Why DAB Stations Closing Down is Good News

It’s been an odd few months in digital radio land as a number of stations have (or are about to) disappear off the infinite dial.

Traditionally in the UK there has been very little change in the radio market. Why? Well, analogue spectrum is constrained and there’s always been a greater demand than supply can meet and at the same time format commitments have meant that stations aren’t really allowed to change their format. This constrained supply has also meant that licences have a value that’s historically been relatively buoyant. Combining this with the format restrains means that even with station sales there isn’t much change.

In a market like the US it’s very different and with cities more spread out there’s more spectrum available for more radio stations to broadcast. Additionally the format of any licensed station can be changed to another at a drop of a hat. The result? An ever changing market driven by competitive formats.

So, back in the UK, we’re not very used to radio change, so when it happens in digital radio it’s all a bit of a shock.

UK Digital Radio stations are more like the US analogue model being very market driven. For a start there’s more supply – it’s easier to get on-air. However, there’s also more competition, for both listeners and advertisers and you’re joining a platform that’s not mature yet – ie, there’s a limited number of listeners.

So, what costs are you looking at to broadcast on DAB Digital Radio? Well, first of all you need some capacity – a bit of spectrum to broadcast on. Across the UK there are local, regional and national multiplexes each operated by a variety of different operators. They usually charge an annual carriage fee, which will result in your studio being hooked up to the multiplex. For a stereo service on a local multiplex you’re looking at between £60,000 to £90,000, a regional about £80,00 to £100,000 and around a cool £1m for some prime national real estate. Some multiplexes also charge a % of your total revenue, but this is fairly rare.

This is a significant amount of money, but for a larger sized local FM radio station your analogue transmission bill wouldn’t be massively different from the cost of broadcasting on a local multiplex. The difference of course is that, depending on your area, DAB penetration is between 15% and 30%. However, those that have digital radio are listening longer and they’re starting to abandon their analogue radios. So, as penetration increases, which it is, it’s going to have a disproportionate effect on stations stranded on analogue radio.

Anyway, I digress.

So, why is it good that DAB stations are closing down? Well, first of all, it’s not very good if you like the station that’s closing down. However, what I’m trying to argue is that overall the shake-up that we’re going through is a good one. Why? Because…

1. Competition is good.
2. Concentration is good.
3. New entrants are good.

1. Competition is good

Competition makes radio stations better. Stations that are number two, are obsessed with the stations that are number one. You only have to look at the competition in London, where three commercial stations – Heart, Capital and Magic fight hard to regain the top spot. However, this kind of fierce competition only genuinely happens when the areas they broadcast to are comparable. DAB actually harmonises markets and brings stations up to a more level playing field. However, the key thing about competition is that you have to pick the right market.

Back in the late 90s both Capital and GWR had the opportunity to put stations onto the new national multiplex – Digital One, and, for the first time, compete head on with the BBC. Separately, they decided to launch Core (GWR’s teen pop station) and Life (an adult contemporary station). They would both take on the BBC’s Radio 1 and the bottom end of Radio 2, with a format that’s consumed by a large number of people in the UK and has a strong demand from advertisers. So, why now are they about to be axed?

Well, in the plans, i’m sure they assumed that take-up would be faster – but then with technology we often suffer from MacroMyopia (overestimating the short term and underestimating the long term). However what they did underestimate was how fixed people are in their listening and what you would have to do to unseat them from their favourite stations. In my view the investment needed in content and marketing to make people consider switching from Real/Century/Heart to Life is huge. And it’s not just hiring great presenters, making the music perfect and creatively marketing a vision, but it’s also trying to find ways to compensate for what the listener will lose by changing – the local news and info, presenters they trust etc. And that’s just the local radio, lets not even get on to competing with Radio 2, who happily spend more £30m on programming alone and can bung an ad on after Eastenders.

I’m partly of the view that ‘mainstream’ is so well catered for by primarily Radio 1 and Radio 2 and secondarily the local commercial stations that unless you can duplicate coverage, content and marketing it is near on impossible to win a mainstream audience for your own new channel.

However, for GWR at least, whilst they launched Core they also launched classic rock station Planet Rock. Initially dreamt up in a pub by Ralph and Steve, well sort of, the station seems to have found itself an audience. Why? Well, it’s targeted and has doesn’t really have any head-on competition. This means that people who like classic rock have to come away from one of many different radio stations, or even better, come to radio away from another medium. This top-slicing is unfortunately the only place that new commercial radio will be able to find an audience.

2. Concentration is good

In the early days of digital radio (er, that’ll be the first seven years) it wasn’t given that much attention by the higher ups, because in the grand scheme of things it didn’t really matter. It was far more important to concentrate on the other things, those FM stations that make all the money. Except of course they don’t seem to be doing as well as they used to, do they? Across the broad traditional radio is getting smaller audiences, this is because of more new radio competition from the digital platforms as well as challenges from other new media. Though, if you look at media that’s been replaced by the internet, it’s pretty much all telly with very little effect on radio.

Radio groups therefore need to ensure they have a variety of radio products (and multi-platform extensions) so they can continue to drive their growth. This means that they have to look again at their digital output and concentrate the resources to give these a better chance at succeeding. It also means that rolling out an XFM (as an established brand) or even a theJazz (as part of the Classic FM team) is a bit easier than making a Fun Radio work. Now, something like Fun’s got a decent audience, is in a high spending market and has little competition, but and it’s a big but, it’s just hard for a radio group to tackle because it’s a very different proposition to how they currently sell.

The concentration on fewer stations will make these stations better, more competitive, with more money to spend on programming and marketing. It will also mean that they’ll be supported by decent online and mobile applications – something that’s going to be more and more important.

There is also a decent new competitor coming around the corner in the form of the stations on 4digital, and especially the apparently well-funded Channel 4 radio stations. Getting your house in order in these instances would seem sensible. Which brings me on to…

3. New entrants are good

Services coming off multiplexes are also good for radio as it means there’s an opportunity for newer entrants to come on board. Whilst it’s unfortunate that someone’s thrown away a load of money for six or more years, that’s the first mover gamble. There’s now much less risk for newer entrants to start broadcasting. New entrants also have different motivations to existing operators so that there’s some genuinely different services – like Traffic Radio, UCB and the ethnic stations. They’re also the kind of new services that will encourage different groups to buy digital radios.

Some people use stations coming off air as a way to say that DAB is failing and should be axed straight away. Somewhat ignoring the fact that millions of the devices are sold every year (collectively more than the iPod) and that listener appreciation scores are in the high 90s in percentage terms.

If it was turned off it also raises the question of what exactly the radio industry would do to grow?

At the moment people can listen to radio-like services on analogue, DAB, DTV and online. At the moment the only one of those sectors that is generating anywhere near the hours that will generate the money required to operate – DAB.

I’ve always been surprised how poorly online radio’s performed, especially as two thirds of radio is consumed in fixed environments (so could be more easily replace by the internet and networked devices). Broadband penetration is much higher than that of DAB and services have been around much longer and for some reason it’s never generate the hours that broadcasters need to make any money. Now I’m not saying that online isn’t a massive threat – just that DAB has, so far, done a pretty good job at generating audience hours.

If UK radio lost its own platform, the competitive pressures it would face on other platforms would significantly speed up the decline in revenue and audience, which would, of course have quite a drastic effect on the quality of content produced.

Are you still reading? Well done, I know it’s been a bit of a slog.

DAB seems to goes through phases where there is a bit of crisis of confidence and we’re probably in the worst one of those for quite sometime. It’s also mainly due to two big beasts who’ve had a bit of a hard time (and not because of their digital investments) – GCap and Global. It’s important to recognise that though important, they are not the be all and end all of digital radio. Even if they turned off all their stations (both simulcast and new) on digital tomorrow there are still more than enough stations to satisfy the needs of listeners. Indeed, listeners would continue to buy digital radios (partly because it’s harder to buy analogue radios) and these two big beasts would merely get smaller every day in their analogue silos.

For the rest of the industry, well, at the top end we have a strong, high quality BBC and we’re about to get some interesting new digital radio stations on the 4digital multiplex, though disappointingly it’s probably going to be the end of the year before we see them. At the smaller end of the industry we’re also starting to see a big change for smaller groups. On the recently awarded multiplexes we’ve got lots of smaller stations who’ll be coming to DAB for the first time. Newer funding model means it’s relatively cheap for them to come on, but it also means they’ll be able to compete with the heritage stations (across larger areas), often for the first time, putting them in a much more competitive position. Indeed I think 2009 will be the resurgent year for the smaller stations as they’ll get an instant benefit from being involved in DAB.

So all in all, change is good. And you better get used to pressing Autotune a bit more often.

13 thoughts on “Why DAB Stations Closing Down is Good News”

  1. “better get used to pressing Autotune”

    If only the DAB radio firmware writers made it easy!

    I almost had to get the manual out for my GCap provided Roberts radio. There’s no menu option for Autotune, scan, update … of course once you know it’s obvious, you have to be on the list of stations and then hold in the tuning dial for a few seconds. Unfortunately I suspect the average user will end up with fewer and fewer stations available as multiplexes get reconfigured.

    Luckily our cheap Bush CD/Cassette/Radio room has a dedicated Autotune button.

  2. I’d suggest the reason internet radio performs relatively poorly is because the choice is so wide. With DAB, the radio set does all the hard work for the listener: it presents a manageable choice of stations and makes it supremely easy to tune in.

    With internet radio, there’s no definitive list of stations. The choice is not only wide but finding stations is harder than with DAB.

  3. I have just read the article by John Plunkett in the Guardian (30/01/08) on DAB radio and I am astonished that he, or those he is quoting, are writing off DAB as a form of radio broadcasting.

    Until DAB came along we didn’t have in this country the choice of radio stations that I have listened to when visiting Oregon or Tennessee. Now I can listen to a jazz music 24/7 on theJazz or old BBC comedy on BBC 7 or contemporary Christian music on UCB UK.

    In the article there is talk of “the three of the largest radio groups having reduced their commitment to the DAB platform in recent months, their stations having been replaced by a mix of ethnic, religious and non-commercial broadcasters, [so] the future health of the DAB platform must be under question.”

    All I would say is that perhaps the sound of those non-stop music and book reading stations did not appeal to audiences and maybe these new ethnic, religious and non-commercial stations are what is needed to enhance the range of broadcasting in the UK and help secure the health of DAB into the future.

    If these new stations can find an audience, and cover their costs, what does it matter that they may not appeal to the chattering classes?

    Radio needs to provide a wide range of services and DAB is helping many people find stations that are fulfilling their listening needs.

    In our family we have more than one DAB radio so that we can listen to these new DAB-only stations at home and in the car.

  4. DAB radio = sibilance, sibilance, sibilance.
    Very poor compressed sound and only useful for the over forties as they lose their ability to hear high frequencies.
    DAB+ will make most current models on the market doorstops.

  5. I would not want to disagree with your ears. However, Ofcom (through ICM) interviewed DAB owners and asked the questions “How would you rate the sound quality on your DAB radios” and “How would you describe the sound quality on DAB compared to FM”. For the first question 83% said excellent or good and for the second 93% said much better, better or the same. More on this here: http://snipurl.com/dabsoundquality

  6. Well that just shows us the power of suggestion. If you bombard enough people enough times with enough propaganda they will end up believing anything (check out peoples views on man-made global warming) but that’s another story.
    Even a bog standard mp3 player outperforms DAB in terms of sound quality but most people have never really compared the difference. Why would they? life’s too short.

  7. “Compeition is good”: That is what the Major government said when they privatised British Rail: well 13 years on we see fares going up to pay not only to throw huge subsidies at the private train operating companies, but for the upgrades which the TOCs should be supplying out of their enormous profits (i.e. subsidies).

    So with radio: Competition would be good if it were based on talent and innovation: in reality it is the same few big names in the industry throwing up music stations which have very little individuality. OneWord has to go, but PopcrapFM sprouts up like weeds all around the spectrum.

  8. Dab seems to be very erratic in terms of its signal strength, and being a builder I have the radio on daily.
    Many a time have I had to revert back to FM just to hear the same station but without the silences caused by weak signals.
    No wonder DAB is slow to take off.
    Its typical britishness,only a half done half thought out job.!!!
    I gather the states uses a wider signal band( I,m no expert!!) thus giving them better reception.
    Until that improves here then DAB will never catch on!!!

  9. the introduction of dab i must say has been a welcomed one for me however i feel that each region has too many rock/dance/pop stations and not more of different types,ie-24hr news,country,reggae etc. i also feel the uk should change to dab+ like other countries.– smile and be happy and fool the world —

  10. yes dab has its detractors – mainly hi fi buffs with £000’s worth of top end kit who will always tell you that listening to a BBC Radio 3 live concert on FM wipes the floor with DAB. What if your preference is for Virgin Talk Sport and Five Live? ever tried listening to them on AM after dark in the wilds of Fenland? It’s like listening to a dog vomiting. DAB has been a revelation for us listeners used to grubby old medium wave. Roll on the second dab multiplex and roll on dab plus . Here in Oxford I have the choice of over 60 stations with the convenience and ease of use of DAB. Doesn’t every Dab radio retune automatically every time you switch on? My Pure Evoke 2 has always found the new stations quite happily without me having to do a thing!

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