Tag: Grant Goddard

DAB: fiddling while Rome burns?

The planned migration of radio broadcasting from analogue to digital platforms in the UK currently sits on a knife-edge. After a decade of existence, the DAB platform is still struggling. Only 9.2% of commercial radio hours listened are via DAB [RAJAR Q3 2008]; while 79% of new radios sold in the UK are still old-fashioned analogue rather than DAB [DRDB/GfK Q2 2008 four-quarter moving average]. The financial pressures on commercial radio owners are already immense, and the burden of continuing to simulcast on both analogue and digital terrestrial transmitters cannot be borne much longer. When I wrote about this dire situation in October, I noted that “Ofcom [is] threatening to revoke the analogue licence of any [simulcasting] station giving up on DAB” and I asserted that the regulator’s “once carrot-and-stick approach to digital regulation now looks like a hostage situation.” If stations who had accepted an automatic analogue licence renewal are still forced to continue simulcasting on DAB (some at a cost of many times their analogue transmission) by the regulator, many will simply go out of business.

My attention was drawn this morning [thanks, Daniel] to a speech made by Ofcom’s Director of Radio, Peter Davies, at the recent Voice of the Listener & Viewer Conference in London, as quoted in The Radio Magazine (headline: “Ofcom: Hundreds more DAB transmitters needed”):

“We need to build a lot more transmitters than we currently have. The BBC currently has around 100 DAB transmitters. It may need four or five times that number in order to achieve the equivalent coverage of analogue. But, in the end, if it builds those transmitters, the DAB network would probably still be cheaper to run than today’s FM network. It’s just too early to set a [switchover] date and far more needs to be done to improve the service before that can become a reality”.

However, the costs of such a DAB build-out programme are significant. The BBC’s existing single national DAB multiplex network of 96 transmitters covering 86% of the population costs £6m per annum. To extend that multiplex to 230 transmitters covering 90% of the population would cost an additional £5m per annum. To extend the existing multiplex to the 1,000 transmitters necessary to cover 99% of the population would cost an additional £34m per annum. Now remember that the BBC only has one single national DAB network, whereas the commercial radio sector has one national DAB network, plus a separate layer of local DAB multiplexes that cover most of the UK, plus a further layer of regional DAB multiplexes in the most populous areas. Now imagine what the costs to the commercial sector might be to extend and improve coverage in all these areas.

Although Peter was talking explicitly about the BBC situation, the implication is that the commercial sector too should invest even further in DAB transmission infrastructure, and yet Ofcom must be aware that station owners can barely afford the present network of DAB multiplexes that already cover 90% of the population. It might appear that Ofcom is pre-occupied with burdening the commercial radio sector with even more transmission costs, at a time when the industry is already fighting for its life as a result of falling audiences and declining revenues (even before the advertising downturn).

I am reminded of Peter’s speech about DAB to The Radio Festival in July 2008:

“Increased coverage of DAB will be absolutely essential if it is ever to become a full replacement for FM for most services…… That brings us to the tricky part – defining what existing coverage is and how we improve it. This is still work in progress but we are approaching it in three stages. Firstly, we need to define what existing FM coverage is. That’s not nearly as simple as it might sound. Radio is not like television where you stick an aerial on the roof and you get reception or you don’t. Radio is used in every room in the house, usually with a portable aerial. It’s used outdoors on a wide variety of devices and it’s listened to in cars. So we need to look at geographic coverage as well as population coverage, and we need to look at indoor coverage in different parts of the house. FM coverage gradually fades as you move around, so we need to decide how strong the signal needs to be to be usable. And, surprisingly, this work has never really been done in any kind of consistent manner for the UK as a whole, so it has taken a little while to agree a framework and calculate the numbers. Having done that, we then to do the same for existing DAB coverage. Now DAB has all the same issues as FM, but it also has different characteristics. It doesn’t fade in the same way – you either get it or you don’t – so we need a different set of definitions here. Once we have defined what existing DAB coverage is, we then have to work out what it would take to get existing DAB coverage up to the level of existing FM coverage. Now, we have already done a lot of work on this, and certainly enough to inform the interim report, and the whole thing will be finalised in time for the [DCMS] Digital Radio Working Group final report later this year.”


Undoubtedly, these are all important DAB technical issues that (belatedly) demand attention. However, in the grand scheme of things, with the commercial radio sector poised on a precipice of viability, how exactly will this work by Ofcom do anything but add to the sector’s existing financial problems?

[PS: Just a reminder that Ofcom’s own research in 2007 found that 50% of UK commercial radio licensees either made a loss or an annual profit of less than £100,000.]

CBS Radio takes Yahoo! Launchcast – be afraid, be very afraid!

While UK radio groups are busy scrapping behind closed doors over the future of the DAB platform, the cost of their Arqiva transmission contracts and the intransigence of the regulator, elsewhere in the world the real ‘future of radio’ is being decided in boardrooms by companies whose individual revenues are greater than the earnings of the entire UK commercial radio industry. Today, CBS Radio announced that it will effectively take over Yahoo!’s Launchcast internet radio services from early 2009, much like its deal announced earlier this year to run AOL’s internet radio. For us in the UK, it might be easy to ignore the fact that a ‘turf war’ is taking place in the US between CBS Radio and Clear Channel to own the internet streaming space. As David Goodman of CBS Radio said today: “This announcement, along with our relationship with Last.fm and other distribution partnerships, reinforces our company’s position as the number one internet radio company in the world”. That last phrase (“the world”) emphasises that, although these two media giants are initially focusing their efforts on the monetisation of the US market for IP-delivered radio, it will eventually prove effective to extend their businesses into other territories at low marginal cost. For us in the UK, I think the days will soon be gone when we listened almost exclusively to UK-owned commercial radio, and when foreign involvement was restricted to occasional forays by Australian, Canadian and Luxembourgian (?) investors. AM licences and FM licences and the regulator and the ownership laws might have been able to keep those pesky foreigners from contaminating our radio industry in the past, but now there is nothing (except music copyright agreements) that will be able to stop either CBS Radio or Clear Channel from streaming their radio stations into every home in the UK with broadband access. I wrote about this phenomenon a few months ago and, if anything, the current advertising downturn will only serve to accelerate the process. Let’s be clear here – I am not talking about us in the UK having to make do with a simulcast of WCBS that is five hours out of sync and is telling us about pile-ups on the New Jersey turnpike. Content is content is content and CBS knows that, whilst music is a global lingua franca, talk is strictly local. But they also realise that talk is expensive, whilst music (despite the higher online royalty rates) still comes relatively cheap. And here is the nub. Many UK commercial radio stations have reduced their speech content, reduced their local content and increased their usage of music over the last decade because, simply, music is cheaper. Their actions have now rendered them particularly vulnerable to competition from the likes of CBS Radio and Clear Channel who, at present, are only marginalised because they have no access to the AM/FM broadcast channel in the UK. If the pendulum were to swing towards IP-delivered radio, UK commercial radio would no longer just be in a ‘bun fight’ with the BBC for listeners. The sector would be fighting for its very economic existence. If you think this overstates the issue, then revisit what happened to the ‘great’ British car industry or those ‘great’ British record companies (now reduced to a dismal EMI). When markets open up to competition, players either evolve, adapt or die. The question now is whether the UK’s largest commercial radio group, Global Radio, can itself struggle to survive long enough to face imminent competition from the emerging, heavyweight players in global radio – CBS Radio, Clear Channel and their ilk – whose deals such as today’s are determining right now what we in the UK will be listening to on the radio tomorrow.

Google not expanding into European radio ad sales (for now)

Philipp Schindler, Google’s Managing Director for Northern & Central Europe, told German magazine Horizont that his company is not currently planning to initiate European trials for marketing radio inventory in Europe. “This is not our focus at the moment”, he said. “We are concentrating on the areas where we’re 100% certain we can offer added value for advertising companies. This means our core business of search engines, but also video advertising on the platform YouTube.” If you work in the existing European radio sales ecology (stations, saleshouses, agencies), this statement means that you can breathe a sigh of relief that your lifeblood will not be under threat from an extension of Google’s successful online advertising inventory auction system. If you are a potential, small-scale radio advertiser, you might not be so pleased, as the opportunity to place your advertising within commercial radio at a relatively low cost is unlikely to happen….. yet. In the interim, we are apparently stuck in some kind of no-man’s land between the past and the future. Almost everybody (even RadioCentre) agrees that the old commercial radio advertising model of ‘spot’ ads is broken and needs to be replaced by a new one. But, as yet, no one can agree what that new model is. Bauer has done interesting deals with the branding of some of its digital-only stations, and Absolute Radio is experimenting too, but the overwhelming majority of commercial radio revenues are still derived from the old ‘spot’ system. In the future, an advertising inventory ‘broker’ such as Google could be selling space across many radio stations via an online interface system that deals directly with advertisers and cuts out all the middlemen (the trial is underway in the US). The problem is that such a system, whilst undeniably making radio advertising more efficient, effectively cuts out the livelihoods of the middlemen (saleshouses, agencies, even stations’ own salesforces). Hence, there is massive resistance from all those directly affected by such a change. The other likelihood is that the price of radio advertising would fall under an auction system. All the radio owners are already struggling with swathes of unsold inventory which they choose not to sell at deeply discounted rates. The argument goes that once you sell a spot too cheaply, you will never be able to raise the price again. However, there is an urgency that will eventually (and sooner rather than later) force radio owners to sell at least part of their inventory to a Google-type advertising broker. The facts are simple. Listening to commercial radio is in decline. Radio advertising revenues are falling. Commercial radio is largely a fixed-cost business. Eventually, these radio businesses will not be able to cover their costs unless they bring in a whole new clientele of radio advertisers. There are thousands of small businesses that would use radio advertising if it were made cheap and easy to book. Individually, these businesses’ ad spend would be tiny. But, when aggregated, it could give radio industry revenues just the shot in the arm they need. In the meantime, we are all sat in a waiting room. Yes, everybody agrees that the old radio advertising model is broken. No, nobody can agree what the new model will be. But, whether it happens this year, next year, or next decade, a company like Google will eventually control the majority of radio advertising in the UK. Even if the door isn’t open now, once their backs are against the wall financially, owners will be desperate for revenues (any revenues) even if it means turning radio stations into the equivalent of a classified ads section. So, the news that Google is not buying radio inventory in Europe creates a breathing space for now. But that doesn’t mean station owners can simply cling on to their old ways and ignore the future threat. The radio business simply has to change, whether that change is precipitated by Google itself or not.

Touch FM to be sold or closed

CN Group has announced that its Touch FM stations in Coventry and Banbury will close in five weeks’ time if a buyer is not found. Managing director Julie Fair said that the two stations do not fit in with the long-term strategy of the company. Small-scale, local commercial radio stations in the UK are under immense financial strain, and some owners have exacerbated the situation by extracting the very ‘localness’ from their stations that should have made them unique. Tindle Radio has been up for sale for more than a year; Laser Broadcasting has been put into administration; The Local Radio Company is selling some stations; UTV has put several stations up for sale; Sunrise is selling two London stations; and KM Radio is closing local studios. Earlier this year, I predicted that between 50 and 100 small local commercial stations would go out of business. It gives me no joy to make such a prediction, but the harsh economics of the radio industry are unavoidable. There will be small local stations that can survive and even thrive – they will be owned by people who understand that being different is an asset, being ‘local’ almost to the point of parochialism is a plus, and that ‘local radio’ is more about offering a community service than about being a budding media baron. In other words, owning a small local radio station has more in common with running a local corner shop than with owning a national newspaper. Yes, it is a tragedy that the UK economy cannot support a local commercial FM radio station in every town. Yes, it would be easy to allocate the blame for this sad situation to all and sundry. But we are where we are now. More closures are as inevitable in local commercial radio as they are in local newspapers. In the future, we will look back and wonder how anyone could have conceived that more than 300 local commercial radio stations could ever hope to achieve profitability in our little land. The truth is that one great little radio station is much more valued by its audience and advertisers than 100 mediocre ones. Will Touch FM be fondly remembered a decade hence? Therein lies the serious challenge facing local stations. It is not enough simply to exist – you have to struggle to be loved by your audience. Or you face the prospect that your station could end up in a pauper’s grave, unmarked, overgrown and forgotten. If you own a radio station and are not fighting every hour to make a big difference in your area, exactly what are you in business for?