bank debt was £110m in October 2009, an amount that must be repaid in quarterly instalments by October 2012;
* Global Radio has been hit hard in 2010 by the new government’s sudden 50% cut to its advertising spend (“The COI change has been larger than expected, very abrupt. It’s been pretty severe, more than 50%,” said Ashley)
* Ofcom is presently re-evaluating the price of Global Radio’s Classic FM licence, the most profitable in commercial radio and, if DAB switchover is abolished, the cost of that licence could be increased from its current £50,000 per annum to nearer £1m per annum from 2011 to 2018;
* The Digital Economy Act 2010 renewed commercial radio licences for a further seven years only on the basis that DAB switchover will happen. If switchover does not happen, the government has the power to terminate all renewed licences by 2015 (or by two years’ notice, if later). However, in its accounts, Global decided to write off the ‘goodwill’ of its GCap acquisitions over twenty years.

For Global Radio, which owns more analogue licences than any other commercial radio group, this means that the value of its business could be reduced drastically if DAB switchover does not happen. Its one national licence would become a lot more expensive and then might have to be publicly auctioned, while its dozens of local licences could be terminated earlier than anticipated. Global needs DAB switchover to happen at all costs.

However, at every opportunity, Global decided to forgo investment in the DAB platform and, instead, to dispose of the majority of its DAB assets. This has left it with almost no remaining leverage to ensure that DAB switchover will ever happen. Furthermore, Ashley has alienated commercial radio competitors such as UTV, precipitating its resignation from the trade body RadioCentre in 2009. UTV’s Scott Taunton described Ashley as a “rich man’s son” and explained:

“For us it came down to Global, as the largest funder of the RadioCentre, making sure that the policies of the RadioCentre were in the interests of Global Radio. At times, for me, that meant the [trade body] was pursuing an agenda that wasn’t necessarily in the interests of all its members.”

So, Global Radio needs DAB switchover to happen in order to maintain the value of its analogue radio business. But it can do little itself directly, its biggest competitor Bauer is unlikely to help, and its smaller competitors have been alienated. Global had succeeded in wrangling a very beneficial deal from Lord Carter in the Digital Economy Act, but Carter exited quickly and the whole government has changed since then. The sting in the tail was that parliament included a get-out clause (if DAB switchover does not happen …) and now that clause looks more likely than ever to be invoked.

The pheasants look as if they might be coming home to roost at the Tabor estate. And what does a young man do when the train set his father made for him is not working the way he wants? He stomps his feet. He shouts. He issues demands. This week, the BBC has been on the receiving end. It should feel honoured. Ashley has demonstrated his belief that the BBC can do more to fix the DAB disaster than the whole of the commercial radio sector and its trade and marketing agencies added together. But, remind me, why should part of my BBC Licence Fee go to fix his plaything?

And what might Ashley think of doing next if the BBC does not bow to exactly what he wants? Will he be demanding that BBC director general Mark Thompson stands on his head in the corridor during short break, or runs around the perimeter of White City in his underwear fifty times in the pouring rain, or sits in the BBC library after work copying out chapters of ‘Paradise Lost’ by hand?

Are any of these shenanigans a strategy for the future of radio? All they demonstrate to the world is that large parts of the UK commercial radio sector seem to have completely lost the plot.

[declaration of interest: I was paid to advise DMGT on the offer made for GCap Media by Global Radio in 2008]

Without local commercial radio, switchover to DAB will not happen

I am often asked why I believe that digital radio switchover will never happen in the UK. My answer is always this – the available statistics and data on consumer take-up of DAB radio fail to demonstrate that it will grow sufficiently to become the mass medium for radio broadcasting. I can see nothing in more than a decade of figures to offer an inkling that DAB radio will ever become anything more than a minority interest, compared to FM/AM.

Audience data published by Ofcom in its latest Communications Market report (page 219, Figure 3.34) help us to understand the current roadblock with DAB consumer take-up. Ofcom divulged the proportion of listening to individual stations by platform, data that has not been made public by RAJAR (see graph below).

The information demonstrates that a few stations, notably AM broadcasters BBC Five Live and Absolute Radio, are making significant headway with attracting audiences on digital platforms. However, in order to put these data in a market perspective, it is necessary to understand the relative importance of each of these stations.

The above graph helps put the planned transition from analogue to digital in a proper market perspective. For example, Absolute Radio has made much of the fact that more than 50% of its listening is already attributed to digital platforms. However, in the context of digital radio switchover, its audience is so small that it has little overall impact. The volume of listening to some local London stations is greater than to national Absolute Radio.

The government has stated that it will not consider ‘switchover’ until at least 50% of radio listening is via digital platforms. Digital listening to the ten stations and station types shown in the above graph add up to only 20%, even after ten years of DAB (digital-only stations bring the total to 24%). There is a reason that it will prove an impossible challenge to get this up to the 50% government target.

Around 300 local commercial radio stations account for 31% of all radio listening. Their success in convincing audiences to migrate to digital platforms will be a vitally important part of the aim to achieve the 50% criterion. However, only 15% of local commercial radio listening is attributed to digital platforms, the lowest proportion (along with BBC local radio) of the ten stations/types in the graph. The task to improve this performance from 15% to the 24% national average is likely to prove impossible, let alone to grow it to the 50% criterion.

This is because many stations in the local commercial radio sector cannot and will not ever be available on DAB because:
* The economics of DAB transmission make it too costly;
* The unavailability of any local DAB multiplex in some areas;
* The unavailability of space for stations on some local DAB multiplexes;
* The industry grand plan to amalgamate existing local multiplexes into regional multiplexes makes DAB transmission, for small local radio stations, more irrelevant and more costly.

These issues had been identified by the government in its Digital Britain consultation in June 2009:
* “merging [DAB] multiplexes will reduce the overall capacity available for DAB services, therefore reducing the potential for new services”;
* “reduced capacity on local multiplexes might result in some services losing their current carriage on DAB.”

The government’s decision to ignore these outcomes is now coming back to bite it on the bum. Not having a plan to ensure that all local commercial radio stations can be made available on DAB will only ensure that the government’s 50% criterion can never be met.

At the same time, the determination of the largest players in the commercial radio sector to forge ahead with DAB, regardless of these unresolved issues, has created a serious schism between them and the smaller local radio groups and independent local stations who have no digital future. These issues were raised in parliamentary debate of the Digital Economy Act but were ignored and trivialised by the DAB lobbyists.

Some local commercial radio owners are seriously alienated by the way their predicaments have been ignored by large radio groups and their trade organisations – RadioCentre, Digital Radio Development Bureau and Digital Radio UK. One such group owner, UKRD, has taken direct action by running a campaign on-air and on its stations’ websites against the government’s proposed switchover to DAB.

A page entitled ‘Love FM’ on the Wessex FM website says:

“As you probably know Wessex FM proudly broadcasts to this area on the FM frequencies 96 & 97.2, and had been hoping to for many years to come. However, recent developments mean that we may not be able to broadcast in this way for much longer. In fact, the current plan from parliament is to switch off the use of FM for many stations in 2015. That means, soon, you may not be able to listen to us on FM.”

William Rogers, UKRD Group chief executive officer explained:

“We are not prepared to encourage any of our listeners to go and replace their perfectly satisfactory analogue radio set with a DAB one which may not be able to pick up a DAB signal at all and if it can, it may be a signal which may be wholly inadequate. Even worse, the very station that the listener may have heard the [DAB marketing] advertisement on may not be on DAB or even have a DAB future.”

Pam Lawton, managing director of another UKRD-owned station, KL.FM in King’s Lynn, said:

“We are not on DAB at the moment and currently most of the DAB digital platforms have been snapped up. As things stand, West Norfolk does not have a digital platform because there are limitations about how many there can be and there will only be one station that will serve Norfolk. That station will probably be based in Norwich so once the government decides to turn off FM, we will have to switch off for good.”

The paradox is that the radio sector stakeholders who have been pushed aside and ignored by the DAB movers and shakers are some of the very ones who hold the key to enabling digital radio switchover to happen. Unless the huge audience for local commercial radio can be persuaded to migrate its listening to DAB, the 50% criterion cannot be achieved.

At the same time, some stakeholders who are making the most noise about DAB switchover matter the least in the scheme of things. Absolute Radio can trumpet its individual success with digital listening, but it is contributing less than 1% to the 50% criterion that has to be reached, despite being a national station. It is the hundreds of local commercial radio stations that, collectively, matter the most. Yet, many of these have been denied any seat at the DAB table.

As politicians have learnt through the ages, unless you can convince the little guys (the local radio station owners) and the ‘man in the street’ (the radio listener) to endorse your grand scheme, a scheme is all it will remain. Fancy words in boardrooms, lengthy documents from corporate consultants and detailed project management timelines will inevitably come to nothing, without involving and bringing on board the people who really matter.

It is the radio industry data, particularly for local radio, that tell the real story of DAB and why it can never become the mass radio medium for UK consumers. That is why digital radio switchover will not happen.

[Note: all RAJAR data are Q1 2010, as used by Ofcom]

DAB radio: a national platform that no one wanted

In 1998, the Radio Authority advertised a licence for the “first and only national commercial digital [DAB] multiplex licence.” There was no stampede of applicants. By June 1998, the regulator had to issue a press release with the headline “Radio Authority receives one application ….” The sole applicant was ‘Digital One’, 57% of which was owned by commercial radio’s GWR Group plc, whose chief executive Ralph Bernard later admitted:

“GWR was encouraged to apply for the national [DAB multiplex] licence and was under some pressure to invest in the opportunities for a national licence from the then regulator. Had we not done it, there would be no national DAB platform now. Not only that, [the regulator] did not know what they would have done on the question of national radio stations with regard to the opportunities given by the then government to renew their national licences for a further period of time if they were to commit to going digital. But how can you [do that] if there are no opportunities to go digital because there is no national multiplex? When I put that question to the Radio Authority, I was told that the answer was: ‘We don’t know what would happen – there is no Plan B’. It was just an assumption that someone would go for [the national multiplex].”

Bernard had a hard time convincing his own board that the DAB licence was a worthwhile investment for a radio group that, until then, had owned radio stations rather than transmission infrastructure:

“When we were seduced into believing that this was going to be the only [national DAB] licence, we realised that there would be substantial losses, but the payback would be when you have the opportunity to be the only player in the national market for DAB. When it’s the Radio Authority, an agency of government, you tend to believe what you are told. On that basis, the investment was justified and, at the time, getting it through my Board was not easy. Persuading shareholders, particularly the larger ones, was not easy.”

Now, twelve years later, GWR Group no longer exists, Ralph Bernard is out of the commercial radio business, but the ‘Digital One’ national DAB platform is still there. Nobody really wanted it in 1998, and nobody really seems to want it now. Its ownership has changed hands like pass-the-parcel, GWR Group plc having merged into GCap Media plc, which was then sold to Global Radio which, in 2009, sold its majority stake in Digital One to transmission provider Arqiva. How many millions were thrown at Digital One over the years by GWR, GCap and Global Radio will probably never be known.

The only thing cheap about Digital One was the cost of its initial 12-year licence, a mere £10,000 per annum paid to the regulator for the radio spectrum it uses. The business model was that Digital One would lease space on the DAB platform to radio stations that would pay it rent (about £1m per year, dependent upon audio quality). Since opening for business in 1999, many digital-only stations have tried using the platform but, to date, almost none have stuck around. No digital radio station has yet made a profit.

The latest additions to the lengthening list of stations that have failed to make the national DAB platform work for them are NME Radio and Panjab Radio, both of which quit Digital One in June 2010 (see shaded area of table). The reason? Almost no one was listening. Add together the digital-only stations broadcasting on the platform last quarter (and that are measured by RAJAR) and, in total, they accounted for less than 1% of total radio listening.

Yet the radio industry, the receiver manufacturers and their lobby groups are still spending money on campaigns to convince the public that DAB radio is a raging success. Digital One says its radio platform reaches “more than 90%” of the [UK] population,” equivalent to 46 million adults. RAJAR tells us that 35% of those adults have a DAB radio. Yet only 226,000 adults per week listened to NME Radio, after nearly two years on-air. If you were in any way persuaded to believe the hype surrounding DAB, your business plan to start a digital radio station might look dangerously over-optimistic.

When NME Radio launched in June 2008, it had forecast that its audience would reach 396,000 adults per week by its second year. For most of its life, the station was broadcast on local DAB multiplexes (and online). Then, from 21 December 2009, NME Radio was made available nationally on DAB for an eight-month trial. Broadcasting to a much bigger potential audience, there should have been a positive uplift to the station’s performance in Q1 2010. However, there was no noticeable impact upon adult reach (226,000) or hours listened.

In its forecasts, NME Radio had projected that DAB would be “53%” by 2010. Maybe this referred to Ofcom’s forecast that, by year-end 2010, digital platforms (not DAB alone) would account for 50% of all radio listening. In fact, in Q1 2010, only 15% of listening to all radio was via DAB, and 24% was via all digital platforms (worse for commercial radio at 12% and 23% respectively). Ofcom’s forecast of how digital radio usage would grow was disastrously inaccurate. NME Radio did not stand a chance of commercial success using DAB.

The other digital radio station that quit the national DAB platform in June 2010 was Panjab Radio. Like NME Radio, it had broadcast via local DAB multiplexes (and online), but was then made available nationally on DAB for a six-month trial from 1 December 2009.

There was no lift to Panjab Radio’s audience in Q4 2009, but the following quarter saw a noticeable increase to 172,000 adult reach and 913,000 hours listened per week. This was almost twice the amount of listening that NME Radio recorded on the national DAB platform, a real achievement for an ethnic radio station.

The day Panjab Radio had joined the national DAB platform, Digital One operations director Glyn Jones said:

“Like Premier Christian Radio and UCB UK, Panjab Radio relied on a fund-raising appeal to pay for the launch of the station. It’s interesting to see the growth of listener-supported stations, and the way they’re extending the range and choice of stations on air via digital radio. These are stations that neither a traditional commercial model nor the BBC have chosen to provide, but which listeners value so much that they’re prepared to help pay for them out of their own pockets.”

The sub-text was that the Digital One national DAB platform cannot support a commercial digital-only radio station because the financial returns are simply insufficient to cover the expense for it to lease space on the platform. If Panjab Radio had managed to sell advertising at the average commercial radio sector rate, it should have generated £1m per annum of revenue. However, an industry study in 2009 found that the average digital radio station generated only £130,000 revenue per annum (and Panjab Radio attracted less listening than others).

When Panjab Radio quit the national DAB platform in June 2010, Digital One’s Glyn Jones issued a press release that seemed over-eager to deflect the blame:

“Panjab Radio’s revenues come from a mix of traditional radio advertising plus fund raising among Britain’s Panjabi and Sikh communities. Following a strategic and financial review the station opted to end its national transmissions but to continue to broadcast on DAB digital radio in three parts of the country with significant concentrations of the target audience – the West Midlands, West Yorkshire and London.”

As the table above demonstrates, the national DAB platform’s history is littered with commercial digital radio stations that failed to make it work for them. Most of the stations currently on the national DAB platform are non-commercial and so do not need to meet their costs from advertising revenues. But religious stations, army radio and unsigned artists do not come close to the mass market purpose for which the platform was originally envisaged. Did GWR Group make its substantial investment in national DAB in the expectation that, after a decade, the platform would be filled with subsidised radio stations attracting tiny audiences?

Two years ago, I had written:

“This sudden flowering of ethnic, religious and publicly-funded radio stations on the DAB platform echoes the fate of the ‘AM’ waveband in the 1990s … The ‘DAB’ platform of 2008, particularly in London, is already starting to resemble the ‘AM’ platform of 1998, suggesting that ‘DAB’ might have already been written off by the sector as a means to reach the ‘mass market’ audiences that national advertisers desire from the medium.”

Since then, this desperate filling of DAB multiplex capacity with non-commercial stations has spread from London to the national platform. Bizarrely, given the overwhelming empirical evidence that this “first and only national commercial” DAB platform is not working, even after a decade of operation, Ofcom is keen to create a second quasi-national DAB platform. Its rationale is that:

“This could help to facilitate the creation of national commercial radio stations to create a consumer proposition analogous to that of Freeview: a wide range of popular and niche services, delivered digitally” because “we believe DAB still offers the best solution for the future growth of radio in the UK.”

This nonsense was written in an Ofcom report less than a year ago, when the writing on the wall could not have been larger that the national DAB platform’s future for commercial radio was doomed. Surely, a regulator that refuses to deal with the reality of the here and now could be a regulator that will eventually find it has no future. For years, Ofcom (and its predecessor) have led the commercial radio sector a merry dance down a DAB blind alley that has proven almost fatal to the industry’s economic health.

If Ofcom publishes one more policy document proclaiming (as if it were still 1998) that ‘the future of radio’ is DAB, rather than it working to bang industry heads together to find a practical route out of the present mess, all it will succeed in doing is writing its own epitaph.

Digital Economy Act 2010: a smokescreen for backroom radio ‘deal’

On 8 April 2010 at 1732, the Digital Economy Act was given Royal Assent by Parliament. Who exactly will benefit from the radio clauses in the Act? Certainly not the consumer.

“The passing of the Digital Economy Bill into law is great news for receiver manufacturers,” said Frontier Silicon CEO Anthony Sethill. As explained by Electronics Weekly: “Much of the world DAB industry revolves around decoder chips and modules from UK companies, in particular Frontier Silicon. These firms can expect a bonanza as consumers replace FM radios with DAB receivers.” Frontier Silicon says it supplies semi-conductors and modules for 70% of the global DAB receiver market.

Sadly, the Bill/Act was not really about digital radio at all. For the radio sector lobbyists, it was all about securing an automatic licence extension for Global Radio’s Classic FM, the most profitable station in commercial radio, so as to avoid its valuable FM slot being auctioned to allcomers. The payback on this valuable asset alone easily justified spending £100,000s on parliamentary smooching. It was interesting to see one Labour MP acknowledge the true purpose for all this parliamentary lobbying in the House of Commons debate when he congratulated “[Classic FM managing director] Darren Henley for making a cause of the issue.”

The clauses in the Digital Economy Bill on the planned expansion of DAB radio and digital radio switchover were simply promises that Lord Carter had insisted upon as the radio industry’s quid pro quo for government assistance to Global Radio’s most profitable asset. The existence of this ‘deal’ between Lord Carter and Global Radio was confirmed by Digital Radio Working Group chairman Barry Cox in his evidence to the House of Lords:

“Lord Carter did not like to do [the deal] immediately. As I understand, he wanted to get something more back from the radio industry. I think there is a deal in place on renewing these licences, yes.”

However, the quid pro quo promise to develop DAB radio will never come to fruition. Now that Global Radio has got what it wanted, over the coming months, the radio industry’s commitment to continue with DAB will inevitably be rolled back. Every excuse under the sun will be wheeled out – the economy, the expense, the lack of industry profitability (having spent nearly £1billion on DAB to date), consumer resistance, the regulator, the Licence Fee, the government (old and new), the car industry, the French, the mobile phone manufacturers, whatever …….

The reasons that digital radio migration/switchover will never happen are no different now than they were before the Digital Economy Bill was passed into law. For the consumer, who seems increasingly unconvinced about the merits of DAB radio, this legislation changes nothing at all. Those reasons, as itemised in my written submission to the House of Lords in January 2010, are:

* The characteristics of radio make the logistics of switchover a very different proposition to the television medium;
* The robustness of the existing analogue FM radio broadcasting system;
* Shortcomings of the digital broadcast system, ‘Digital Audio Broadcasting’ [DAB], that is intended to replace analogue radio broadcasting in the UK.

More specifically:

1. Existing FM radio coverage is robust with close to universal coverage:
* 50 years’ development and investment has resulted in FM providing robust radio coverage to 98.5% of the UK population.

2. No alternative usage is proposed for FM or AM radio spectrum:
* Ofcom has proposed no alternate purpose for vacated spectrum;
* There is no proposed spectrum auction to benefit the Treasury.

3. FM/AM radio already provides substantial consumer choice:
* Unlike analogue television, consumers are already offered a wide choice of content on analogue radio;
* 14 analogue radio stations are available to the average UK consumer (29 stations in London), according to Ofcom research.

4. FM is a cheaper transmission system for small, local radio stations:
* FM is a cheaper, more efficient broadcast technology for small, local radio stations than DAB;
* A single FM transmitter can serve a coverage area of 10 to 30 miles radius.

5. Consumers are very satisfied with their existing choice of radio:
* 91% of UK consumers are satisfied with the choice of radio stations in their area, according to Ofcom research;
* 69% of UK consumers only listen to one or two different radio stations in an average week, according to Ofcom research.

6. Sales of radio receivers are in overall decline in the UK:
* Consumer sales of traditional radio receivers are in long-term decline in the UK, according to GfK research;
* Consumers are increasingly purchasing integrated media devices (mp3 players, mobile phones, SatNav) that include radio reception.

7. ‘FM’ is the global standard for radio in mobile devices:
* FM radio is the standard broadcast receiver in the global mobile phone market;
* Not one mobile phone is on sale in the UK that incorporates DAB radio.

8. The large volume of analogue radio receivers in UK households will not be quickly replaced:
* Most households have one analogue television to replace, whereas the average household has more than 5 analogue radios;
* The natural replacement cycle for a radio receiver is more than ten years.

9. Lack of consumer awareness of DAB radio:
* Ofcom said the results of its market research “highlights the continued lack of awareness among consumers of ways of accessing digital radio”.

10. Low consumer interest in purchasing DAB radio receivers:
* Only 16% of consumers intend to purchase a DAB radio in the next 12 months, according to Ofcom research;
* 78% of radio receivers purchased by consumers in the UK (8 million units per annum) are analogue (FM/AM) and do not include DAB, according to GfK data.

11. Sales volumes of DAB radio receivers are in decline:
* UK sales volumes of DAB radios have declined year-on-year in three consecutive quarters in 2008/9, according to GfK data.

12. DAB radio offers poorer quality reception than FM radio:
* The DAB transmission network was optimised to be received in-car, rather than in-buildings;
* Consumer DAB reception remains poor in urban areas, in offices, in houses and in basements, compared to FM.

13. No common geographical coverage delivered by DAB multiplexes:
* Consumers may receive only some DAB radio stations, because geographical coverage varies by multiplex owner.

14. Increased content choice for consumers is largely illusory:
* The majority of content available on DAB radio duplicates stations already available on analogue radio.

15. Digital radio content is not proving attractive to consumers:
* Only 5% of commercial radio listening is to digital-only radio stations, according to RAJAR research;
* 74% of commercial radio listening on digital platforms is to existing analogue radio stations, according to RAJAR research.

16. Consumer choice of exclusive digital radio content is shrinking:
* The majority of national commercial digital radio stations have closed due to lack of listening and low revenues;
* After ten years of DAB in the UK, no digital radio station yet generates an operating profit.

17. Minimal DAB radio listening out-of-home:
* Most DAB radio listening is in-home, and DAB is not impacting the 37% of radio listening out-of-home;
* Less than 1% of cars have DAB radios fitted, according to DRWG data.

18. DAB radio has limited appeal to young people:
* Only 18% of DAB radio receiver owners are under the age of 35, according to DRDB data;
* DAB take-up in the youth market is essential to foster usage and loyalty.

19. DAB multiplex roll-out timetable has been delayed:
* New DAB local multiplexes licensed by Ofcom between 2007 and 2009 have yet to launch;
* DAB launch delays undermine consumer confidence.

20. Legacy DAB receivers cannot be upgraded:
* Almost none of the 10 million DAB radio receivers sold in the UK can be upgraded to the newer DAB+ transmission standard;
* Neither can UK receivers be used to receive the digital radio systems implemented in other European countries (notably France).

21. DAB/FM combination radio receivers have become the norm:
* 95% of DAB radio receivers on sale in the UK also incorporate FM radio;
* 9 million FM radios are added annually to the UK consumer stock (plus millions of FM radios in mobile devices), compared to 2 million DAB radios, according to GfK data.

22. DAB carriage costs are too high:
* Carriage costs of the DAB platform remain too costly for content owners to offer new, commercially viable radio services, compared to FM;
* Unused capacity exists on DAB multiplexes, narrowing consumer choice.

23. DAB investment is proving too costly for the radio industry:
* The UK radio industry is estimated to have spent more than £700m on DAB transmission costs and content in the last ten years;
* The UK commercial radio sector is no longer profitable, partly as a result of having diverted its operating profits to DAB.

24. DAB is not a globally implemented standard:
* DAB is not the digital radio transmission standard used in the most commercially significant global markets (notably the United States).

These factors make it unlikely that a complete switchover to DAB digital terrestrial transmission will happen for radio in the UK.

With television, there existed consumer dissatisfaction with the limited choice of content available from the four or five available analogue terrestrial channels. This was evidenced by consumer willingness to pay subscriptions for exclusive content delivered by satellite. Consumer choice has been extended greatly by the Freeview digital terrestrial channels, many of which are available free, and the required hardware is low-cost.

Ofcom research demonstrates that there is little dissatisfaction with the choice of radio content available from analogue terrestrial channels, and there is no evidence of consumer willingness to pay for exclusive radio content. Consequently, the radio industry has proven unable to offer content on DAB of sufficient appeal to persuade consumers to purchase relatively high-cost DAB hardware in anywhere near as substantial numbers as they have purchased Freeview digital television boxes.

Additionally, it has taken far too long to bring DAB radio to the consumer market, and its window of opportunity for mass take-up has probably passed. Technological development of DAB was started in 1981, but the system was not demonstrated publicly in the UK until 1993 and not implemented for the consumer market until 1999. In the meantime, the internet has expanded to offer UK consumers a much wider choice of radio content than is available from DAB.

In this sense, DAB radio can be viewed as an ‘interim’ technology (similar to the VHS videocassette) offering consumers a bridge between a low-tech past and a relatively high-tech future. If DAB radio had been rolled out in the early 1990s, it might have gained sufficient momentum by now to replace FM radio in the UK. However, in the consumer’s eyes, the appeal of DAB now represents a very marginal ‘upgrade’ to FM radio. Whereas, the wealth of radio content that is now available online is proving far more exciting.

The strategic mistake of the UK radio industry in deciding to invest heavily in DAB radio was its inherent belief in the mantra ‘build it and they will come.’ Because the radio industry has habitually offered content delivered to the consumer ‘free’ at the point of consumption, it failed to understand that, to motivate consumers sufficiently to purchase relatively expensive DAB radio hardware would necessitate a high-profile, integrated marketing campaign. Worse, the commercial radio sector believed that compelling digital content could be added ‘later’ to DAB radio, once sufficient listeners had bought the hardware, rather than content being the cornerstone of the sector’s digital offerings from the outset.

In my opinion, the likely outcome is that FM radio (supplemented in the UK by AM and Long Wave) will continue to be the dominant radio broadcast technology. For those consumers who seek more specialised content or time-shifted programmes, the internet will offer them what they require, delivered to a growing range of listening opportunities integrated into all sorts of communication devices. In this way, the future will continue to be FM radio for everyday consumer purposes, with personal consumer choice extended significantly by the internet.

Renewal of national commercial radio licences: debated in the House of Lords

House of Lords
8 February 2010 @ 1723
Digital Economy Bill
Committee (7th Day)

Clause 31 : Renewal of national radio licences
Debate on whether Clause 31 should stand part of the Bill.

Lord Clement-Jones: My Lords, before I propose that the clause not stand part, I must apologise. As a result of the way in which the business of the House has been organised today, I shall not be able to be here for about two hours of the Committee’s proceedings. I very much regret that, as many important matters remain to be debated. However, since the business was switched at extremely short notice — I hope that the Whips are whipped for it in some future incarnation —

Lord Davies of Oldham: Oh!

Lord Clement-Jones: I am of course not referring to the noble Lord, Lord Davies. Moving this business from Tuesday to Monday at very short notice is not a happy situation. I therefore hope that Ministers will give full and frank responses as if I were present. I am very grateful to my noble friend Lord Addington, who has kindly agreed to step into the breach when I am not able to put the arguments. I propose that Clause 31 should not stand part. Under this clause, the national analogue radio stations talkSPORT, Classic FM and Absolute Radio are receiving valuable seven-year extensions to their licences. In exchange, the existing licensees have been asked to give their support to an early switchover, with the proposed 2015 date coming much earlier than that recommended by the Government’s 2008 Digital Radio Working Group. However, there is a view among some operators that extensions to these licences are not worth the damage to radio of a digital switchover policy which assumes an unrealistic timetable for digital switchover and which fails to provide solutions that allow all local radio stations to move to digital. They do not accept that as a reasonable quid pro quo for an early switchover. They believe, on the contrary, that the industry’s engagement with the digital radio switchover proposal has been distorted by its interest in licence extensions which are essentially to do with the attractiveness of the current analogue model for radio rather than the proposed digital model. Their view is that Clause 31 will deprive the Government of revenue due from re-auctioning the licences for these national analogue stations. However, the Government have failed to publish an assessment of how much revenue will be lost to the Treasury under this approach. The Government need to justify the advantage of the clause against the background of the following factors: that the sums lost to the Treasury will clearly amount to tens of millions of pounds over the lifetime of the extended licences; and the lack of evidence about whether digital investment by the holders of these licences will continue without the extensions. On the face of it, many are already, contractually or otherwise, committed to digital even without this.

Lord Howard of Rising: My Lords, although I share a number of the noble Lord’s concerns, I do not think that removing the clause would be helpful. It is a facilitating clause that enables the move to switchover at a later date, and it does not set in stone when the switchover will take place or indeed that it must happen. It is more important that the Secretary of State considers a range of issues before nominating a switchover date than that the process in its entirety is stopped. I believe that the level of digital radio listening should be much higher than the Government have suggested. It would also be very much better if the fact that the FM spectrum will remain in use for local and community radio stations was on the face of the Bill. More progress should be made in creating a help scheme and a recycling scheme. We should be focusing on these issues rather than on an attempt to derail the digital switchover process completely.

The Lord Bishop of Manchester: My Lords, I recall that last week the noble Lord, Lord Clement-Jones, and I supported each other’s amendments, but sadly that relationship is about to be broken albeit, I hope, temporarily. To allow the Bill to pass without this clause would pose a real problem for the entire digital radio project. The three commercial stations currently granted national analogue licences cater for a broad range of tastes, from Beethoven and Brahms to Bon Jovi, via the latest soccer score from Bolton Wanderers. Their collective appeal has been vital to encouraging digital take-up by listeners, with around a fifth of their current audiences now listening via a digital platform. To disrupt that migration would be rather unwise. Re-advertising these national licences with just a few years to run before we expect to switch off the service seems to be sending the wrong signal to both the industry and to listeners. It seems to suggest that we are not fully committed to digital as the future, that we doubt whether we will be in a position to switch over the bulk of national stations in seven years, and that we can expend less energy on the steps that are undoubtedly still needed to get listeners to switch to digital, especially through pushing down the cost of DAB radio sets and through getting DAB into more cars as standard. I do not think that any of those things are the right course. If, as I understand it, the message from the legislature to the private sector is to be, “We want you to invest in this new technology, market it to your listeners and encourage them to adopt the new listening platforms”, surely we cannot keep expecting these companies to keep on writing blank cheques. We all appreciate that digital platforms are still in their relatively early days. It has to be remembered that not one digital radio station has yet posted a profit. For their pioneering endeavours, they deserve the stability that this reprieve offers them. One does not often hear pleas for breaks for business from these Benches, but this is a case of tidying up the licensing regime to make it serve the purposes of the digital age.

Lord Eatwell: My Lords, I declare an interest as chair of the consumer panel of Classic FM. This panel is entirely independent of the company. It is devoted to maintaining the standards of Classic FM and the widespread broadcasting of classical music by the independent sector. If this clause does not stand part of the Bill, your Lordships should be aware that the future of Classic FM will be severely compromised because it is a requirement of existing law that the analogue licences are auctioned. As at present conceived, analogue licences do not have a clear format specification. There is not a licence for classical music. There is simply a licence for non-speech, which is the licence held by Classic FM. If these national stations were to be auctioned in the near future, I would be willing to bet the noble Lord who is opposing that Clause 31 shall stand part of the Bill at least a bottle of claret that this licence would be secured by a pop music station, and that Classic FM would disappear. I wonder whether the noble Lord has taken into account that possibility in his proposal.

Lord Young of Norwood Green: My Lords, key to supporting the drive to digital is to encourage and to allow broadcasters to invest in their digital futures. Experience shows that licence renewals, which are linked to the provision of a digital service, are a key incentive. At a time when the Government are asking the industry to contribute to a focused and intense drive towards digital, we believe that it would be wrong to remove this incentive. Clause 31, alongside Clause 32, would allow Ofcom to grant a further renewal period of up to seven years to analogue licence holders who also provide a digital service. Clause 31 relates specifically to the national analogue licences, although the rationale for the decision for extending the renewal is identical for both national and local licences. I do not want to take up too much time because noble Lords who have contributed to this debate have put many of the arguments excellently. The noble Lord, Lord Howard, talked about the necessity to maintain the clause. The right reverend Prelate displayed a very catholic — I hope he does not mind me using the word — taste in music from Beethoven to Bon Jovi, which I liked. In his analysis of the need for Clause 31, he is absolutely right. As he said, we cannot expect companies to carry on writing blank cheques. We need to give them an incentive. My noble friend Lord Eatwell’s analysis of Classic FM was exceedingly apposite. We believe that this clause is essential for the reasons stated by a number of noble Lords. In those circumstances, I support the Motion that this clause stands part of the Bill.

Lord Clement-Jones: My Lords, I thank the Minister for that reply. I also thank other noble Lords for contributing to the debate with some fairly bloodcurdling prospects. However, I do not think that the Minister has answered the question about why these extensions are required. I put this proposal somewhat as a devil’s advocate. By and large, I believe that the majority of the radio industry is behind the scheme as put forward by the Government, but there is a significant minority of interest which is not. That is why I put forward the clause stand part debate. But if I was in their shoes, listening to what the Minister had to say, I would consider that his arguments were entirely circular and that the Government have done this because they needed to and that this was the best way forward. I do not think that any real forensic argument has been put forward by the Minister. I could probably put forward rather better arguments than the Minister has. I certainly could have put my finger on areas where investment is needed, since I have been briefed by some of the major radio players. The Minister has been extremely half-hearted in responding. This is the one bit of this Bill which is the Government’s opportunity to set out their stall in terms of their digital radio policy, other than the amendments we have already dealt with. We had quite a useful debate on our last Committee day, but the Minister has not really answered the questions in a robust way. Certainly, he has not set out the stall for the Government’s policy in terms of the extensions of these national analogue radio stations. We are talking about digital radio switchover. What is it about these extensions that will make those radio stations invest more when they migrate to digital? That is what it is all about. The Minister did not even attempt to talk about the amount of money that the Treasury would forgo. Some estimates have put that as high as £73 million, which is a large amount of money. I do not think that the Minister dealt with that either. The Minister has been extremely disappointing. I do not think that that minority of radio stations will be particularly happy to hear the Minister’s lack of engagement with their arguments. It is almost as if he has taken a view that only a minority of radio stations is concerned, that the bulk of the radio industry is quite happy and that therefore that minority will be overridden without so much as a buy your leave. That is an unfortunate position to be in. This House, above all, is about rational debate and about putting forward the arguments. To be frank, in previous amendments to this clause, the Minister put forward some useful points — he certainly did in response to some of mine — but when I have tried to elicit an overarching policy, he has been lacking and I have been somewhat disappointed.

Clause 31 agreed.
Clause 32 agreed.
Amendment 241B not moved.
Clauses 33 and 34 agreed.

Clause 35 : Local radio multiplex services: frequency and licensed area

Amendment 241C
Moved by Baroness Howe of Idlicote
241C: Clause 35, page 39, line 3, leave out “local”

Baroness Howe of Idlicote: My Lords, this amendment, which relates to the provisions for digital radio, seeks to allow for the efficient use of the radio spectrum and for a potential increase in radio listening choice for the people of Northern Ireland. Although national BBC services are available via digital radio in all four parts of the United Kingdom, the national commercial multiplex is unavailable in Northern Ireland. The reasons for that are historical and technical, and relate to how the same frequencies were used in the Republic of Ireland. The result is that stations, including Absolute Radio, Planet Rock, BFBS radio and Premier Christian Radio, cannot be heard digitally in Northern Ireland. There is some hope that the spectrum position will change. However, as currently worded, even if that spectrum were to become available, Ofcom would not have the powers to allow it to be used by the national commercial multiplex. That is clearly an anomaly and, I suspect, an oversight. It would result in the inefficient use of spectrum and an artificial restriction on the radio-listening choice for some citizens. This amendment seeks to correct the situation and, without obliging, would enable Ofcom to increase the coverage of the national commercial multiplex. Were this to become technically possible, Ofcom would follow the process already proposed for similar expansion of local digital radio or multiplexes using the framework already in the Bill. This amendment, while modest and not contentious, will have benefits for the people of Northern Ireland and clearly will be welcomed by the radio industry, so I hope that the Government will be prepared to accept it. I beg to move.

Lord Young of Norwood Green: My Lords, this amendment would allow Ofcom to vary the frequency or licensed area of national, as well as local, radio multiplex licences. On the face of it, this is not an unreasonable change and would potentially enable the national commercial radio multiplex to extend its coverage to Northern Ireland. However, Clause 35 was structured specifically with reference to local radio multiplexes so as to allow them to merge or be extended in order to close the gaps in local radio multiplex coverage in the UK not currently served by DAB. Simply removing the word “local” from the text may not be the best way to achieve the desired result. Consideration needs to be given to what variation powers Ofcom should have with regard to national multiplex licences and to the basis on which such powers should be exercised. We have some sympathy with what the noble Baroness is trying to achieve and the Government will consider this issue before Report. With that assurance, I hope that the noble Baroness will feel able to withdraw the amendment.

Baroness Howe of Idlicote: My Lords, I am pleased to hear that, even if this amendment is not entirely appropriate according to the Minister, serious consideration is going to be given to how this can be made possible. Under those circumstances, I beg leave to withdraw.

Amendment 241C withdrawn.
Amendments 241D to 241F not moved.
Clause 35 agreed.

Clause 36 : Renewal of radio multiplex licences
Debate on whether Clause 36 should stand part of the Bill.

Lord Clement-Jones: My Lords, Clause 36 deals with the renewal of radio multiplex licences and it inserts a new Section 58A after Section 58 of the Broadcasting Act 1996. The House of Lords Delegated Powers and Regulatory Reform Committee, which we always listen to with some respect, had some interesting words to say about this clause: “It is impossible to tell from the Bill whether the policy is that the licences should or should not be renewable at all, let alone for what period or on what grounds. Indeed, paragraph 56 of the memorandum candidly admits that the relevant policy decision has yet to be made. We draw attention to the skeletal nature of the power in clause 36, to enable the House to examine it further and determine whether it is justifiable in this context”. I am merely a humble hand maiden of this House in tabling this clause stand part debate, and I hope that the Minister can give us further enlightenment.

Lord Young of Norwood Green: I have never had to respond to a hand maiden before in this House. I am still wrestling with that analogy. The Government stated in the Digital Britain White Paper that we would work with the industry to agree a plan to build out the DAB infrastructure to current FM coverage. We recognise the need to limit as much as possible the impact of such build-out on radio stations. One way this can be achieved is to allow multiplex operators to spread the cost of the investment in the new infrastructure by extending the period of their licence. We have suggested that licences could be extended up to 2030. The renewal of multiplex licences as a means to support digital radio was first introduced in the Broadcasting Act 1996. However, these renewal powers only apply to licences which were granted within 10 years of the 1996 Act coming into force. Therefore, there are a number of multiplex licences which are currently not eligible for a renewal. If renewals are to provide a real support to the build-out of DAB coverage to FM levels, they need the flexibility to achieve three objectives: first, to allow the extension of the licence period for those licences which are already eligible for, and in some cases have already been awarded, a renewal under the existing terms; secondly, to allow the renewal to apply to all multiplex licences, including those not currently eligible within the existing provisions; and thirdly, to ensure that any further renewals are awarded with conditions which link them to the progress to digital radio switchover, and more specifically to an agreed build-out plan and timetable. The link to a DAB coverage plan for switchover, which is likely to take a year to agree, is why we believe these powers are most appropriately applied via an affirmative order. I note concerns about the breadth of the order-making powers and I hope that I have satisfied noble Lords that they are justified because of the range of changes needed to implement this policy.

Lord Clement-Jones: I thank the Minister for that brief but — I hope to discover on reading Hansard — informative statement. As somebody who is not fully conversant with the radio multiplex licence variations, that was not the clearest possible answer I could have asked for. I hope that it will make sense on further consideration. It seemed to tell me that the Government need the maximum possible flexibility without having determined exactly which licences require extension. I am not sure that takes us a great deal further than what the House of Lords Delegated Powers and Regulatory Reform Committee said, but perhaps, as I say, on reading Hansard it will all become blindingly obvious.

Clause 36 agreed.
Clause 37 agreed.

FRANCE: de-localising RFM and Virgin Radio

Like the UK, commercial radio in France is delivered both nationally and locally. Category ‘C’ stations have local studios, employ local staff and are permitted by the regulator to sell local advertising and use a national brand name, as long as they produce a minimum of 3 hours per day of local programmes. Category ‘D’ stations are broadcast nationally from one central studio, have no local offices and are only allowed by the regulator to sell national advertising.

Now it seems as if some of the local radio operations of European media conglomerate Lagardere, branded RFM and Virgin Radio in France, might have to be closed. “We are in the process of looking at some of them,” said Lagardere Active chairman Didier Quillot. The objective, he told Le Monde, is to know “whether they are all profitable”. The newspaper commented: “the future looks bleak for those that are not.”

Monday 14 December 2009 was a busy day for Lagardere. In the morning, it made a detailed presentation to the CSA, France’s media regulator, about “the economic and financial situation” of its RFM and Virgin Radio local operations. In the afternoon, it repeated the presentation to the IRTS public body, trade unions and staff representatives of the two networks.

RFM is presently available from 192 transmitters across France, of which 55 are local Category ‘C’ stations. Virgin Radio is available from 228 transmitters, of which 146 are local Category ‘C’ stations. Each of the local stations employs at least one journalist and one producer (as required by the regulator) plus advertising sales staff. Lagardere insists that, for the moment, “no decision has been taken and no request has been filed with the regulator”.

A few weeks ago, the programme director of RFM and Virgin Radio, Jean Isnard, produced a study on the future of local radio. Its conclusion was that it would be more profitable to close down some local stations and centralise them in Paris. Such closures, converting Category ‘C’ to Category ‘D’ stations, are unlikely to be implemented until February or March 2010, once the regulator has approved. Lagardere has referred to this strategy as “drastic economic measures” although it has reiterated its “determination to maintain a significant local presence”.

One insider told Le Monde: “For Didier Quillot and Alexandre Bompard, CEO of Europe 1, the crisis impacting the radio sector is not cyclical but structural.” Lagardere is also trying to sell its Paris sports news station, Europe 1 Sport, which is losing 1.2m Euros per annum. It had acquired the station two years ago, intending to transform it into a national station on T-DMB digital radio. However, as Le Monde commented: it is “too expensive, too late!”

The journalist union, SNJ, has denounced Lagardere’s proposed re-structuring of RFM and Virgin Radio “in the strongest terms”. It suspects that 25 local offices would be closed and 40 jobs are threatened. It accused Lagardere of using the economic crisis and competition from new media as pretexts for a purge of local journalists.

Meanwhile, competing national radio station RTL (owned by Bertelsmann) has seen advertising revenues fall 10% year-on-year, despite being ranked #1 station in France for the last three years. On Thursday 17 December 2009, management requested 30 voluntary redundancies from the station’s 300 staff. Chief executive Christopher Baldelii told Le Figaro: “Being market leader is good, but we must not rest on our laurels. RTL has to be modernised to increase its competitiveness”. The objective is to save 20m Euros over the next three years.