Tag: radio industry

DAB radio in cars by 2013? – "extremely challenging" say car makers

The UK association of car makers, the Society of Motor Manufacturers and Traders [SMMT], has cautiously welcomed the Digital Britain report but has expressed “reservations about the ambitious timetable” to ensure that DAB radios are available in all new cars by 2013. It has also expressed concern about the 32 million vehicles already on the road, of which it says “only a small percentage” already have DAB radios fitted, noting that the timetable to fit them with “aftermarket devices” is “extremely challenging”.

SMMT has emphasised that the government’s ambition to accelerate the take-up of DAB radio will be “contingent on all national and commercial broadcasters investing in content”. Its Chief Executive Paul Everitt said: “The long-term challenge will be for the broadcasters to invest in content and coverage to create demand for these [DAB radio] products to be provided as standard”. The commercial radio industry has yet to make explicit statements, in the wake of the Digital Britain report, as to how it plans to enhance its exclusive digital radio content to accelerate consumer interest in the platform, or how it plans to finance the build-out of necessary DAB infrastructure upgrades to improve UK coverage.

The Digital Britain report had set out a five-point plan to encourage take-up of DAB radio receivers in cars:
· to work with car manufacturers so that vehicles sold with a DAB radio are available by the end of 2013
· to support a common logo for DAB car radios
· to encourage the development of portable analogue-to-digital radio converters
· to promote the introduction of more sophisticated traffic information within DAB broadcasts
· to work with European partners to develop a common European approach to DAB radio in cars

The last of these points has already received a setback, following the decision last week of commercial radio in Germany and Switzerland not to commit investment to the development of DAB as a replacement platform for their existing FM/AM services. An announcement from Austria is anticipated soon.

Asked about the DAB situation with cars, Tony Moretta, Chief Executive of the Digital Radio Development Bureau [DRDB], the agency charged with marketing DAB in the UK, had said on BBC Radio 4’s ‘You & Yours’ show last week:

“One of the things that has held back the car industry slightly with DAB in the UK is that the UK has been ahead of the rest of the world in going to digital radio. Now if you’re a mainstream car manufacturer, you want to be able to manufacture a car with a radio that will work all around Europe. It’s only been relatively recently that you’ve seen France and Germany and other countries commit fully to digital radio. And so the car manufacturers now have a common standard they can build a radio into their car and it can work across the whole of Europe. So you’re starting to see a big change now. Most car manufacturers now offer DAB as standard in a car or as a factory-fitted option starting for as little as £55. So that’s for new cars, and we saw the other day Ford and Vauxhall announce their support for Digital Britain’s recommendations. What we are going to have to do is look at adapting those cars that haven’t been changed by that point.”

The DRDB has cited the more enthusiastic Ford and Vauxhall responses to Lord Carter’s Digital Britain report, but has not yet mentioned the considerably more “cautious” SMMT response. It should be noted that Ford has been a long time minority shareholder in the MXR regional DAB multiplexes, and thus would benefit financially from improved uptake of the DAB platform in the UK, whether in-car or otherwise.

In-car DAB radios are still a rarity in the UK:
· Out of 2.4m new vehicles registered in the UK in 2007, only 20,000 buyers chose to install a DAB radio
· Out of 34m cars on the road in the UK in 2007, it is estimated that between 170,000 to 200,000 had DAB radios fitted.

Commercial radio in Germany and Switzerland rejects DAB radio

The commercial radio industries in Germany and Switzerland have both rejected proposals that they should invest in developing the DAB digital radio system in their countries to replace existing FM/AM transmissions. The German argument against DAB was that the significant investment required simply did not justify the lengthy wait for a financial return, based on evidence from other European countries that have already introduced DAB radio.

This news is a blow to UK broadcasters and technological companies who have long hoped that the DAB system would become the pan-European digital radio broadcast standard. In June 2009, the Digital Britain Final Report had proposed the government would “work with our European partners, including the European Commission, to develop a common European approach to digital radio”. This proposal drew on the work of its predecessor, the Digital Radio Working Group, whose Final Report had noted in December 2008 that “Germany has plans to launch DAB+ across the country in 2009, while France will launch DMB audio services at around the same time”.

Not only do the German and Swiss announcements impact the prospects of UK consumers benefiting from economies of scale that could have reduced the retail prices of DAB receivers. They also throw doubt over the willingness of European car manufacturers to install DAB radios in new cars, if the broadcast technology is still only implemented in a handful of countries. A week ago, UK technology company Imagination Technologies, whose processors are used in over 80% of DAB radio receivers, had said that “recent announcements from France, Germany, Denmark and Eastern Europe …. mean that the global market for digital radios and digital radio technology is due to take off”. Frontier Silicon, the UK’s leading supplier of DAB radio chips, had announced a US$10m investment in production of a new advanced DAB chip at the beginning of 2009 and had noted that “penetration of DAB radios in the year continues to rise, with ageing analogue broadcasting systems [due to be] switched off in Switzerland ….” The profitability of both companies is very dependent upon the uptake of DAB technology more widely than only their home market.

In Germany, the association of private broadcasters (VPRT) issued a statement on Thursday which said: “The conditions required for a successful introduction, always a prerequisite, have not been met. … For VPRT’s private radio companies, the significant initial and operating costs are too great. Against the backdrop of the economic crisis, such investments are a certain risk. … The VPRT member radio companies have, therefore, concluded that DAB+ has no economically viable future. Even with significant promotion of the system by public funds for at least the next five to ten years and under regulatory pressure, there is only a slim chance of partially recovering (the costs) within the market. Against this background, the VPRT speaks against the planned introduction of DAB+ in the autumn of 2009.”

The World DMB Forum, the international agency promoting the adoption of DAB technology, describes Germany as “among the leading European proponents of DAB Digital Radio” with 546,000 DAB radios sold to date and 116 different radio services available on the platform. Its June 2009 update said that “it is planned that by 2012 most of the German population will have access to the [DAB] services”. Without the co-operation of commercial radio operators, it now looks unlikely that this target will be met.

In Switzerland, the Association of Private Radios (VSP) issued a statement the same day as the Germans, which said: “Today’s ruling by the VPRT makes even more difficult the launch of DAB+ in the whole German-speaking world and VSP recommends that all members use realistic calculations before beginning.” VSP said that the pursuit of DAB radio could create an additional cost of 5 to 8 million Swiss francs “until break even is reached”. Whilst it acknowledged that such an investment could “make sense for strategic market reasons” for one or two players, for the rest of the commercial sector it felt that the financial requirements “exceed the entrepreneurial risk”.

Switzerland presently has around 20 million FM radio receivers, but only 300,000 DAB receivers and an unknown quantity of newer DAB+ receivers. The commercial radio industry there noted that it anticipates greater competition for radio listening will derive from internet-delivered services. Both German and Swiss commercial radio have warned that a phasing out of FM technology would lead to lower revenues, reduced investment and fewer jobs in their companies, and would thus reduce diversity of media voices in their markets.

At the same time, elsewhere in Europe, the decision by the French government that every new car in France will have to include a digital radio from 2012 is looking increasingly challenging. At the recent EBU Digital Radio conference, it was revealed that the decision had been made by the Ministry of Industry without the benefit of prior consultations with technology companies. The French media regulator, the CSA, is only now meeting industrialists this month to discuss the urgent requirement to manufacture car radios by 2012 that include the T-DMB digital standard (a variant of DAB) adopted in France.

Although both the DAB+ and the T-DMB technologies are part of the DAB family of standards, the overwhelming majority of the 9m DAB radios purchased to date in the UK are unable to process either DAB+ or T-DMB signals and would therefore be of no use in Germany or France. Swiss commercial radio, meanwhile, has expressed more interest in using another technology, ‘HD Radio’, which is not part of this DAB family of standards but is the digital radio broadcast system already used in the US and which requires altogether different radio receivers.

[Many thanks to Michael Hedges for his translations and for his excellent ongoing coverage of these issues in Follow The Media]

Digital Britain: is the 50% criterion for digital radio listening achievable?

Both Digital Britain and the final report of the Digital Radio Working Group which preceded it have placed considerable emphasis on one performance metric – the date when the proportion of listening to all radio via digital platforms surpasses 50%. This date will be a ‘trigger point’ for policy changes that will impact the entire radio broadcast industry and it is therefore important to ensure that the data used to determine it are entirely correct.

Figure 6 on page 93 of the Digital Britain Final Report is a graph that shows three things:
· Historical data for the share of all radio listening listened to on digital platforms from 2005 to date
· A trendline demonstrating how this share would continue to increase through “organic growth”
· A forecast demonstrating how this share would grow faster if a “drive to digital” were to be pursued.

In the Digital Britain graph, the historical data for digital platforms’ share of radio listening is shown as 7% at year-end 2005, 12% at year-end 2006, 17% at year-end 2007 and 20% at year-end 2008.

However, the historical data I have from RAJAR (the radio industry’s official radio ratings body) show these figures as 11.0% for year-end 2005, 12.5% for year-end 2006, 16.6% for year-end 2007 and 18.3% for year-end 2008.

So there may be minor differences in the precise numbers for each year, but is that really such a big deal in the overall scheme of things? Well, in this case, yes it is. Whilst the numbers look relatively close on paper, it is only when you draw them onto a graph that you can see the significant differences.


In the Digital Britain report, the trendline for continuing ‘organic growth’ demonstrates that the important 50% criterion would be reached in 2015. The government is proposing that, through a concerted “drive to digital”, that date could be brought forward to 2013. Left to its own devices, the 50% criterion would be reached six years from now, but concerted action could reduce that time to four years.

However, instead of using the data in the Digital Britain report, if a graph is constructed of the official quarterly data from RAJAR, the resultant trendline displays a noticeably less steep gradient. Using this industry data, the 50% criterion is unlikely to be reached through ‘organic growth’ until 2018. In this scenario, the government’s concerted “drive to digital’ would pose the challenge of reducing the interim period from nine years to four years.

Whilst it might seem realistic in Digital Britain to propose reducing a six-year period to four years through concerted action to push digital radio, the reduction of a nine-year period to four years represents a considerably more substantial challenge for the industry to achieve. Some might say it could prove impossible.

The issue becomes even more critical for the commercial radio sector when you realise that the Digital Britain report threatens to revoke stations’ licence renewals if the radio industry as a whole does not succeed in achieving this 50% criterion by 2013. In other words, the government is holding a gun to the radio industry’s head – either achieve this specific goal by 2013, or you may lose your livelihoods.

This is what makes this single dataset so critical to the future of the radio industry. Is the 2013 goal a reasonable target that can be realistically attained, as Digital Britain argues, or is it unrealistic if the interim period has to be somehow slashed from nine years to four years?

When you agree to join a game of poker, you should always check first that the odds are not overwhelmingly stacked against you winning.

[NB: The trend lines in the above graph are straight-line trendlines generated automatically by Microsoft Excel from the datasets, not my subjective judgement.]

[Thanks to Phil for sharing his concerns]

UK Commercial Radio In Numbers: Q1 2009

Click here for my latest presentation containing data for the UK commercial radio industry’s key performance metrics in Q1 2009 for revenues, audiences and radio receiver hardware.

Revenues

Q1 2009 radio revenues were down 19.5% year-on-year, eclipsing the previous quarter’s 14.5% decline (although Q1 2008 had been an exceptionally strong quarter). National advertising continues to weaken, the last four quarters having declined by 15.9%, 12.2%, 21.2% and 28.8% respectively year-on-year. By comparison, local revenues have proven more resilient, down 6.4% in Q1 2009 year-on-year.

The gravity of the downturn is demonstrated by the fact that Q1 2009 was the lowest quarter for revenues since 1999 (at face value – if inflation were factored, the situation would be worse). The size of the industry is likely to continue to contract throughout 2009 and it will have to make further, significant cuts to overheads simply to ensure its survival. Public and parliamentary debate to date has focused upon the economic plight of local newspapers, but local commercial radio is just as endangered.

John Myers’ local radio report for Digital Britain suggested a number of regulatory and legislative changes that would potentially ease the financial burden on the commercial radio sector, but these still remain proposals at present. Until the government’s Digital Britain final report and Ofcom’s consultation exercises potentially turn these recommendations into action, the worsening economic pressures on commercial radio are likely to continue to produce further casualties.

Although some voices are already talking up a future bounce back of revenues after the recession (whenever that might be), it is important to recognise that the recent advertising downturn has only exacerbated a downward trend in radio revenues that was already established. In real terms (removing the impact of inflation), radio revenues peaked in 2000 and had already declined by 25% between 2000 and 2008. The current economic cycle is merely aggravating the structural decline that was already evident.

Audiences

At the root of commercial radio’s structural problem is the public’s declining consumption of its output – hours listened during the last four quarters were down 2.3% year-on-year. Radio as a medium continues to attract significant amounts of listening (22.4 hours per week per listener) and reaches 90% of the population weekly. Within those impressive totals, commercial radio is maintaining most of its reach but is losing listener hours. In Q1 2009, the average commercial radio listener consumed 13.5 hours per week, compared with 15.6 hours per week five years earlier.

It would be easy to lay the blame for this loss of listening at the door of increasingly promiscuous 15-24 year olds spending increasing amounts of time using mobile phone applications, social networking websites and streamed video. Whilst it is true that 15-24 year olds’ average time spent with commercial radio has fallen to 12.4 hours per week in Q1 2009 from 15.2 hours per week eight years ago, blame must also be shouldered by the other constituent demographics within commercial radio’s ‘heartland’ 15-44 year old audience.

Reductions in time spent listening to commercial radio have been almost as substantial amongst 25-34 year olds (12.7 hours per week in Q1 2009, down from 15.5 hours eight years earlier) and 35-44 year olds (14.2 hours per week in Q1 2009, down from 16.6 hours eight years ago). Commercial radio’s share of listening amongst both these demographics fell to 49% in Q1 2009, so that BBC radio listening now dominates all age groups except for 15-24 year olds, in which commercial radio still has a 59% share. Only two quarters ago, commercial radio’s share had been above 50% in all three constituent demographics of its 15-44 ‘heartland’ audience whilst, back in 1999, it had been above 60% in all three. These changes represent the crux of commercial radio’s long-term problem.

Additionally, people under the age of 40 are evidently listening to more ‘audio’ then ever before, assisted by the take-up of portable audio players and the blossoming integration of audio applications into mobile phones. However, listening on these new platforms is not being reflected in the audience data quoted above because the RAJAR radio ratings metric continues to define ‘radio’ listening in the traditional linear way, excluding time-shifted consumption (listen again, podcasts) and non-broadcasters (Last.fm, Spotify). Sooner or later, the industry will have to decide whether RAJAR is to remain merely a marketing tool to demonstrate the two traditional broadcasters’ (BBC and commercial radio) continuing dominance of the shrinking market for linear radio; or whether it is more important for RAJAR to demonstrate that ‘audio’ is a growing consumer medium now shared amongst a widening group of content providers. Comments made recently by the BBC’s Tim Davie at the RadioCentre conference offer encouragement in this respect.

Transactions, Openings & Closures

In May 2009, Global Radio finally sold its eight Midlands stations (an OFT requirement of its acquisition of GCap Media) to former Chrysalis Radio chief executive Phil Riley in a deal reported to be worth £30m and backed by Lloyds TSB. Global’s rival Bauer Radio was long anticipated to be the successful buyer, causing some to comment that the transaction has the hallmarks of a ‘warehousing’ deal that would satisfy current competition issues until media ownership rules are amended by legislation to allow further radio consolidation and cross-ownership.

In May 2009, UKRD succeeded in its acquisition of The Local Radio Company [TLRC] in a deal that valued the latter at £2.88m. UKRD owned six local stations, having closed one and sold three stations during the last year. TLRC owned 20 stations, having sold eight during the last year. Since the acquisition, two further TLRC stations have been sold – Bournemouth’s Fire FM to Westward Broadcasting for £40,001, and Macclesfield’s Silk FM to neighbouring Dee 106.3 for a nominal amount. In the seven months to April 2009, Fire’s operating loss was £129k on revenues of £216k, implying an annual cost base of almost £600k, considerable for a station with a weekly reach of 28,000 adults.

In April 2009, TLRC also sold digital station Jazz FM for £1 to former TLRC chief executive Richard Wheatly and former finance director Alistair Mackenzie, the station having lost £733k in the six months to March 2009. In May 2009, the new owners announced a £500k national poster campaign for the station which broadcasts on Sky, Freesat and regional DAB multiplexes. To date, no digital radio station has generated an operating profit.

Forward Media finally exited the radio business by selling its last remaining stations, Connect FM in Kettering and Lite FM in Peterborough, to Adventure Radio (which owns Chelmsford Radio, Herts Mercury and Southend Radio) for undisclosed amounts.

In March 2009, Midwest Radio sold its two stations, MidWest Shaftesbury and MidWest Yeovil, to South West Radio Ltd, the company that had purchased five stations in the West Country from the administrators last year, following the failure of Laser Broadcasting. Another former Laser station, Fresh Radio in Skipton, was sold in March 2009 by administrators to Utopia Broadcasting which includes some station management.

In April 2009, CN Radio sold Touch FM in Banbury to a management buyout team for an undisclosed amount and the station was relaunched as Banbury Sound. In November 2008, CN had said it would close its Touch FM stations in both Banbury and Coventry if it did not find buyers.

April and May 2009 saw the closure of seven local analogue commercial stations, a greater number than in the previous three years. Ofcom revoked the licence of KCR FM in Knowsley from owner Polaris Media, following failure to comply with its format. Sunrise Radio closed two London stations, Time 106.8 in Thamesmead and South London Radio in Lewisham, which had been up for sale since last year. Pennine FM, purchased by John Harding from TLRC last year, closed in Huddersfield. UTV closed Valleys Radio in South Wales after Ofcom had rejected a co-location request. Jason Bryant closed Radio Hampshire in Southampton and Winchester, stations which he had acquired from Southampton Football Club in 2007 and from Tindle Radio in 2008 respectively.

However, Pennine FM has since been acquired from administration by former station staff Adam Smith and Steve Buck and relaunched in May 2009. Similarly, internet broadcaster Play Radio has expressed interest in acquiring the two Radio Hampshire stations from administration, and a creditors’ meeting is due on 24 June.

On digital platforms, local Stafford station Focal Radio closed in May 2009 with the loss of 23 jobs after local businessman Mo Chaudry, who had invested £80,000 to ‘save’ the station, withdrew his support after being arrested on corruption charges involving Stoke City Council. London DAB station Zee Radio (simulcast on Spectrum AM) closed in April 2009 after a year on-air.

The national DAB multiplex Digital One has three new additions, two temporary. On 20 April 2009, forces radio station BFBS launched a simulcast on the platform, following its earlier trial. On 1 June 2009, Amazing Radio launched a six-month trial service showcasing unsigned UK bands as an extension of its Amazing Tunes website. From 27 June 2009, Folder Media’s Fun Kids station will be simulcasting a 14-week trial, extending its present availability on DAB in London.

In London, black talk/music station Colourful Radio launched on DAB on 2 March 2009, and music station NME Radio added DAB on 13 May 2009.

In the coming months, UKRD/TLRC is likely to divest further local stations from its portfolio. At the top end of the commercial radio business, consolidation has created huge groups of large local stations whilst, at the bottom end of the market, an increasing number of small local stations are now being divested from groups to local owners (or closed down). In a small way, this is returning local commercial radio to its 1970s roots, when it was expected that each station would be owned by local entrepreneurs. It will be instructive to see how each of these divergent strategies succeeds in such tough economic times.

Radio in Digital Britain – sense and sensibleness

In the 13-page radio section of the Digital Britain Final Report published yesterday, there was not one mention of the word ‘switchover’ in the context of ‘digital radio switchover’. Neither was there a single mention of the word ‘switch-off’, as in ‘FM radio switch-off’. Throughout the document’s radio section, the new buzz phrase is ‘Digital Radio Upgrade’, meaning a drive to make DAB radio better and improve its consumer take-up. In Digital Britain, the notion of switching off FM radio broadcasting, notably for local stations, has been buried for good.

Not that you would have realised this fundamental policy shift by reading some of the press reports. “FM radio switched off by 2015”, said the headline in The Telegraph. “Government sets 2015 as digital radio switchover date”, said the headline in Media Week. “Digital radio switchover set for 2015”, said the headline in Broadcast. “Analogue radio switch-off set for 2015”, said the headline in The Guardian. These bold press assertions are contradicted by the Report’s recommendations that “FM spectrum is to be re-planned to accommodate the current MW services” (paragraph 43) and that “a new tier of ultra-local radio [which] will occupy the FM spectrum” (paragraph 39). The report is perfectly clear that FM is not to be switched off (at least, not in my lifetime).

It was almost as if the lobbyists for FM switch-off – the large commercial radio groups, most notably Global Radio – had written the press headlines the way they had wanted the outcome, regardless of the actuality. This was reinforced by an article that appeared in Media Week yesterday morning – only hours before Digital Britain was published – in which “a well-placed source” predicted “a schedule for the shutdown of FM radio” under the headline “Digital Britain to give radio licensees guaranteed protection”. That source proved not to be so well-placed.

The Media Week headline referred to the owners of the three national commercial stations who had been lobbying to have their licences extended by another term in order to avoid the impending auction of their frequencies, as required by existing legislation. I have written previously about Global Radio’s determination to seek an automatic renewal of its Classic FM licence, which otherwise expires in September 2011. So did Digital Britain give Global, TIML and UTV the renewals that they wanted?

The answer appears to be both ‘yes’ and ‘no’. Digital Britain will:
· extend all commercial radio licences, national and local, “up to a further seven years” for stations that simulcast on DAB
· insert a two-year termination clause into all new licences
· review all licences in future and determine whether the Digital Radio Upgrade is likely to be achieved by the end of 2013
· terminate licences if the Digital Radio Upgrade is not achieved
· then re-advertise the national licences under the existing auction scheme.

Not only does this add considerable strings to licence extensions of “up to” seven years, not only does it allow those extended licences to be terminated at two years’ notice, but it also puts the onus squarely on the licensees to make sure that the DAB platform succeeds (something which has not been achieved in the last decade). If the Digital Radio Upgrade does not hit its targets, the licensees lose their stations. This is a poker game that, whilst offering national stations a potential second life, also threatens to take that life away not so far down the line. For an owner trying desperately to convince its bank lender of the long-term value of its national commercial radio licence, Digital Britain has not offered anything in the way of future guaranteed revenue streams. As a result, indebted radio owners now have two guns pointed at their head – one from their bank manager and the other from Lord Carter.

Worse, even the licence renewals proposed by Digital Britain require new legislation to be enacted. If there is renewed turbulence in government, and with the ever-present threat of a snap general election, it is looking doubtful whether media legislation will be a priority in a Parliamentary timetable that will be rushing to legislate more significant political issues during this government’s final days. If new legislation doesn’t happen soon, then Ofcom will have to rush to advertise the Classic FM licence in an auction by early 2010 at the latest.

Furthermore, even if digital platforms do succeed in accounting for more than 50% of radio listening by the end of 2013, which station owner (either commercial or BBC) is going to be prepared to switch off their analogue signal and lose 50% of their listening at a stroke? In the case of a commercial station, losing 50% of listening would mean losing 50% of revenues, an idea that nobody will entertain. In this way, regardless of the speed with which the 50% criterion is reached, the outcome is the same – stations will have to simulcast on both analogue and digital broadcast spectrum for many years to come, a necessity that is almost doubling transmission costs during a period when sector revenues are falling precipitously.

For smaller local analogue radio stations, the future remains rather unclear. Another Digital Britain proposal (paragraph 26) to amalgamate local DAB multiplexes into bigger geographical units makes sense in order to bring economies of scale to multiplex owners, but unequivocally transforms DAB into a large-scale broadcast platform for national or regional operators. A local analogue station in Bridlington, for example, will find it even more expensive and inefficient to be on a ‘Yorkshire’ multiplex, thus restricting that local station’s future distribution platforms to FM broadcast and online. Neither will such a local station benefit from the automatic analogue licence renewal promised only to stations simulcasting on DAB. If anything, such stations’ predicament will ensure that FM continues to be the consumer platform for local radio, which still accounts for 40.7% of all radio listening [RAJAR Q1 2009].

Digital Britain’s acceptance of the important citizen benefits of local radio broadcasting is underlined by its (unexpected) proposal to license “a new tier of ultra-local radio” on FM and to re-plan the FM waveband if existing stations (ever) migrate from FM to DAB. Although the report is at pains to explain that it does not intend to “blur the lines between commercial and community stations”, it makes sense in the long run to consolidate a third tier of radio with the flowering of a whole new set of radio stations that genuinely want to serve local communities. With many small local commercial stations now barely breaking even, it might make sense to turn some of them into companies limited by guarantee and thus let them seek public subsidy from local councils and regeneration schemes.

Such an expansion of radio content in local markets could potentially invigorate the entire radio medium, making ‘local radio’ more of a ‘must have’, particularly following cutbacks in local news provision by local newspapers and regional television. It is also a potential antidote to the continuing transformation of many of our former local commercial radio stations into regional or quasi-national services (see the example of Radio 210 in my previous article on ‘Heart-ification’). As Digital Britain commented: “Today’s radio industry has been shaped more by the scarcity of the analogue spectrum than by market demand” (paragraph 4).

On the issue of public subsidy, the biggest disappointment for commercial DAB radio owners/operators must be Digital Britain’s insistence that “the investment needed to achieve the Digital Radio Upgrade timetable will, on the whole, be made by the existing radio companies” (paragraph 44). The report acknowledges that “this will require a significant contribution from the commercial operators” (paragraph 21) but suggests it should be funded by:
· savings from the negotiated 17% reduction in transmission charges as a result of the Arqiva/National Grid Wireless merger (paragraph 22)
· future savings from the ending of simulcast analogue and DAB transmission (paragraph 22)
· cost savings from the anticipated relaxation of co-location rules and the automatic extension of analogue licences (paragraph 25).

Although there is a brief mention of “residual access” to some of the funds left over from the BBC’s Digital Switchover Help Scheme being used to support DAB infrastructure build-out, the overwhelming message is ‘you guys are on your own to make DAB work’. The worry is that, when times were relatively good in the late 1990s/early 2000s, commercial radio did not manage to develop sufficient traction for the DAB platform. How is it ever going to succeed now in an environment where sector revenues are falling so rapidly?

So the conundrum continues, same as it ever was. Everybody wants DAB to work. Nobody except the BBC wants to pay for it. Commercial radio simply isn’t making a profit anymore. We can argue about how/why it got to that desperate situation, but nothing changes the fact that there is no surplus cash slopping around ready to invest in either DAB infrastructure or exclusive digital content. Without an ongoing commitment to both, even the limited migration of national radio services from analogue to digital transmission proposed in Digital Britain is unlikely to ever happen. Consumers follow content, not platforms (or, as Digital Britain says: “consumers will adopt new technologies when they are affordable and the benefits are clear” (paragraph 8)).

This is not at all to imply that Digital Britain does not offer a lot of sensible recommendations. Whereas the outcome of the Digital Radio Working Group in December 2008 was a remarkably theoretical report that appeared to bypass the harsh economic realities of the radio sector, the Digital Britain document is realistic and pragmatic, telling the radio sector that much of what it needs to do to make the DAB platform a success is in its own hands. How the radio sector moves forward with these issues in the coming weeks will determine how much further we continue to plod along the long DAB road. There is an increasingly stark choice for commercial radio – to give up now and accede the DAB platform to the BBC and Arqiva, or to press on and further endanger the viability of the entire commercial radio sector.

Lord Carter proffered a lot of home truths in Digital Britain and he threw down this gauntlet: “Any good business will invest in its future if it understands that future and the potential returns from its investment” (paragraph 8). What he did not do was throw commercial radio a map to get it to the buried treasure.

——————————-
On a purely personal level, I was pleased to see Digital Britain embracing several policies I had advocated for the radio sector:
· the two-year pilot scheme for an output focused radio regulatory regime takes up the idea of the Local Impact Test I proposed in November 2007
· the proposal to use the surplus from the Digital Switchover Help Scheme and the savings from the Arqiva/NGW merger for DAB infrastructure build-out was a strategy I suggested in October 2008
· the notion that ‘localness’ will prove a commercial radio station’s Unique Selling Point in the future global media village is a scenario I have included in client briefings and conference presentations for several years.

For the purpose of transparency, I contributed radio sector analysis to two documents that were part of the Digital Britain process – a pre-consultation overview and the regulation of local radio.

Digital radio switchover – searching for the Credible Plan

Ed Richards, Chief Executive, Ofcom [ER]
Q&A @ Radio 3.0 conference, London (excerpt)
21 May 2009

Q: Isn’ t the big issue with DAB ‘[FM] switchoff’?….

ER: It is one big question but it definitely isn’t the only big question. And the difference with TV is very instructive. One of the profound differences with TV, of course, is that in the case of TV you couldn’t extend Freeview digital television without turning off the analogue spectrum, and that’s a profound difference. One of the other differences, of course, is that the value of the spectrum released by analogue switchoff in television is extremely high. Indeed, people are fighting each other metaphorically to get hold of it and have been ever since we mooted the idea some years ago. So there are some very big differences. The other obvious differences are that people have more radios than they do have TV’s, and so on and so forth. It is a very big question but I don’t think it’s the only one. That is why we put as much emphasis on the inherent sustainability and viability of digital [radio] services. It is always going to be asking people a lot to simply look forward, especially in the context of no switchoff date – and even if there was a switchoff date, it would be some years away – it’s always going to be asking them a lot to take losses for a long period. If only we can get to a point where DAB services are essentially at least breakeven, the better because that gives you a base from which to plan the other more challenging things, which include switchoff, and we want to work quite hard at that alongside the debate about Digital Britain.

Q: Without a date, it feels like it’s almost over the horizon. People I talk to in radio nearly all say ‘what we need is a date’. Is Digital Britain going to give us a date, do you think?

ER: That is a common theme that you hear, it is true. Before answering the thrust of that, I reiterate that I think you need to address the date and the migration issue, but you need to address the underlying economics first and immediately at the same time. And that means a frequency plan, savings in transmission, and so on and so forth, and it means continuing growth and more listeners on DAB. I hear everybody, a lot of people, say that we have to have a date. Will Digital Britain give us a date? I don’t know. There are a number of things we don’t know about Digital Britain yet.

Q: Would it be helpful if it did give us a date?

ER: It depends what the date was. It wouldn’t be helpful if the date was next year. I think the most important thing is … Let me rephrase the question slightly. You can only have a date if you have got a credible plan that delivers that date. So I could give you a date now but it would be meaningless. It would be rather like the television switchover date in one or two countries around the world – which I won’t name because it would get me into trouble – but they name dates, the governments stand up and puff up their chests and name dates but they are meaningless and, as soon as they have left the room, everybody laughs. So a date is meaningless without a credible plan to get there, so I recognise ….

Q: It’s a bit chicken and egg, isn’t it?

ER: Well, you have to have one in order to have the other. I think where people really are on this is, when they say we must have a date, that is another way of saying we must have a credible plan which gives us a date, and I would agree with that ….

Q: But how close are we to a credible plan?

ER: We are getting closer. We are doing a lot of work, as I said in my contribution, around the re-planning and I think the re-planning is very important to it. We need to have a clear set of proposals about quality of service and coverage and all those sorts of things, and those things need to be in place before you can have a credible plan. But there is work actively taking place on that and being driven forward. But better to get that right and to have a sense of urgency and determination, than just to pluck a meaningless date out of the air.

…..

Q: I’m still struggling slightly with [FM] switchoff only because it strikes me that almost everything hinges upon this and what you say is perfectly sensible – you can’t really have switchoff until you have a credible plan – but we know that, in the real world, unless we are forced by one thing or another, we don’t actually face this and businesses are very similar to life and everybody is still hedging their bets on FM. I speak to mobile phone manufacturers who say ‘well, look, we only have room in our phones for so many transmitters and receivers. We have got Bluetooth, we have got infra-red, we have da-da-da-da-da and all our users tell us they really value FM’. So they are not going to switch it until they have to. People with DAB radios in their cars are still a rarity and the manufacturers are not going to start installing them as standard until someone says ‘OK, 2013, 2012, 2011, whatever it is – that’s it’.

ER: Well, that’s the attraction of setting a date and driving everyone to it. But I’m trying to think of something different to say than what I said earlier.

Q: Would you favour it as an option?

ER: If there is a credible plan, yes. You’ve got to have a credible plan. And what you can’t do is just pluck a date out of the air and say ‘we’re all going to get there’ because I know what will happen under those circumstances. What will happen is that it will be fine for about a month and then, going for coffee outside the conference room, everyone will say ‘well, that is not going to happen, is it?’

Q: Except in TV, it has and it is.

ER: In TV, we wrote the original document which said ‘we will push on to digital switchover in this timeframe and here is how you can do it’. We wrote that document and said ‘these are the six of seven things you have to do to deliver it’ and we knew what you had to do to re-plan, we knew what you had to do to lead people across, we knew about the re-tuning, we knew the vast majority of things and there was a plan. That plan was then picked up by the creation of Digital UK, and so on. We’ve got to get to that next step, so I think it’s an exciting prospect but we’ve got to believe that it’s credible and deliverable. So I know that I’m repeating myself and not being particularly helpful but I do genuinely believe that and we need to – senior people in the industry need to sit round, look at this, stare at the steps and say ‘will that deliver it, is it consistent with what is in the audience’s interest?’ There’s no point in doing something which audiences then regard as a disaster. We have to do something that audiences, as it took place, will regard as a good thing. That’s an acid test and I think that’s possible, but there’s a lot of work to do and we’ve got to see if we can get there.

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.

UK Commercial Radio Revenues Q1 2009

Commercial radio revenue figures for 2009’s first quarter have been released. There is no good news.

Q1 2009 DATA
£128.6m total revenues – lowest since Q3 1999
£36.8m local revenues – lowest since previous quarter, then Q1 2002
£68.4m national revenues – lowest since previous quarter, then Q1 1999
£23.4m branded content – lowest since Q3 1999

YEAR-ON-YEAR
Total revenues – down 19.5%
Local revenues – down 6.4%
National revenues – down 28.8%
Branded content – down 4.1%

QUARTER-ON-QUARTER
Total revenues – down 0.3%
Local revenues – up 1.5%
National revenues – up 4.2%
Branded content – down 13.7%


Commercial radio continues to suffer not only from the advertising downturn, not only from the migration of marketing spend away from traditional media towards online, but from a continuing long-term decline in listening to commercial radio content (see earlier

post on Q1 2009 RAJAR results).

The commercial radio industry has not been under so much revenue pressure since the 1991 recession. Then, local advertising contributed 51% of total sector revenues, whereas now it is only 29%. The industry’s increasing reliance on national advertisers (now 53% of the total) has left it particularly vulnerable, much more so now than in 1991, simply because national advertisers have many more media options to choose from than local advertisers.

The most obvious symptom of this is the closure of more local commercial stations. Last week alone, Radio Hampshire’s FM stations in Southampton and Winchester closed, and Stafford digital station Focal Radio closed. Unfortunately, more closures such as these are likely to follow, both of local commercial stations and newer digital stations. Unlike car plants or hospitals, commercial radio stations are not viewed as a vote winner by politicians, making any kind of government bale-out most unlikely.

As a result, the solution to commercial radio’s problems can only come from within the industry itself. It is wholly unproductive to argue to cut off the BBC’s balls, or to use the Licence Fee to improve commercial radio’s DAB infrastructure, or to expect government to subsidise local news, or to insist that radio licences’ expiry dates be extended. Commercial radio is a business (admittedly, fettered by regulation). If you cannot make that business work for you, then get out of the business.

If I enter a game of poker, I know what the written rules are before I start playing. If I then suffer a losing streak, I cannot expect the rules suddenly to be changed to alleviate my bad luck or poor judgement. Either I play the game or I throw in my hand and quit.

The commercial radio industry desperately needs to get on with the business of radio. Perhaps then, at these numerous radio industry conferences, we could sit through some presentations about what people had actually successfully done to their businesses, rather than more speeches about what should be done, could be done or, most infuriatingly, what someone else (usually the BBC, the government, Ofcom, Lord Carter) should do to help the industry.

Radio – your future is in your own hands.

Global Radio and TLRC: a tale of two sickies

Global Radio is the UK’s largest radio group, accounting for around 40% of all commercial radio listening. Each week, its stations are listened to by 37% of the UK adult population (18.5m persons) for an average 9.3 hours per week.

The Local Radio Company [TLRC] is one of the UK’s small radio groups, accounting for around 1% of all commercial radio listening. Its stations are listened to by 1% of the UK adult population (680,000 persons) for an average 7.6 hours per week.

In Global Radio’s accounts filed with Companies House, its auditor noted on 22 April 2009:
“… there is a material uncertainty which may cast significant doubt over the ability of the group and parent company to continue as a going concern”.

In The Local Radio Company’s accounts filed with Companies House, its auditor noted on 5 March 2009:
“…. there remains in existence a material uncertainty which may cast significant doubt about the Company’s ability to continue as a going concern”.

Both Global Radio and The Local Radio Company had lost substantial amounts of listening to their stations over recent years. In commercial radio, there is a close relationship between the amount of listening to radio and the revenue generated by that radio listening.

The graph below shows that, between Q4 2001 and Q4 2008, the majority of stations presently owned by Global Radio lost significant amounts of market share in their local markets, particularly those in smaller markets.

The graph below shows that, between Q4 2001 and Q4 2008, the majority of stations owned by The Local Radio Company lost significant amounts of market share in their local markets, regardless of their size.

Global Radio was created from the acquisition of GCap Media and Chrysalis Radio, whilst GCap Media itself had been created from the earlier merger of GWR Group and Capital Radio Group. The graph below shows the listening accrued by the notional aggregation of these groups over time. The volume of listening in 2008 (8.9bn hours per annum) was down 24% on what it had been five years earlier. The data is not like-for-like, as it includes sundry station launches, closures, acquisitions and sales during this period.
Using sector average yields for each of these years, the Global Radio stations’ estimated revenues from advertising sales were likely to have been around £223m in 2008, down 20% on five years earlier. (The £ amounts are actual and not adjusted for inflation.)

The Local Radio Company was created in 2004. The graph below shows the listening recorded by RAJAR to its stations, which was down to 351m hours per annum in 2008. Again, the data is not like-for-like, as it includes sundry station launches, closures, acquisitions and sales during this period.

Using sector average yields for each of these years, The Local Radio Company stations’ estimated revenues from advertising sales were likely to have been around £9m in 2008. (The £ amounts are actual and not adjusted for inflation.)

Commercial radio is a largely fixed cost industry. This means that the cost of running a radio station is broadly the same whether it is listened to by 1m people or 100,000 people. This creates challenges in times when audiences are falling (as in now). Less listening equals less revenues, but it is much harder to cut costs. As a result, operating margins of radio stations tend to be badly squeezed when listening is falling. The massive investment in DAB infrastructure that the commercial radio industry has made over the last decade has squeezed its margins even more tightly.

Examination of the annual accounts of Global Radio, GCap Media and Chrysalis Radio makes it possible to estimate the revenues and operating profit of what now comprises Global Radio over the last few years. The group revenues are remarkably close to the revenue figures derived from listening data in the earlier graph.

The key assumption that produces the £6m operating profit figure for 2008 is that Global has managed to shave 10% from its operating costs year-on-year (equivalent to about £24m per annum of cuts). That is a very tough challenge in a fixed cost industry. If, in fact, Global has cut its overheads by less than 10%, the operating profit figure for 2008 would be lower (anything less than an 8% cut would transform this £6m estimated operating profit into an operating loss).

For The Local Radio Company, operating losses are de rigueur. Its annual accounts show the company’s diminishing revenues (down to £15m in 2008) and persistent operating losses. The revenue figures in the graph below are greater than the revenues estimated from listening data in the earlier graph because they additionally include revenues from a jointly owned advertising saleshouse (the two income sources are nowhere isolated within the accounts).


For both Global Radio and The Local Radio Company, as their respective auditors noted, there exists doubt about their ability to continue as going concerns. The Local Radio Company accounts, published on 4 March 2009, noted pertinently:
“Revenues are down year on year and, within a fixed cost business such as broadcasting, this has a direct impact on the Group’s profitability and cash position.”
Someone had to rescue The Local Radio Company from its predicament. This week, UKRD Group reportedly acquired The Local Radio Company after a protracted struggle.

This is the point where the stories of these two radio groups diverge. By contrast, Global Radio remains remarkably upbeat about its own prospects. A series of press articles appeared this week variously entitled ‘Global Radio anticipates profits’ (Broadcast), ‘Global Radio expects steady profits despite ad slump (The Guardian), ‘Global Radio declares steady profit despite auditor’s warning’ (Brand Republic) and ‘Global Radio shrugs off warning with £31m profit’ (The Times).

In The Times, Global Group chief executive Ashley Tabor said that in the year to 31 March 2008, revenues were £269m and profits were £31m (notionally, if Global had then owned its current assets). He admitted that advertising revenues had fallen “by double digits, between 15% and 20%” in the year to March 2009, but insisted that “underlying earnings will be roughly the same”, even allowing for a fall of about £40m in revenues. This is a remarkable assertion.

If revenues were to fall by £40m year-on-year, but earnings remained the same year-on-year, then costs too would have to fall by £40m. Basic maths. For Global to cut its overheads by £40m would require around a 17% cut to the cost base it inherited from GCap Media and Chrysalis. And this would have to be achieved within a year to maintain earnings at their same level. This is a very tall order.

Ashley insists that, for the year to March 2008, revenues would have been £269m and profits £31m. My estimates for calendar year 2007 (detailed above) were £264m revenues and £24m of operating profit. These figures are relatively close. Then there is a divergence of opinion. For the year to March 2009, Ashley seems to be forecasting revenues of £229m and profits of £31m. My estimates for calendar year 2008 (detailed above) are revenues of £222m and operating profit of only £6m.

My ‘operating profit’ figure excludes any potential, one-off gains made from radio station sales. Ashley’s ‘earnings’ figure is more likely to be pre-tax profit. I am more interested in quantifying the health of the underlying business, which is the running of radio stations. From that perspective, it is difficult to see how the future can look positive for Global Radio. As The Times noted today: “Global probably lost money in the year to March 2009, but we will not see those accounts until next year”.

The elephant in the room is Global Radio’s cost of debt servicing. Chrysalis was acquired using £84m of debt at an interest rate of 6.125%. GCap Media was acquired with £126m of debt at an interest rate of Libor plus 3.4% (equals 4.771% today). Interest payments currently total more than £11m per annum, enough to wipe out the estimated operating profit.

If the advertising market falls further in 2009 (Ofcom forecasts a 20% decline in radio revenues year-on-year), Global Radio will be under immense financial pressure. The Bank of Scotland (now part of Lloyds Bank) has a mortgage over Global’s assets as security for these loans. In the meantime, Global is still hoping to sell some of its local stations in the Midlands (sales required by competition law) to arch-rival Bauer Radio, reportedly for £38.8m cash. Bauer can afford to play a patient, waiting game in a buyer’s market. The longer it holds out, the greater the pressure on Global to sell. If Bauer can wait long enough, it might even be able to acquire these stations (and others) at a knockdown price from the Lloyds Bank bargain bin.

Digital radio: never mind the content, feel the bandwidth?

“It’s a simple equation. The BBC has had an unfair share of the analogue spectrum but digital enables the commercial players the space to compete on a much more equal footing.”
Steve Orchard, operations director, GCap Media in Music Week, 9 December 2006, p.10.

For almost an eternity, the UK commercial radio industry has complained vociferously that it has been discriminated against because the BBC has the use of more analogue spectrum than it does. The argument has been made repeatedly that commercial radio will always ‘under-perform’ against the BBC as long as the BBC is allocated more space on the FM waveband. To support this argument, its proponents hold up the fact that the BBC has four national channels on FM, whilst commercial radio has only one (they choose to ignore the fact that, additionally, the BBC has 40 local stations on FM, whilst commercial radio has 200+ local stations on FM).

When DAB radio arrived a decade ago, there was a widely held notion within commercial radio that the new technology provided an opportunity to even the score with the BBC. Whereas the government was unlikely ever to re-allocate analogue spectrum to provide equal amounts to the BBC and its commercial competitors, in digital spectrum the commercial sector pushed ahead with DAB (before the BBC did) and a successful ‘land grab’ rewarded it with much more DAB spectrum than the BBC. The prognosis was that, in the future, DAB would replace analogue usage, and that the commercial sector’s dominance of digital spectrum would eventually reward it with the dominance over the BBC it craved.

It is difficult to say precisely how much more DAB digital spectrum the commercial radio sector has than the BBC. With DAB, there is a degree of flexibility because you have the choice to either use a section of spectrum for one station (in high audio quality) or for two or three stations (in lower audio quality). Commercial radio and the BBC each have one national DAB multiplex (though their coverage of the UK is not identical). Additionally, commercial radio has 46 operational local and regional multiplexes that cover the most populous parts of the UK. These multiplexes probably more than double commercial radio’s superiority over the BBC in DAB spectrum. But then commercial radio also leases some space on its local multiplexes to the BBC for its local stations. This makes comparisons complicated.

Whatever the detail, it is obvious that commercial radio has control of far more DAB digital spectrum than does the BBC. To compound the situation, commercial radio also has control of far more Freeview digital radio spectrum than does the BBC. So, as had been hotly anticipated a decade ago, surely by now commercial radio must have the upper hand over the BBC in digital radio listening. The answer is ‘yes’ – commercial radio had almost been winning the digital race – and ‘no’ – it is no longer. In fact, the latest RAJAR data show that commercial radio’s share of digital listening (40.5% in Q1 2009) has fallen below its share of analogue listening (41.6% in Q1 2009) for the first time.

These data cover all digital listening to all stations available on digital platforms (including simulcasts of analogue stations). However, because of the RAJAR methodology, the data do not include time-shifted listening to ‘listen again’ and ‘podcast’ radio content. These are both areas in which the BBC offers far more content (and markets it much more heavily) than does commercial radio. If it were possible to incorporate this time-shifted listening into the above data (which it is not), it is likely that commercial radio’s share of listening would be much lower than its present 40.5% via digital platforms.

The long-held belief that commercial radio would somehow automatically win the war with the BBC on digital spectrum purely because it controlled more spectrum had always been mistaken. This belief assumes, somewhat bizarrely, that each consumer randomly spins their radio dial and then leaves it on whatever frequency the radio has landed on. Only by utilising such a random system of selection would usage ever be proportionate to the amount of spectrum. Unfortunately for the commercial radio sector, consumers are not mindless idiots. Anyone endowed with an Economics GCSE can easily see the gaping holes in this notion. Apparently few in the commercial radio industry could.

Consumers make choices and the radio station they decide to listen to is the one from which they expect to derive the most ‘utility’. This is why ‘content is king’. This is why BBC Radio Two and Three both use equal amounts of spectrum, but the former has a 16% share, and the latter 1%. And this is why one fantastic radio station will always attract more listening than any number of mediocre ones (viz Atlantic 252, Laser 558, Luxembourg 208). It is not about how much spectrum you occupy, but about what you do with it. Consumers are motivated to listen by your content, not by your spectrum.

For commercial radio, after a decade of trying to convince itself and others that its abundance of digital spectrum would somehow entitle it to automatically trash the BBC, the dream (and it was a dream) is now over. Belatedly, it is back to the drawing board. As the BBC, PrimeTime, Bauer and Planet Rock have demonstrated, if you put some content on digital radio that consumers want to listen to, then they will listen (if they are made aware it exists through a marketing campaign). Digital radio would have a lot more listeners today if that simple truism had been understood by more players in the commercial radio sector a decade ago.