Tag: Digital Radio Working Group

Paying for Digital Britain's 'Digital Radio Upgrade': who, me?

The Digital Britain Final Report published in June 2009 proposed that the UK radio industry embark on a ‘Digital Radio Upgrade’ which would seem to involve (take a deep breath):

· Providing greater choice and functionality for listeners (para.15)
· Listeners who can currently access radio can still do so after Upgrade (para.15)
· Building a DAB infrastructure which meets the needs of broadcasters, multiplex owners and listeners (para.21)
· Redrawing the regional DAB multiplex map (para.21)
· The BBC beginning “an aggressive rollout” of its national DAB multiplex to ensure its coverage achieves that of existing FM by 2014 (para.23)
· Commercial radio to extend the coverage of its national DAB multiplex and to improve indoor reception (para.21)
· Investment to ensure that local DAB multiplexes compare with existing FM coverage (para.24)
· The extension and improvement of local DAB coverage (para.25)
· Measures to address the existing failings of the existing DAB multiplex framework (para.26)
· The merger of adjoining local DAB multiplexes and the extension of existing multiplexes into currently unserved areas (para.26)
· The existing regional multiplexes to consolidate and extend to form a second national commercial radio multiplex (para.26)
· Convincing listeners that DAB offers significant benefits over analogue radio (para.28)
· DAB to deliver “new niche [radio] services” and to gain better value from existing content (para.29)
· DAB to offer more services other than new stations (para.30)
· DAB to offer greater functionality and interactivity (para.31)
· Implementation of digitally delivered in-car traffic and travel information (para.31)
· DAB radio receivers to be priced at below £20 within two years (para.32)
· Introduction of add-on hardware (similar to Freeview boxes) to enable consumers to upgrade their analogue receivers (para.32)
· Energy consumption of DAB radio receivers to be reduced (para.33)
· New cars to be sold with digital radios by 2013 (p.99 box)
· A common logo to identify and label DAB radios (p.99 box)
· Development of portable digital radio converters (p.99 box)
· Integration of DAB radio into other vehicle devices such as ‘SatNav’ (p.99 box)
· Work with European partners to develop a common approach to digital radio (p.99 box)

A lengthy list. And who is going to pay for all this? Digital Britain stated that “the investment needed to achieve the Digital Radio Upgrade timetable will on the whole be made by the existing radio companies” (para.44). This means the BBC and the commercial radio sector. And what exactly do these radio broadcasters think about having to pay for all these proposals without the aid of specific government funding? A seminar organised by the Westminster Media Forum this morning gave us an opportunity to find out. Here’s what was said about the Digital Radio Upgrade issue (speech excerpts):

Caroline Thomson, Chief Operating Officer, BBC [‘CT’]:
“The [Digital Britain] report is clear that there is an ambitious target for analogue switch-off in 2015. It is an ambitious target. Radio switch-off is a very different issue from television switchover, but we are supportive of this ambition and we will work with partners in the industry towards delivering it. And we have already made a lot of progress working with commercial radio to develop the policies on this. But, at the heart of it, we must remember that we must put listeners first and be careful not to damage the ability of listeners to tune in to the content they love. Working with commercial radio to secure the digital future in a way that will work for all our listeners is a crucial part of this. As my colleague Tim Davie, Director of [BBC] Audio & Music, said recently: ‘unless we huddle together for scale, we are going to be in trouble’. The BBC is drawing up our digital rollout plans in radio to see where and when it is possible to extend DAB coverage, and how much it would cost. We are willing partners, and DAB is a good example of an area of the Digital Britain report where we are helping to meet the charge.”

Andrew Harrison, Chief Executive, RadioCentre [‘AH’]:
“The real choice, which Digital Britain identifies, is which broadcast platform do we want – FM or DAB. And here, the genie is out of the bottle. DAB now exists on 10m sets, the BBC will not withdraw 6Music and BBC7 or the Asian Network or Five Live Extra – it never withdraws services – and commercial services will not fold DAB-only stations like Planet Rock or Jazz FM. Digital Britain has been clear in its aspiration – national, regional and larger local stations will have a clear pathway to upgrade to DAB and switch off FM. Smaller players will have a clear opportunity to remain on FM without an obligation to move across to DAB. Strategically, that’s a simple resolution – both will co-exist. So, next we need a plan to work out how we might achieve the migration criteria – on transmitter coverage, set sales and in-car penetration. The devil inevitably will be in the detail. But we need two strong interventions from government – on coverage and on cars – before any migration plan will be taken seriously. On cars, Digital Britain falls short of mandating manufacturers, unlike in France, to put digital radio in all cars from 2013. Encouragingly, Ford and Vauxhall have both confirmed their intent to upgrade in line with the timeline for 2013, but we need government to force the pace. On coverage, Lord Carter has ducked the funding issue. The commercial sector has already built out its national and local multiplexes as far as is commercially viable. So I’m delighted to hear Caroline emphasise that the BBC is supportive of the direction and ambition for digital radio and are willing partners helping to fund the change. It’s now time for the BBC and government to stop their wider dance around the BBC’s future role and theoretical possible future uses of the Licence Fee which have never been paid for before, and [to] instead consider how to broker a coverage plan for digital radio that will make it happen.”

Carolyn McCall, Chief Executive, Guardian Media Group [‘CM’]:
“It’s hard to escape the feeling that what the Digital Britain report has done is just gone: ‘we recognise the issue, big issue DAB’. They said something like that, which is pretty important, but they have just gone: ‘Ofcom, deal with it’. That’s how it strikes me. It just seems that so much of this on radio is being left to Ofcom to deal with. And if what I read is true, David Cameron doesn’t want an Ofcom anyway. So that is quite a serious issue for us as an industry. The most worrying aspect of the report in relation to radio is the assertion that investment needed to achieve the Digital Radio Upgrade will be made by existing radio companies. Effectively, the promise of deregulation is being made conditional on commercial radio funding digital [upgrade], stumping up more money that the commercial industry simply cannot afford. We’ve always had too much regulation for a small industry struggling in an unregulated digital world. While we back DAB, I don’t think any commercial broadcaster is going to feel comfortable about paying for those developments. The final point on radio is that, at a time when that industry in particular needed some clarity, the report does not give us any clarity. What new powers will Ofcom have, what role will they be expected to play, what is the position on the vital issue of Format change, what is meant by greater flexibility in relation to co-location, and mini-regions? The list goes on. I would say to Stephen [Carter], or Ben [Bradshaw], or indeed Jeremy Hunt, we need urgent clarifications on these issues and quickly.”

Q&A session [excerpts]:

[Is analogue radio switch-off going to include the [BBC] Radio 4 Long Wave signal?]

CT: That is the government policy. The policy is to switch off all analogue radios.

[Existing DAB coverage is not good enough?]

AH: Right now, self-evidently, DAB coverage is not good enough for anyone to consider switchover. There is a bill to be paid to deliver that public policy imperative. As long as that bill is met and covered, I think the BBC and the commercial sector would confidently switch over knowing the coverage is better ….

[Unless you start spending money now, and if you are, where is it going to come from, it’s not going to happen, is it?]

CT: First of all, we will not do the analogue switch-off unless it is the case that there are very big thresholds that have already been passed, particularly about car radios. And the challenges of getting to those thresholds by 2013, which is what we’ve said, are enormous, even if we build out the transmission. So let me just be clear. It is not the BBC’s policy to switch off FM or Long Wave until we are secure and clear – that is why I made the reference to listeners in my speech – that that is the policy which will work for listeners. On the money, for now we don’t have the money to build out beyond 90% – that is our current build-out – and the final 10% costs much more per percentage than the previous 90%, but we will look forward to a discussion with the government about it. We would like to be able to do it because, in the long term, as for commercial radio, running dual illumination [FM/DAB simulcasting] costs a lot of money so a switchover in 2020 costs us more than a switchover in 2015. But we won’t do the switchover in 2015 unless we believe particularly that car radios are up …..


CM: This point about digital radio [switchover]. There are no funds. I am not really convinced […noise…] and margins are slim because everyone has been hit by the recession quite badly. I don’t know where the money is going to come from for digital switchover of radio.

AH: I remain confident that where we are now with Digital Britain from the radio perspective is into the negotiation now – who pays for this? Frankly that is a negotiation that is far more likely to be concluded positively in the next few months between the BBC and a Labour government than under a Conservative government, so I remain optimistic that both sides will be brought to the table. In terms of who pays and who can afford this, the reality is that the BBC Licence Fee is £3.5bn, that’s seven times the total income of commercial radio. The cost of DAB coverage build-out is about £5m a year – that’s less than Jonathon Ross’ salary or Michael Lyons’ pension fund – so it’s purely a question of priorities for the BBC. I would have thought that it is quite within the limit of the BBC’s talented management to come up with a solution that can meet the public purposes set out for DAB and still deliver all the wonderful content that we enjoy.

Exclusive digital radio content: saying it and doing it are two different things

Everyone seems to agree – it is the availability of exclusive radio content on digital platforms that will drive consumer uptake of the hardware and digital listening.

In its Final Report, the Digital Radio Working Group had said in December 2008: “We must present a compelling [DAB] proposition for consumers not only through new content, but in building a whole new radio experience”.

In its Interim Report, Digital Britain had said in January 2009: “We will expect the radio industry to strengthen its [DAB] consumer proposition both in terms of new and innovative content and to take advantage of the technological developments that DAB can offer”.

In its report commissioned for RadioCentre, Ingenious Consulting had said in January 2009: “…. there is not as much DAB-only material as hoped, and very little that’s truly compelling – there’s no ‘must have’ content as with sports and movies on Sky [TV]”.

In its submission to Digital Britain, Ofcom had recommended in March 2009 “the creation of new commercial radio stations to create a consumer proposition analogous to Freeview: a wide range of popular and niche services, delivered digitally”.

The Digital Radio Working Group had spent a year meeting throughout 2008 and made its final recommendations in New Year 2009. Five months later, for the consumer turning on their DAB radio, the choices do not seem much different than they were then. While the industry continues to talk and talk and talk and talk endlessly about what should be done, the consumer proposition for digital radio seems to be disappearing down the tubes. The data from the Q1 2009 RAJAR audience survey demonstrates that.

For commercial radio, its digital stations are now capturing a lower proportion of its listening (4.5%) than a year ago (5.5%). Only 23% of listening to commercial radio via digital platforms is to exclusively digital content, compared to 30% a year ago. These results are not surprising, given the closure of many digital stations during 2008 (Core, Oneword, Life, TheJazz, Virgin Radio Groove, Yarr, Easy, Mojo and Islam Radio). In 2009 so far, Stafford’s Focal Radio and London’s Zee Radio have also closed.

For the BBC, the results are almost as disappointing. Its digital stations have recovered from a poor performance last quarter, but it appears that much of this improvement may have been due to heightened public interest in 6Music following the Ross/Brand affair. BBC digital stations now capture 2.9% of listening to the BBC, compared to 2.7% a year ago. Only 14% of listening to the BBC via digital platforms is to exclusively digital content, compared to 16% a year ago. For the BBC, it is beginning to look as if interest in its digital content is no longer growing as it had been during 2006 and 2007.


The summary graph (below) of hours listened to exclusively digital radio stations demonstrates the trend’s recent tendency to have levelled out, primarily as a result of commercial radio’s performance since 2007, but now also as a result of the BBC’s performance in recent quarters. Whilst commercial radio experienced significant station closures in 2007/8, the BBC’s portfolio has remained constant and is receiving as much cross-promotional marketing exposure as ever.


It is true that some new initiatives to provide exclusive digital radio content have happened in recent months:

* Colourful Radio launched on DAB in London on 2 March 2009.

* BFBS Radio is available nationally on the Digital One DAB multiplex from 20 April 2009. The station is government funded and aimed at British forces and their families. Unfortunately, listening to BFBS by the general public is likely to substitute for either commercial radio listening, reducing its ratings and revenues, or substitute for BBC radio, reducing its ratings. In the end, neither result will help commercial radio or the BBC make DAB a successful platform.

* NME Radio launched on DAB in London on 13 May 2009.

* Amazing Radio is available nationally on the Digital One DAB multiplex from 1 June 2009 on a six-month trial. Amazing Tunes is a UK website showcasing unsigned bands and musicians. This is a great idea for an on-demand internet service but I am not sure this content will prove so appealing as a broadcast station. The problem, as Xfm discovered with its own disastrous experiment two years ago, is that listening to a playlist chosen by listeners can be as entertaining as looking through a relative’s 300 holiday snaps. Out of several million people’s playlists on Last.fm, I find there are no more than a handful of other people’s selections that I can sit through. What works well online for Amazing is not necessarily going to work in the broadcast medium.

However, at the same time:

* Bauer Radio has relocated Q Radio from London to Birmingham, and Heat Radio from London to Manchester, effectively downgrading these digital stations and making redundancies

* Bauer Radio has removed five stations (Kerrang!, The Hits, Q, Heat, Smash Hits) from the Sky platform

These downgrades are significant because Bauer is easily the biggest player in digital radio, now that Global/GCap/Chrysalis has sold/closed all but two of its digital stations, both of which (The Arrow and Chill) survive only as music jukeboxes. Commercial radio’s commitment to exclusive digital content seems to be hanging by the barest of threads. If Lord Carter decides not to respond positively to the commercial radio industry’s demands for some kind of financial support in the Digital Britain report published in a fortnight, that thread is in imminent danger of snapping.

And so the talk about the need for exclusive digital radio content is likely to run and run and run. But, as long as it remains talk rather than significant action, consumers will remain unimpressed and the graphs above will continue their present trajectories. Nobody wants this to be the outcome, but nobody seems to be doing anything concrete to stop it happening.

DAB: there is no alternative?

The most startling suggestion in the recent report on “The Drive to Digital” commissioned by RadioCentre is the part that details the prerequisites for commercial radio to “forge ahead with DAB”:

“This requires changes to terms of trade and the active support of the other principal players in radio – the government, Ofcom, the BBC and Arqiva – including commitment not to pursue alternative technologies to DAB” [emphasis added].

In other words, commercial radio considers that the way to make the DAB platform a successful technology is to force the remaining stakeholders – notably the BBC – to stop using other alternative digital delivery platforms (the internet, Freeview, Sky, FreeSat, mobile phones) to distribute radio. This would effectively force consumers who want to listen to, for example, digital station BBC7 to purchase DAB radios whereas, at present, the station can be received on the full range of digital platforms.

This sounds like an extreme solution to a challenging problem, beating consumers with a DAB ‘stick’. After almost a decade, the industry has had to reluctantly admit that its ‘carrot’ approach has failed to convince the public of the value of DAB radio. The RadioCentre report acknowledges that “[DAB] has been plagued by a damaging combination of slow take-up, poor coverage, high costs and uncompelling content” and that “there is not as much DAB-only material as hoped, and very little that’s truly compelling – there’s no ‘must have’ content as with sports & movies on Sky [TV]”.

The notion of forcing, rather than persuading, the public to use the DAB platform had been touched upon in the Final Report of the Digital Radio Working Group published in December 2008. It noted that “many of the consumer groups believe that, once an announcement [of an AM/FM switch-off date] is made, no equipment should be sold that does not deliver both DAB and FM”.

Such a proposal would prove impossible to put into practice. Most consumer electronics hardware is made by global companies whose models benefit from ‘universality’ and not from having to manufacture a special UK-only version that would incorporate the DAB platform. Right now, there is not a single mobile phone on sale in the UK that includes the DAB platform, and that situation is unlikely to change because Nokia, Samsung, Sony, LG and Motorola understandably consider FM radio to be the universal radio platform.

A similarly unrealistic proposal for DAB surfaced in March 2008, when Channel 4 Radio commissioned an independent report that proposed:

“to distribute one digital (DAB+) radio set [free of charge] to each household – approximately 26 million sets in total – to stimulate mass take up of digital radio. The sets would be provided over a period of three years, starting in 2010, with 80% distributed over the first two. The total cost of the ‘switch-on’ plan (DAB+ sets, marketing campaign and administration) would be £383m […]. Preliminary thinking is that distribution would use vouchers that would be redeemed in larger retail outlets or via promotional codes online”.

The report anticipated that such a mass consumer giveaway “could result in 60% digital listening by 2012” whereas, without it, “digital listening may not reach 60% until 2017, with analogue switch-off no earlier than 2020”. However, the hypothesis failed to consider that a household given a free DAB radio might not necessarily use it, if there were no radio content of sufficient appeal broadcast on the platform. Given that the average household has six radio receivers, a free distribution such as this might simply result in a glut of unused DAB receivers advertised on E-bay.

Such unrealistic proposals only serve to demonstrate a phenomenon highlighted by a web site that is currently nominating DAB radio for the ‘Fiasco Award 2009’ in Spain:

“The fact that a technology is possible does not necessarily mean that people is willing to pay for it, and the fact that Institutions and Companies support it does not mean they did the necessary previous research: they were probably just thinking that they didn’t want to be left behind.”

In the case of the DAB platform, its forced take-up would be the last opportunity remaining for the largest UK commercial radio owners to throw a protectionist cloak around their assets. Through their joint ownership of the DAB platform infrastructure in the UK, this handful of companies hope to limit UK citizens’ future radio listening to their content broadcast on their stations received via their DAB platform. To make this scenario work, of course it would be essential to eradicate competing digital radio platforms.

And why are radio owners so desperate? An excellent US article this week by Seeking Alpha’s Jeff Jarvis expressed the reasons most eloquently:

“We’ve been wringing hands over newspapers and magazines, but TV and radio aren’t far behind. Broadcast is next. It’s a failure of distribution as a business model. Distribution is a scarcity business: ‘I control the tower/press/wire and you don’t and that’s what makes my business.’ Not long ago, they said that owning these channels was tantamount to owning a mint. No more. The same was said of content. But it’s relationships (read: links) that create value today. Young [Broadcasting, filing for bankruptcy with $1bn debt] tried to build relationships, once upon a time. At WKRN in Nashville, Mike Sechrist did amazing work starting blogs, building relationships with bloggers, training the community in the skills of the TV priesthood. But he left and all that disappeared. Been there, done that, I can imagine executives saying as they try to stuff the hole in the dike with borrowed dollars. Didn’t work. The local TV and radio business, once a privilege to be part of, is next to fall. Timber.”

As if that was not enough, the credit crunch has exposed the flimsy financial arrangements of recent radio acquisition deals. This was perfectly explained by Jerry Del Colliano’s consistently provocative US blog in an entry entitled ‘Radio: bankrupt in 6 to 12 months’:

“Consolidated radio groups are facing bankruptcy because some will not be able to restructure their massive debt — the debt they acquired in the first place when they paid too much for overvalued radio stations. No one worried about it then. But now, it’s time to pay the piper. Why else do you think radio people who know better are hunkering down for what they know is coming — default.”

“One reader, a radio executive, claims New York money types are not just talking about the possibility of radio groups defaulting, but the probability. Some think it can happen within six months to a year. Radio groups like Cumulus, Univision, Clear Channel, Entercom — in fact, most of them — have structures that make it difficult to survive if debt cannot be restructured. And in case you haven’t noticed, money is hard to come by these days…….”

“Radio groups are more susceptible because they are leveraged to such a high degree. That’s the reason that the stock prices are so low. Shareholder equity is zero as every single penny of cash flow currently goes to servicing debt. Soon, they won’t be able to service the debt and/or they will be in violation of covenants with the banks and/or equity lenders who will seek to take the stations back.”

If this sounds like cross-Atlantic doom-mongering, I assure you that there are UK banks out there already demanding their pound of flesh from more than one indebted UK radio group. 2009 will not be a pretty year. Particularly when Quarter 4 2008 UK radio revenues were down 15% year-on-year, their lowest quarter since 1999.

In these troubled times, proposing radio sector policies to preserve broadcasters’ oligopolies, or to artificially stifle the development of competing delivery platforms, is not what is needed. Sure, you might wish to be the only ship on the ocean but, if your rust bucket has a hole in its hull, you will drown anyway.

[thanks to The Guardian’s Jack Schofield]

Localness: please, sir, can I have some less?

The government’s announcement that an independent review group will look at the ‘localness’ issues relating to content on commercial radio could re-ignite a war of words between the stakeholders that a year ago ended in a tense ceasefire. Last time, hostilities between the large radio owners and Ofcom became elevated to such an extent that the regulator’s chief executive Ed Richards even used the Annual Ofcom Lecture to chastise the commercial radio industry for its persistent lobbying to loosen its ‘localness’ obligations:

“Some [radio owners] have called for a huge relaxation in relation to localness, some in the industry even call for a complete removal of all regulation. They believe that localness is either no longer valued or that its value is significantly outweighed by its cost. The problem is that the evidence is to the contrary. What our research tells us is that people continue to want to hear local programming. …. But we are not convinced that the market alone will deliver this if left to its own devices. We recognise very clearly the significant economic challenges faced by the radio sector, but our forthcoming proposals will not involve eliminating the obligation to deliver local programming or its reduction to a negligible level.”

Ofcom subsequently published its policy statement on localness in February 2008 and although, on the surface, it might have looked as if a ceasefire had broken out between the two sides, behind the scenes the industry’s lobbying for further reductions of its ‘localness’ obligations continued regardless. Ofcom had estimated that its policy changes would save the radio sector £9.4m to £11.7m per annum from a cost base of around £620m. For the radio industry, these potential savings were simply not enough. Andrew Harrison, chief executive of RadioCentre, argued that “the heavy burden of the existing localness regulation and legislation [..] is holding back current profitability and future investment in the sector”. By December 2008, industry lobbying had succeeded in persuading the Digital Radio Working Group to recommend in its Final Report that:

“commercial radio must be given greater freedom to shape its digital future to provide a sustainable future for local radio in a digital world through a relaxation of analogue localness requirements………”

and to comment that:

“…. a model which focuses so heavily on where content is made may not be the best way to deliver either what listeners will most want in the future or allow the industry space to grow. We therefore recommend that the commercial radio sector, Ofcom and the government should look closely at the current localness regime in the coming months……..”

What proved interesting about last week’s government announcement of the independent review into ‘localness’ was that it contained no mention of Ofcom whatsoever. Even though the press release noted that the review would examine “to what extent are the current requirements for a pre-determined number of hours of local content, and the locality in which content is produced, appropriate and sustainable”, as implemented by Ofcom, it did not mention the regulator by name. This omission is downright weird. The Communications Act 2003 states clearly that:

“It shall be the duty of OFCOM to carry out their functions in relation to local sound broadcasting services in the manner that they consider is best calculated to secure: (a) that programmes consisting of or including local material are included in such services but, in the case of each service, only if and to the extent (if any) that OFCOM consider appropriate in that case; and (b) that, where such programmes are included in such a service, what appears to OFCOM to be a suitable proportion of them consists of locally-made programmes.”

Furthermore, the Act states that “OFCOM must: (a) draw up guidance….” and “OFCOM may revise the guidance from time to time”, but it “must consult” licence holders and stakeholders beforehand. The legislation is crystal clear as to where the responsibility resides. What we are seeing in the government announcement is an intervention at a higher level as a result of perceived dissatisfaction with the way that Ofcom has implemented its responsibilities on this “particularly contentious” issue, as Ed Richards described it

Ofcom’s 2007 consultation on ‘localness’ in radio had elicited 43 responses and the regulator “noted the calls from the commercial radio industry for a reduction of locally-made programming….” Ofcom stated determinedly: “We believe that our proposed guidelines already represent a substantial deregulation of locally-made programming in many cases”. However, it looks as if further lobbying has undermined the Ofcom position, and the regulator is now being sidelined by direct government action on this issue, which could lead to new legislation or to new implementation of existing legislation.

So what precisely does the commercial radio industry want changed by Lord Carter in Ofcom’s localness requirements?

  • local commercial stations required to broadcast no more than 4 hours a day of locally made programming
  • regional commercial stations not required to broadcast locally made programming
  • local news broadcasts on local stations can be produced in centralised newsrooms
  • stations serving populations of less than 750,000 (i.e.: two thirds of the UK’s stations) permitted to locate their studios outside the area they serve
  • the 4 hours a day of ‘local’ programming can be simulcast across co-located stations and still count as locally made programming.

And what concessions would the commercial radio industry offer Lord Carter in return for its newly, co-located, networked content, ‘local’ stations?

  • news bulletins (not all local) 13 hours a day on local stations
  • news bulletins 24 hours a day (not all regional) on regional stations (13 hours a day on specialist music stations)
  • extended news bulletins (of unspecified length)
  • a commitment to safeguarding stations’ remaining local content (weather, traffic, what’s on, charity appeals, community information)

However, these demands and concessions position the ‘localness’ issue strictly in the context of content regulation. In fact, there is a much bigger game being played out, which concerns the further investment required in the DAB platform to try and make it a success with consumers. Essentially, the commercial radio industry is trying to put a gun to Lord Carter’s head and is demanding: ‘we won’t invest any more money in DAB to make it work, unless you stop Ofcom making us do local things we don’t want to do’.

The initial response to the commercial radio lobby was likely to be: ‘you acquired all these local radio stations, knowing that they had localness obligations. If you wanted a national radio station, why didn’t you buy one of those instead?’ It does seem a bit like Stagecoach begging the government to transform its local bus routes into a national coach service. However, Lord Carter is trying to grapple with the issues and forge a compromise whilst still insisting that “government can not, nor should it, be the main driving force for digital radio”.

The biggest danger here is that the ‘localness’ issue becomes a mere sideshow to the much more politically and commercially significant decision over the future of the DAB platform. As such, ‘localness’ risks becoming a mere pawn in a complex set of negotiations that are essentially designed to maintain the balance sheet valuations of the largest radio groups which have already made significant investments over a decade in costly DAB infrastructure.

Sadly, this is not the first time that the ‘localness’ issue has been invoked merely as a quid pro quo within a much bigger game. In the original Bill that became the Communications Act 2003, there was no ‘localness’ clause for local radio, just as there never had been in previous broadcast legislation. It was inserted at the last minute as what the then Minister for Broadcasting, Dr. Kim Howells MP, admitted was “the quid pro quo for greater liberalisation in the radio market”, allowing more concentrated ownership of local radio than the Bill had originally proposed. In the ensuing House of Commons debate, Michael Fabricant MP successfully stoked the flames of fear:

“What if Clear Channel – a United States organisation for which I have a considerable respect, but which the [UK commercial radio] industry is rather concerned about – were to acquire a number of radio stations and found that it could pull in large audiences, based in the US, and not be all that local? Its presenters could be based in New York, for example, and it could put in pre-recorded local identifications. Everything could be done on a PC-based system. The stations would sound like local radio, even though they were not; and, because they had a good playlist, they might pull in a big audience. Would we not want back-stop powers in such a case?”

Six years later, neither Clear Channel nor its competitors have bothered to enter the UK radio market. Instead of the then touted prospect of US-financed global radio, we now have Irish-financed Global Radio wanting to run as much of its UK local radio empire as possible from Leicester Square. At the end of the day, for the listener, does the distinction matter whether a local radio station’s studio is in New York or New Bond Street? If I were a listener in NorthEast England, when I choose to listen to local radio, rather than national radio, if it does not fulfil my desire for ‘local’, then it offers me zero utility. If I am digging my car out of a three-foot snowdrift and the jolly ‘local’ radio presenter does not mention the inclement weather from her faraway studio, it simply isn’t local radio.

Surely, a ‘localness’ policy for radio should put the citizen/consumer/listener at the heart of its doctrine, something which Ofcom policies to date have failed to do. But neither does the commercial radio industry come out of this smelling of roses. I have yet to see one UK case study backed with evidential data which demonstrates that a decrease in local content on a local radio station has resulted in audience growth. Reduced costs? Yes. Improved profit margins? Yes. But local commercial radio stations have always been gifted scarce analogue radio spectrum for free, in return for their public service content commitments. A local radio station that is not trying to maximise its audience but, instead, aims to maximise profits by reducing costs, cutting local content and knowing full well that its audience will inevitably decline, would seem to be misusing valuable spectrum.

It remains to be seen whether this latest initiative to review radio’s localness requirements will result in new regulation that finally puts the listener at the centre of its policies, rather than simply responding to the needs of either the box-ticking regulator or the de-localising, large radio groups.

On a personal note, over several years I researched the issue of ‘localness’ and ‘localism’ in local radio, and I wrote an unpublished paper a year ago that examined the issues and suggested a way forward that would reinstate the local radio listener at the heart of localness regulatory policy. If the laws or regulatory regime do have to be changed, my only hope is that they are changed for the better, and not for the worse.

Digital Britain: the devil is in the indefinite article

Commenting last week on the publication of the government’s Digital Britain report, RadioCentre Chief Executive Andrew Harrison said that “the devil will be in the detail”. Absolutely true because, sometimes, a single word can tell you more about the direction that government policy is taking than a weighty tome. In the case of DAB, the wording of the Digital Britain report raised one such question: does the government want the DAB platform to supplement FM/AM radio, or does it want DAB to supplant it?

The Final Report of the Digital Radio Working Group last December had recommended:
“DAB as the primary platform for national, regional and large local stations” [emphasis added].

However, last week’s Interim Report of Digital Britain made a commitment:
“to enabling DAB to be a primary distribution network for radio” [emphasis added].

This may seem like an insignificant detail but, for the radio industry, it certainly is not. If DAB is to be the primary platform, the implication is that if your radio station is not available on the DAB platform, your business will be marginalised. It implies that the FM and AM platforms will be closed down, which would be a disastrous outcome for smaller commercial radio stations who may not be able to afford the cost of DAB transmission and/or who cannot find space on their local multiplex (if that multiplex even exists) [see ‘Committed to its listeners’].

On the other hand, if DAB is to be a primary platform, the implication is that it will be available to consumers as an adjunct to existing FM/AM radio and to IP-delivered content. In this scenario, the ideal radio receiver of the future will be one which, to the user, is ‘platform neutral’ but has capabilities to receive DAB, FM/AM and IP. The user would simply select “Radio 4: live” on the radio’s interface and the radio itself would determine which was the most reliable delivery platform in that location to serve Radio 4 live. Or, the user might select “Radio 4: The Archers” and it would deliver the most recent episode by IP.

Strangely, the subtle difference between “a” and “the” seemed to be ignored by some stakeholders:

Laurence Harrison, director of consumer electronics at Intellect, said:
“This commitment to DAB as the primary distribution network for radio is exactly the sort of strong and decisive leadership we wanted to see from government” [emphasis added]

Frontier Silicon, in its first press release:
“…..welcomed the Government’s commitment to DAB as the primary distribution network for future radio broadcasting in the UK” [emphasis added]

Frontier Silicon, in a second press release:
“…..the Government’s endorsement of the digital migration of radio and commitment to DAB as the primary distribution network for future radio broadcasting” [emphasis added].

The precise wording was also reported badly by some media:

The Guardian’s Media Monkey wrote:
“….DAB radio was the ‘primary distribution network’ for radio….” [emphasis added].

The Sunday Times wrote:
“….DAB digital technology, set to become the ‘primary distribution network’ for radio….” [emphasis added].

The Daily Mail wrote:
“Lord Carter, the Communications Minister, said: ‘We are making a public commitment to DAB as the primary distribution medium’…” [emphasis added].

The Telegraph wrote:
“The Digital Britain report…… gives a firm commitment to digital radio (DAB) as the primary way of listening to content in the future” [emphasis added].

The BBC wrote:
“The culture secretary said digital audio broadcasting (DAB) will become the ‘primary distribution network’…..” [emphasis added].

No wonder the public is confused. The potential implication of the Digital Britain report on areas of the UK where DAB reception is presently non-existent is just starting to be realised. “FM reception in Eden Valley may disappear” said one local Cumbria newspaper headline yesterday. More coverage like this will inevitably follow.

How many civil servants must have scoured the precise wording of the Digital Britain report before it was published? The change of emphasis from “the” to “a” is unlikely to have been accidental. If the DAB platform were to fail (no acceleration in consumer take-up, no increased exclusive content), then the government will find it needs a ‘get out of jail free’ card. The word “a” provides it with the perfect caveat, next month, next year, whenever.

Warning! Digital radio objectives may appear closer than they are in reality

By coincidence, the Interim Report of Lord Carter’s Digital Britain team was released on the same day as the latest quarterly RAJAR radio ratings data. The former focused optimistically on the inevitability of the UK replacing its existing analogue radio system with the DAB platform. The Digital Britain report stated:
“We are making a clear statement of Government and policy commitment to enabling DAB to be a primary distribution network for radio” and “we will create a plan for digital migration of radio…….”

This coincidence of timing between Lord Carter and RAJAR offered a perfect PR opportunity for the radio industry to emphasise just how successful its drive towards digital migration has been to date. But where exactly were the stories of dazzling digital radio success?

The RAJAR press release noted that “digital listening hours [are] up 10% year on year” and “DAB ownership [is] up 35% year on year”. The brief RadioCentre press release avoided mentioning digital radio altogether. The BBC press release only mentioned digital radio in the context of its digital-only stations, but nothing specifically about the DAB platform. The Digital Radio Development Bureau [DRDB] press release was headed “Digital listening and hours up” and noted that “radio listening via a digital platform has increased year on year while remaining stable quarter on quarter”. The Bauer Radio press release avoided all mention of the DAB platform. So, not much evidence today of digital radio’s success.

What about the DRDB’s statement that digital platform usage is “stable quarter on quarter”? Only two months ago, DRDB announced the launch of a joint BBC and commercial radio Christmas marketing campaign “aimed at driving sales of DAB radios this season”. Although DAB radio hardware sales in the final quarter of the year had subsequently proven disappointing, might not the campaign have also encouraged some consumers to use the DAB platform more, if they already owned the DAB hardware?

Apparently not. Whilst it is true that the latest RAJAR data show increases in listener usage of digital platforms year-on-year, that growth is nowhere near fast enough to make DAB “a primary distribution network for radio” anytime soon, as Lord Carter has advocated. The Digital Britain report has simply decided to endorse wholesale the earlier proposals contained in the Digital Radio Working Group’s Final Report, as it stated:
“We will create a plan for digital migration of radio, which the Government intends to put in place once….. 50% of radio listening is digital”.

Furthermore, the Report pledged the Government to “work with industry to satisfy the migration criteria by 2015 and, where possible, identify initiatives which could bring forward the migration timetable”.


These are bold words. The RAJAR data shows digital platforms’ share of listening was 18.3% in Q4 2008, down from 18.7% the previous quarter, but up from 16.6% year-on-year. If this last year’s rate of growth is projected and compounded into the future, the 50% criterion would not be attained until 2019. To achieve the desired outcome by 2015, let alone before 2015, would necessitate a remarkable change in radio listening habits, the likes of which have not been witnessed to date.

DAB is presently, by far and away, the most significant platform for digital radio listening (the others are digital TV, the internet and ‘digital’ mobile phone). As a result, Lord Carter’s anticipated increase in digital radio listening is heavily dependent upon consumer purchase of DAB radio receivers, rather than simply a switch from one available technology to another. However, the disappointing sales of DAB hardware last quarter point to sales growth being unlikely to move into positive territory during 2009.
DAB receiver sales in 2008 did not meet the forecast made by the DRDB in 2007, let alone the more optimistic forecasts of previous years. The DRDB did not publish a sales forecast in 2008, but there is little doubt that the growth trend is beginning to look more linear than exponential. DAB receiver uptake is presently the main pre-requisite for growth in digital radio usage and one that is looking increasingly uncertain.

The other essential factor is consumer usage, not just ownership, of DAB radios. If owners continue to listen on their other analogue radios (the average household has six radios) rather than via DAB, it will still take a long time to reach the 50% threshold. It surely must be the exclusive content available on the DAB platform that will promote its usage (though other factors such as DAB’s ease of use and signal strength will play a part). However, 2008 saw a significant reduction in available DAB content, precipitated by GCap Media/Global Radio’s decision to withdraw almost entirely from the DAB content market.

Somewhat surprisingly, given this reduction in available content, the DAB platform’s share of commercial radio listening showed a significant increase last quarter (to 9.9% from 9.2% the previous quarter) but the aggregate usage of digital platforms has stayed remarkably flat during 2008 at around 19%. Put simply, we are not seeing much, if any, growth in digital platform usage for commercial radio. (NB: much of the apparent growth in the graphs above and below derives from re-distribution of earlier ‘unspecified’ respondent data in recent quarters.)
If commercial radio’s success with digital platforms seems ‘stuck’, then the BBC could be in an even worse position. In the last quarter, usage of both the DAB and internet platforms declined, leading to old fashioned analogue radio having accounted for a greater proportion of listening than in the previous quarter (up from 68.8% to 69.6%). This is particularly alarming, given the BBC’s much more extensive cross-promotion of its digital platforms across all media, and given the integration of radio into the BBC iPlayer in 2008. It is true that one quarter’s data alone might only prove to be a statistical aberration, but it is worrying news to arrive on the very day that Lord Carter chose to pin his colours to the ‘radio must be DAB’ mast.
Digital-only stations are not proving to be as attractive to listeners as they need to be in order to drive up usage of digital platforms quickly towards the desired 50% criterion. Year-on-year, hours listened to national digital-only stations are down 7%, yet DAB receiver ownership increased by 35% over the same period, according to RAJAR. In aggregate, 16 national digital-only stations accounted for 33 million hours listening per week last quarter, a drop in the ocean compared to radio’s total 1 billion hours listened per week.

So, the reason it might have been so quiet today on the digital radio PR front is that there really was not much good news from RAJAR to be shouting about, from either the BBC or commercial radio perspective. And the plan laid out in the Digital Britain document, which might look great in theory, still depends upon:

  • increased consumer expenditure on DAB radio hardware
  • increased investment in DAB content
  • increased investment in DAB transmission infrastructure

and thus does not appear to be a plan at all steeped in reality, in a time when discretionary expenditure (personal and corporate) is less forthcoming than ever.

The priority for the radio industry in 2009 must be survival, pure and simple. For commercial radio, it is survival in the worsening struggle against the twin evils of falling listening and declining revenues. For the BBC, it is the struggle to ensure that the commercial radio sector survives. Without a successful commercial radio sector, the BBC’s own radio services could be under threat.

Let us hope that the Final Report for Digital Britain incorporates a greater dose of realism and pragmatism, or unfolding events might easily catch up with it even before its publication.

DAB radio: now you hear it (in-store), now you don't (in-home)

The Digital Radio Development Bureau [DRDB] announced yesterday that, after a one-year trial, Ofcom “has agreed to put in place a permanent licensing regime for all retailers across the country” to install DAB repeaters that will boost the signal in-store. According to DRDB:
“Many electrical retailers suffer from poor analogue and DAB signal strength due to the steel framed infrastructure of the building or their basement location. Installing a DAB repeater on the roof of the store means a signal can be boosted in-store and DAB radios can more easily be demonstrated, thus increasing sales potential.”

Currys owner DSGi’s Trading Manager Amanda Cottrell said:
“We know from experience that demonstrating DAB radio in-store is the best way to show consumers the benefits of more station choice, ease of tuning and clean, digital quality sound. Consumers like to get hands-on with new technology and these DAB repeaters will help us to maximise sales in areas where demonstration was a problem.”

I understand the retail sales floor problem, but am I the only one worried that the solution implemented here might not be quite appropriate? I admit it is a very long time since I studied consumer law (1981, Durham Technical College), but my thinking is that these actions could potentially lead to consumer redress under UK legislation. Have the legal eagles at Ofcom considered this fully?

Under Section 15 of the Sale Of Goods Act 1979, when goods are sold by ‘sample’ (ie: consumer sees in-store demonstration sample of DAB radio receiver, but store supplies consumer with sealed, boxed good), “the goods must correspond to the sample in quality”. The law requires “that the goods will be free from any defect, making their quality unsatisfactory, which would not be apparent on reasonable examination of the sample” [my emphasis].

Under the new ‘repeater’ system, when the consumer examines the in-store sample of the DAB receiver, the receiver will be capable of offering ‘perfect’ reception of DAB radio stations. This is due to the installation of special in-store equipment. A fixed antenna has been installed on the roof of the building, pointed directly to the nearest DAB transmitter mast, and its received signal supplies a relay transmitter (transmitting the same stations) placed on the shop floor adjacent to the DAB radio receiver demonstration area.

When the consumer takes the sealed, boxed DAB radio home, they may open it and find that reception of radio stations on their hardware is not as good as it was in-store. This is because their radio is not receiving the DAB signal from a relay transmitter only metres away from the receiver, as it was in-store. Instead, it is receiving signals from the nearest DAB transmitter, probably miles away, and that signal may or may not penetrate the building in which they are using the radio.

The consumer could theoretically apply to Ofcom to install a relay transmitter in their home, in order to replicate the precise conditions in which the sample DAB receiver was demonstrated in-store. Ofcom’s response to the consumer’s application would certainly be ‘no’. Thus, the in-store ‘sample’ DAB receiver was purposefully demonstrated to the consumer under an artificially created environment that cannot ever be reproduced within the consumer’s home.

This would not be the first time that the marketing of DAB radio in the UK has come under legal scrutiny for potentially misleading consumers. In 2004, Ofcom banned an advertisement broadcast on London station Jazz FM which had claimed falsely that DAB radio offers consumers “CD-quality sound”. In 2005, the Advertising Standards Authority upheld a complaint against DAB multiplex owner Switchdigital for a misleading radio advert which had claimed that DAB radio was “distortion free” and “crystal clear”. In its verdict, the ASA said it had “received no evidence to show that DAB digital radio was superior to analogue radio in terms of audio quality”.

The problems concerning the paucity of DAB reception in some circumstances (basements, steel buildings, built-up areas) have been known to the broadcast industry for a long time. At the 2006 TechCon event, Grae Allen, then manager of digital distribution at EMAP Radio, had explained that “[the] Wiesbaden 1995 [radio conference] and all the other DAB planning dealt with mobile reception – in-car and portable outdoors. It made assumptions about aerial heights being just above ground level and, to provide good service to 99% of locations, the conclusion was that it required 58dbųV per metre to maintain that quality of service, and it made some assumptions about the performance of receivers and aerials.” In practice, he said, “some receivers do not quite live up to expectations – some have lossy aerial systems and suffer from self-noise.” Grae said that 2006’s European Regional Radio Conference “[was] moving DAB to become a truly indoor medium. The new planning model has around 10dbųV higher field strength than was envisaged in the original plan.”

In 2006, BT Movio had been about to launch a mobile TV service using DAB spectrum, and Grae said: “That raises a question. We are seeing increasing numbers of hand-held receivers, such as the BT Movio receiver, that do not have an aerial of any significant size. So, in some areas, we may have to go to higher field strengths to deliver to handhelds indoors. So how are we going to improve the coverage? Unfortunately, the people who fill in RAJAR diaries don’t tend to live in large numbers alongside the sheep in the fields [where DAB transmitters are mostly located]. They live in the cities and the urban sprawl, and that’s where we need to deliver the high field strengths that are required for the types of receivers that are becoming popular, and the level of service that is expected. In the future, as I envisage it, we will see a need to put more and more [transmitter] sites inside the cities in areas where we actually need significant power where people are living and working.”

Mark Thomas, then head of broadcast technical policy at Ofcom, admitted at the 2006 TechCon event that the original DAB power allocations had proven too low: “The Radio Authority had no data of how [DAB] receivers performed, so it had to make some very broad-brush assumptions. More recently, now that we have a lot of receivers in the market and we can see how they behave, an industry group has been working under Ofcom’s chairmanship for the last two years to look into the issue in more detail and come up with some modus operandi for new transmitter sites”. Mark concluded: “The Ofcom approach is that the industry co-operates between commercial operators with each other, and with the BBC, in identifying the sites that will improve field strength of DAB services to consumers and will also avoid the issues surrounding Adjacent Channel Interference. ACI also adds to the investment challenge that all of this spectrum development is building.”

Now zoom forward from 2006 to December 2008 and read the Final Report of the Digital Radio Working Group, which said:
“We believe that action is needed to improve the quality and robustness of the existing [DAB] multiplexes’ coverage. We recognise that such a request has significant financial implications for multiplex operators…”

So, it would appear that, from 2004 onwards (when Mark acknowledges Ofcom was aware of the problem), the UK radio industry has continued to market and sell millions of DAB radios to UK consumers, in the full knowledge that its DAB transmission infrastructure requires a significant upgrade to provide consumers with sufficiently robust DAB radio reception in built-up areas and in homes.

The latest DRDB ‘repeater’ sales initiative merely tackles the symptom of poor DAB reception which has existed for years, and the solution is limited entirely to electronics retailers. What is still missing is a solution to the core problem of the “quality and robustness” of DAB radio reception….. for consumers.

Classic FM – always check the expiry date before purchase

When Global Radio paid £375 million for GCap Radio in 2008, the portfolio of stations it acquired included Classic FM, the most listened to and most profitable of the UK’s three national commercial radio stations, and the only one of the three on FM. Classic FM was almost the only jewel remaining in GCap’s tarnished crown, after its management had destroyed the audiences/revenues of Capital FM and its other city FM stations by implementing disastrous content and commercial strategies. Classic FM presently has an 11% reach, a 3.8% share, 66% of its adult hours listened derive from the desirable ABC1 demographic, whilst 85% derive from ‘housewives’. Its only competitor in the classical music format is national BBC Radio Three, which has only a 4% reach and a 1.2% share but, of course, carries no commercials. Classic FM is a cash cow. [ratings: RAJAR]

There is only one problem for Global Radio. Classic FM’s licence expires on 30 September 2011 and it cannot be automatically renewed. This is a big problem. Whereas local commercial radio licences are still awarded (and re-awarded) by Ofcom under a ‘beauty contest’ system, national commercial radio licences are not. The system for national commercial radio licences is simple. Sealed bids are placed in envelopes. Ofcom opens the envelopes. The bidder willing to pay the highest price wins the licence. That’s it. This system is enshrined in legislation. Even if Ofcom wants a different system, it cannot change it without legislation.

As Classic FM’s new owner, Global Radio definitely wants a different system that will enable it to hang on to this most valuable asset. Global has been busy bending the ears of anybody and everybody who it might be able to persuade to interpret the broadcasting rules in a way that lets it keep Classic FM after 2011. Even Ofcom has had its lawyers busy examining the legislation to see what flexibility it has to interpret the rules in a way that might maintain the status quo.

Unfortunately, the legislation in the Broadcasting Act 1990 is quite specific:
“[Ofcom] shall, after considering all the cash bids submitted by the applicants for a national licence, award the licence to the applicant who submitted the highest bid.”

There is one, and only one, caveat in the legislation:
“[Ofcom] may disregard the requirement imposed by subsection (1) [above] and award the licence to an applicant who has not submitted the highest bid if it appears to them that there are exceptional circumstances which make it appropriate for them to award the licence to that applicant; and where it appears to [Ofcom], in the context of the licence, that any circumstances are to be regarded as exceptional circumstances for the purposes of this subsection, those circumstances may be so regarded by them despite the fact that similar circumstances have been so regarded by them in the context of any other licence or licences” [emphasis added].

Nothing more explicit is mentioned in the legislation about these possibly “exceptional circumstances”. The problem facing Ofcom is that, if it were to award the licence to Global Radio in a hypothetical situation where it had not been the highest bidder, whoever was the highest bidder would be likely to seek a judicial review, forcing Ofcom to explain in front of a set of judges the precise nature of the “exceptional circumstances” it had invoked. This would not be a pretty sight. There are no precedents because this part of the legislation has never been used before.

So what is the precise meaning of the ‘cash bid’ that has to be submitted to Ofcom in a sealed envelope? It is an amount to be paid annually by the winner throughout the licence period (increased annually by the rate of inflation). When Classic FM won the licence in 1991, it agreed to pay £670,000 per annum, plus 4% of its revenues as demanded by the regulator.

Later on, the Broadcasting Act 1996 allowed the regulator to extend Classic FM’s licence once, but on new terms, if the station agreed to simulcast its output on DAB. The regulator set Classic FM’s new licence payment as £1 million per annum plus 14% of its revenues from 1999. This new licence would have expired in 2007.

Then, the Communications Act 2003 allowed Ofcom to extend Classic FM’s licence again for a further four years but, once again, it could re-set the terms. Ofcom reduced Classic FM’s licence payment to £50,000 plus 6% of its revenues from 2007. This is the licence that expires in 2011.


Why did Ofcom decide to reduce the payments so substantially in its 2006 decision? It argued that the growth of listening via digital platforms was “leading to a decline in the scarcity value of the analogue spectrum”. Additionally, it argued that the licensee’s “share of advertising, derived as a result of access to the analogue spectrum, is likely to fall.”


Ofcom had forecast in November 2006 that digital platforms would account for 33% of radio listening by 2008, and 50% by 2010. By the time the Classic FM licence was due to expire in 2011, Ofcom anticipated that digital platforms would be responsible for 60% of radio listening overall. In other words, the FM licence would, by 2011, be accountable for only the minority of listening to Classic FM.

Ofcom’s forecast proved to be extremely wide of the mark. By Q3 2008, only 18.7% of radio listening accrued from digital platforms, little more than half of what Ofcom antcipated. The 50% threshold is unlikely to be reached even by 2015, and certainly not by Ofcom’s target of 2010. As a result of these forecasting failures, Classic FM (along with the other two national commercial stations) is now paying Ofcom an amazingly discounted rate for the licence fee to use analogue spectrum. The combined licence fees of the three national licensees would have been £7 million per annum under the previous regime, whereas these were reduced by Ofcom to less than £1.5 million (by Ofcom’s own estimate).

The net result of these changes is that Global Radio has a bargain licence on its books. Classic FM probably generates more than £20 million revenues per annum, but Global now pays only £1.3 million for its licence. The bad news is that Global Radio’s cash cow will end in September 2011. If Global does not win the re-advertised national FM licence, the value of its balance sheet could be up to halved. On the other hand, to keep this prize asset it will have to bid significantly more than the £50,000 annual licence fee it is paying now, so that Classic FM’s future profitability would be impacted anyway, even if Global managed to keep the licence.

However, there are plenty of other media owners out there who would like to have the UK’s only national commercial radio FM licence in their portfolio. The fact that the DAB platform has not grown anywhere near as quickly as anticipated in the UK simply makes this FM licence more valuable. The last time the licence was advertised in 1991, bids were only open to European Union applicants. Since then, legislation has opened up the bidding process worldwide. The licence format does not have to be classical music – the licensee can operate any format of its choice, apart from pop music (this caveat is in the legislation).

The fly in the ointment is that Ofcom adopted a new policy in 2007 that all its analogue local and national radio licences would be scheduled to expire on 31 December 2015, or five years from their commencement, whichever is longer. For Classic FM, this means that its next licence period would theoretically run only from 1 October 2011 to 1 October 2016. If a new bidder won the licence by offering the highest cash bid, five years is hardly enough time for a nascent business to establish itself and become profitable, particularly if it were to adopt a format other than classical music. The Ofcom policy seems unworkable in practice, and also seems biased in the incumbent’s favour.

Now, with an understanding of Global Radio’s desperation to hang on to its Classic FM licence almost at any cost, it is useful to re-read Paragraph 2.3 of the Final Report of the Digital Radio Working Group. Remember that Global Radio owns about 50% capacity of the UK’s commercial radio DAB transmission capacity and Global Radio accounts for 39% of commercial radio listening. The Report said:

“In exchange for its ongoing and future commitment to DAB, we believe the radio industry must have greater certainty and control of its future. Therefore, we propose that the government must relax some of the existing legislative and regulatory burdens placed on the radio industry, which will require parliamentary time, as outlined below and Ofcom should consider how to reduce some of the existing regulatory burdens.

First, the commercial radio industry must be granted a further renewal of its analogue services which are carried on DAB, and of DAB multiplex licences. [emphasis added]”

Now read this quote once more but replace the phrase ‘the radio industry’ or ‘the commercial radio industry’ with ‘Global Radio’. Aha! Wouldn’t it be great for Global Radio if the government could be persuaded to step in and somehow automatically renew its “analogue service” Classic FM licence, thus avoiding a licence auction in 2010? Even moreso if Global could be allowed to continue paying only £50,000 per annum (plus 6% of revenues) for the FM spectrum it uses? If you were Global, would you not be eager to offer the government a deal whereby you maintain your costly DAB infrastructure (and maybe even extend it) as the price you have to pay for securing the future of your most significant balance sheet asset?

From reading its Final Report, it certainly looks as if the Digital Radio Working Group bought into this argument. The next hurdle for Global Radio is to persuade Lord Carter and his Digital Britain team to buy into the same deal, which is: we promise to keep the DAB platform alive, despite it losing us a small fortune, if you ‘arrange’ legislation that enables us to keep the Classic FM licence for another decade. Thus, the government avoids the embarrassment of the DAB platform failing in the UK, and Global Radio might stand a better chance of staying in business.

To date, the other commercial radio owners have seemed happy to go along with this plan. They, like Global, would get to renew their radio licences automatically too (although none of their licences are as individually valuable as Classic FM’s). On the other hand, they too will be burdened with the continued costs of simulcasting their services on the DAB platform, with almost no financial return. However, despite most radio owners’ private dislike of the whole DAB ‘fiasco’, publicly they continue to stress their continuing support. Nobody turns down a ‘free lunch’, and a free licence renewal is an enticing offer for a radio industry still built upon oligopoly power rather than open competition.

The only question now is whether the government considers it politically worthwhile to ‘help’ the commercial radio sector with new legislation that would extend the licence status quo, in return for forcing onto consumers a ‘new’ DAB radio technology that is more than a decade old and has long been superseded by innovation.

Lord Carter’s pronouncements during the next fortnight might give us an idea of how important/unimportant it is to the government to: 1) bale out privately held Global Radio; 2) force further investment in improving/developing the DAB platform.

Shipwrecked on desert island DAB

One important question was sidestepped by the Digital Radio Working Group in its enthusiasm for the DAB platform in the Final Report: if DAB only comes to be adopted in a handful of countries, what are the ‘opportunity costs’ for UK consumers? In other words, if UK consumers are forced by government policy to purchase DAB receivers to replace their analogue radios, what other consumer hardware will they not purchase, either because it does not incorporate DAB radio, or because they have already spent their allocated budget replacing all five or six analogue receivers in their household with DAB radios?

The answer might be provided by the annual International Consumer Electronics Show [CES] taking place this week in Las Vegas, which describes itself as “the world’s largest consumer technology tradeshow” with 2,700 exhibiting companies, 500 expert speakers and 200 conference sessions.

The Digital Radio Working Group had written in its Final Report that:
“…. the DAB standard used in the UK and all three variants will be receivable on [radio] sets which manufacturers will be producing from [2009], so creating a European-wide market for digital radio.”

You might imagine that such innovations in DAB radio hardware would be reflected at this week’s CES event? Apparently not. Only 6 out of the 2,700 exhibiting companies list ‘DAB’ in their descriptions – the UK’s Frontier Silicon (“the leading supplier of audio processors for digital radios powering over 70% of all DAB radio products”); Germany’s Fraunhofer Institute (“audio/video compression technologies”); Taiwan’s Joycell (broadcast antenna manufacturers); China’s Blue Tinum and Shenzhen Baoan Fenda which manufacture DAB/FM/internet radios; and Hong Kong’s Kenwin Industrial which makes plastic injection moulds for electronics products. Additionally, not one of the 200 conference sessions at CES is about DAB. The reality is that, for most of the 130,000 people attending the event, DAB will simply not exist.

But, if you do a search for ‘internet radio’ at CES, you find a list of 393 exhibitors, 320 products and 32 conference sessions. Now compare that with ‘DAB’: 6 exhibitors, 8 products, 0 sessions. Furthermore, the newly formed Internet Media Device Alliance, a group of companies significantly involved in internet radio, will be launching at CES. One of its steering committee members is Anthony Sethill, CEO of Frontier Silicon, who said: “Frontier’s role in the formation of the IMDA affirms our position as the leading supplier of Internet radio connected audio products to the global consumer electronics market.” The significant word there is ‘global’. Despite its current dominance of the largely UK market for DAB, Frontier needs a global market for its product lines…. something that DAB’s limited take-up will never offer it.

So why does the Digital Radio Working Group want to shipwreck UK radio listeners on a desert island of DAB (for accuracy, I should add that you can take your DAB radio to Denmark or Norway and it will work there too)? The answer might be in paragraph 3.10 of its Report, which states:
“We strongly believe that in order for radio to preserve the qualities which make it such a valued part of our everyday lives, and to allow it to build a strong future, it must have a space where it can be the master of its own destiny and have the freedom to take risks” [emphasis added].

If you replace the word ‘radio’ with ‘the BBC and UK commercial radio companies’ and then read this sentence again, it becomes perfectly clear that what the Working Group is advocating is protectionism of the British radio broadcasting industry – protectionism from unregulated radio content delivered from non-UK sources via internet radio. Heaven forbid that we UK residents might prefer listening to Ryan Seacrest over Johnny Vaughan, because the government will seemingly do as much as possible to stop such an outrage happening.

If you think this is a fantastical notion, I suggest you read paragraph 3.9 of the same Report, which is unapologetically ‘patriotic’:
“Radio is an important part of the national discourse and perhaps an even more important voice in local democracy. These principles are the bedrock of radio in the UK and we believe they are something which citizens not only value, but expect”.

The fact is that UK radio, much more than television, offers an easy platform for politicians and their policies to be propagated to mass audiences of voters (viz Radio 4’s Today programme). Incredibly, the Central Office of Information has long been commercial radio’s biggest advertiser! The best way to preserve this cosy relationship is to build a wall around it.

For the mandarins, it might look like a nice walled garden to play in. For us consumers, it has all the hallmarks of a content prison.

Digital Radio Working Group – it must be 'Numberwang'!

The Final Report of the Digital Working Group published today includes an “Aspirational Timetable” which, it says, will “act as a useful guide for those working towards digital migration in the coming months and years”. The projected dates in the timetable include:

  • End 2010 – “DAB sales to exceed sales of analogue radios”
  • 2014 – “All new cars to be fitted with digital radios”
  • 2015 (approx) – “Migration criteria met”

One of three specified “migration criteria” is:

  • “that at least 50% of total radio listening is to digital platforms”

which would look like this by (year-end) 2015:

How likely is this outcome???

It might prove instructive to re-examine earlier forecasts for digital radio take-up published by three leading stakeholders – Ofcom, RadioCentre and the Digital Radio Development Bureau:


This last graph is interesting because the Digital Radio Development Bureau published progressively less optimistic annual forecasts for DAB set sales in 2004, 2005, 2006 and 2007. Its 2007 forecast only projected figures to 2008. When I enquired in September 2007 why the forecast horizon had been reduced by three years, the DRDB told me:

“The problem with forecasting a cumulative to 2011 is that there are too many variables. If we based it on what there is available now in the traditional radio market, we could certainly come up with a figure. But if, as suggested in the forecast, DAB moves into other form factors, such as mobile phones, docking stations, MP3, MP4 etc, then that ‘traditional’ figure would be selling the market short and would not be indicative of the potential cumulative market for DAB.”

Fifteen months on, DAB has made slow progress moving into these other ‘form factors’, with mobile phones and cars still on the starting blocks. Notably, DRDB has yet to publish a 2008 forecast.

None of this statistical evidence offers confidence that the Digital Radio Working Group’s “Aspirational Timetable” is anything more than ‘pie in the sky’.