Phase 2 of Digital Radio in the UK

On Monday, Ed Vaizey, the communications the Minister will take part in the Go Digital event at Broadcasting House in London and make some announcements about digital radio. If the papers are to be believed, he won’t be binding the Government to a switchover from FM to digital – but then he wouldn’t be the first politician to alter their direction of travel with an election coming up.

What he will talk about  is the kick-off of another round of changes that alter the direction of radio. In truth, it will bring together many of radio’s factions and bind them around a plan to suit how listeners have changed how they now listen to radio and consume media.

It will also provide a unique get out clause for some in the industry to take. It will unshackle them from big radio’s ship and let them go their own way.

Phase 1

Digital Radio was born out of frustration and competition. Not by listeners, but by industry. Six competing radio groups of similar sizes wanted to be able to grow and get around the limitations of the regulated world they existed in. The largest, particularly the Capital Radio Group, were quite happy with the status quo – whilst those with something to gain – mainly GWR – was keen to push to a digital world. Like all technology you over-estimate what the short-term will deliver and under-estimate what will happen in the long term.

Digital Radio’s growth was slower than anticipated. But then again, the radio industry had never really launched a new product. Their other attempts at diversifying – restaurants, online music streams, shopping portals, local websites – fared even worse.

The commercial national multiplex and Planet Rock, the local multiplexes and expanding footprints of brands like XFM, pressured the BBC to follow suit. Strategically this digital explosion would affect their stations and the value they delivered listeners. Their answer was Networks X, Y and Z – Radio’s 1xtra, 6Music and BBC7. EMAP, a magazine company with brands and access to spectrum then pressed the button on music radio and TV services delivered on Freeview and local DAB – Kiss, Kerrang, Magic, Mojo, Q and Heat.

The demand for multi-platform expansion conjured up a new national multiplex and a new entrant – Channel 4. C4 realised that it needed to be a multi-media entity and with strong commercial success ‘doing some radio’ didn’t even seem that complicated or expensive. Their fall from grace was driven by two things. First was the economic crash, the second, rarely talked about, was the existing radio industry’s desire not to play ball. A strong new entrant was not something that radio (commercial or BBC) really wanted, and behind closed doors they decided to give the new boy a particularly hard time. This frustration and the economic change, made C4 pull the plug.

This wasn’t the only corporate activity that was changing radio’s direction. Over a few years Tim Schoonmaker’s departure from EMAP, Fru Hazlitt’s desire to ‘save’ GCap, Digital One‘s pricing model, consolidation across the sector and the arrival of Global and Bauer alongside a massive economic collapse certainly re-aligned everyone’s views. Trendy multi-platform was out – sticking to the knitting was in.

However, one thing the industry chose not to pay attention to, was the change in how people were listening to the radio. Slowly but surely consumers have expanded the number of stations and platforms they listen in on. The UK leads the world in digital listening – with half of consumers now listening on a non-analogue device. Each week over 11m people make time for new stations not on the AM or FM dial.

Post-economic slump, the one group that was watching the changing behaviour was Clive Dickens and the team at ARI. Clive left Capital in 2000 and spent much of his time outside of radio and the UK. A combination of external new media consultancy and a few UK radio projects (Juice, FM107.9, Jack) gave him a slightly less-jaded perspective than a lot of radio who had been somewhat stuck fighting it out in the trenches over the previous decade.

With Virgin Radio up for sale, ARI had been working to acquire it. With the financial terms tough to achieve, they ended up fronting the Times of India’s bid for the station. With some money to play with and an asset with audience, Clive and the team worked to deliver their own vision for what they saw of radio’s changing audience.

Absolute did lots of things – but the success of their decades stations – particularly Absolute 80s – is where they had the biggest industry impact.

Up until then, everyone had launched new brands. But with no marketing, they  found it hard to gain traction with listeners and enthusiasm inside their businesses. Robbed of resources or sales focus, many languished.

For Absolute, the decades stations was an attempt to solve a problem – declining hours and revenue – and an expensive main operation. With digital listening growing they thought these services would be a cost-effective way to bolster hours. They were right. They’ve nearly doubled the group’s hours. They also aggressively sold the hours as a network with their main station. The stations continue to generate cash for the business. Without them, the company would have lost more money.

Up until this point the new Global Radio was not enamoured with digital radio. With an eye for a monopoly, the failure of digital radio, would have left them in an even stronger position. But it wasn’t just Absolute’s success that changed their mind.

The BBC was faring somewhat worse. Whilst 1Xtra and BBC7 were doing okay, 6Music’s cost per listener hour was just too expensive to continue. Spending £6m a year on something generating 500k listeners wasn’t good public service business. As we know, its threatened closure gave it radio’s best ever marketing campaign, supercharging its audience on the way to 2m, suddenly meaning its cost per listener hour was good value.

6Music and Absolute 80s successes were being observed elsewhere. With Global having rolled out Heart and Capital across previous local FM licences, they also picked up spare spots on mutliplexes up and down the country. Suddenly these ‘out of area’ and digital hours made up a growing part of their business – from 15% when they acquired GCap to over 30% now. Suddenly it wasn’t a nice to have, it was essential and even opened up a way to consolidate their lead even further.

Global’s rising scale and their announcement last year of a Real and Smooth acquisition suddenly meant Bauer had to do something before they ended up a far away 2nd place in the market.

They needed new hours, fast. So they acquired Planet Rock, Absolute Radio (and all of those spin offs), pushed Kiss national on DAB for the first time and launched their own spin-offs with Kisstory and Kiss Fresh.

All of the commercial groups had realised that digital had meant consumers were broadening their listening. They no longer needed to make them abandon Kiss for Capital or Heart for Magic, as  the playbook for the last two decades had instructed. Instead, if they had the right brands in the right places they could start to grow again by chipping away at competitors’ hours.

Nearly 20 years after Ralph and co. at GWR thought digital spectrum would let them expand, it turned out it was the changing consumer behaviour (driven by platform growth) that would allow commercial radio to expand (and the BBC to provide popular services for licence fee payers).

Monday’s announcements

The change in the big groups’ attitudes has been driven by consumer take up of digital radio – 56.7% of listeners tuning in digitally every week (reach) and give 35.6% of all of their listening (hours) to digital radio.

Whilst digital radio consumption continues to grow, it does so steadily, rather than explosively.

If take-up speeds up, then it means the BBC and Commercial Radio will pay less for transmission but it also means that radio consumption will stay high. Digital listeners listen longer because they have more choice and enjoy radio more. This is good for the industry and good for commercial radio’s business model.

So to accelerate it, there needs to be further carrots. We’ll see these in the form of the Government/BBC/Commercial Radio jointly funding the further roll out of local digital radio transmitters. It also seems that we’ll see the advertisement of a second national multiplex and therefore more national stations. I also imaging we’ll see a renewed focus on marketing, particularly with cars.

FM switchover

What we won’t see, is the ‘stick’ of any firm news about FM switchover.

I think this is a shame. Some further certainty about the end of big stations on FM would have focused the mind of manufacturers, stations and listeners and digital take-up would have accelerated. Just as it did with Digital TV.

It would have forced the industry to sort out a plan for migrating all commercial stations to digital and would have meant a plan for community radio to get hold of some more FM licences.

I’m not really worried about the bigger stations and the BBC. They have seen which way the wind is blowing and have adjusted their sails accordingly.

Who I feel sorry for is the smaller radio stations.

To start with, I’m sure Monday’s announcement will be a huge relief. If your business is really just an FM licence then suddenly it will seem like you’ve got a little more breathing room.

However, what I really think, is that it’s the beginning of the end for you.

However uncomfortable an FM switch-off may have been, at least it would have forced those stations to develop a plan for the future. Now what will happen is mainly nothing.

Already stations like Wessex FM, Wish and The Revolution have faced hours competition from stations on DAB, DTV and Online and struggled with an on-air product optimised for analogue days. These stations now have little radio hours growth opportunities and their lack of investment in a modern website, mobile strategy or any broadening of their businesses will leave them in a precarious position.

But maybe there’s still time for them to change? Perhaps. However based on past experience I’m not so sure.

Groups like UTV and UKRD seem to have parallel strategies in their business.

UTV have an amazing cross-platform brand around sport – talkSPORT, Sport magazine, a huge and mobile-friendly website as well as an exciting international business too. I’m less sure about their ILR division – where is their growth? Simulcasting some of their stations on DAB and online is good – but what else? What about the stations that don’t even have that?

It’s a similar situation for UKRD. I think what they’re doing in Surrey is totally the right thing – a simulcast of their successful Eagle Radio and building on that with a new service – Eagle 3. If they can do locally with audience and revenue what Absolute did nationally – then they’ll enjoy significant success.

But what about the other stations? What happens to those stations marooned on FM with shonky websites and middle of the road formats?

For many of those stations, there isn’t currently a digital broadcast route for them – which is a real shame. Unfortunately by there not being a switchover announcement they’ll likely lose the impetus to fix that.

I also imagine that from an investment perspective, the stations without a digital future are likely to suffer in these group’s investment rounds. Why invest in stations that don’t have a digital future when you can re-enforce the ones that do?

Phase 2

Phase 2 is great news for listeners – it does everything they’ve asked us to do. It re-enforces coverage of local and national DAB and it will give them more stations to listen to.

It’s also great news for the BBC, Global and Bauer – it’s a plan they all agree on that will drive digital hours and give them more opportunities to grow.

For many, Phase 2’s protection of FM will be a ‘good thing’ – both for listeners who find that platform performs better for them and for stations  who have it as their only broadcast platform.

Consumers

Radio is, and always will be, consumer-led. The reason the industry gets so flustered about digital, is that they’re trying to re-calibrate for how consumer behaviour is changing.

Nearly everyone in the industry would love it if listeners just stayed listening to FM. But listeners don’t want just FM. They want more. 6Music in the car, Capital in Liverpool on DAB, to listening to their old favourite from home on their smartphone or just tuning in to their local breakfast show on FM.

If you work for a station that doesn’t really have a decent website, isn’t the market leader in radio and who’s future is seemingly only FM, ask the boss what the plan is for dealing with all this changing consumer behaviour.

Me? I’m excited about changing consumer behaviour. It means we move on, evolve, do something new. It means we can re-think things we’ve always done, it opens up new opportunities, makes us stop and think,  and above all it means what we do stays being fun.

Update: An update from Adam Bowie on today’s announcement.

10 thoughts on “Phase 2 of Digital Radio in the UK”

  1. Monday marks the beginning of the end for DAB,

    The article completely glosses over the fact that ‘digital’ now means much more than this technological anachronism.

    FM stations are actually far better placed to deal with changing consumer behaviour.

  2. Thank you for a well balanced post. As a listener to a number of the radio stations that have found space on DAB I am so glad that this platform has allowed them to broadcast without listeners having to subscribe in order to be able to listen. In an only-analogue world I, and many others, would not have been able to listen to Jazz FM, Planet Rock, Premier Christian Radio or UCB UK.

  3. If it weren’t for DAB i would not be able to listen to UCB UK as I cannot afford Sky’s fees for itself and Freesat From Sky.

  4. “But what about the other stations? What happens to those stations marooned on FM … For many of those stations, there isn’t currently a digital broadcast route for them”

    …by design though, surely? DAB, with its multiplexes (or should we call them fragrant bouquets?) gives power and control to the big boys. It was never designed to empower small/individual stations.

    You didn’t quite start your DAB story at the beginning. In the beginning was BBC R&D, who wanted a way to broadcast the BBC’s national stations without the reception problems of FM. They found a way to do this which required all the stations together on one frequency. This was great for national stations, but hopelessly inefficient for local stations, so they assumed local stations would stay on FM. Some folks at BBC R&D later thought local stations would use a digital single-station FM replacement technology called DRM+, but found certain vested interests stopped them, saying that DAB was the answer to everything… and here we are.

    One ray of sunshine for those small FM stations: if BBC Radios 1-4 are removed from FM too early, there will be a lot of analogue-only radios around, and people will be looking for something to listen to. Depending on the timing, this may be a short-term or non-existent blessing, before it becomes a permanent curse.

  5. Well, my multiplexes I co-own with the ‘little guys’ – Lincs, Sunshine, Town and Country, UKRD etc….

    Technologists may have one thought about technology, but consumers often take it a different way. They wanted existing stations – local and national – and new ones – that’s what made them buy a DAB radio.

    The only thing that’s stopping DRM is a lack of sets. If UK operators thought there was an opportunity with it they’d have taken part.

    However, one of the things that’s driven digital is new stations and those are often from new operators to markets. In America where HD Radio (like DRM) is linked to analogue frequencies, it hasn’t encourage any innovation or change to the status quo, so it sadly stumbles and dies.

    One of the thoughts if there was an FM switchover was to release all the frequencies to community radio (and legitimise the pirates). I think that would have been great. But with no FM switchover plans that’ll all go quiet.

  6. I think the government’s announcement was a sensible one, as many posters have noted, DAB is not ideally suited to local broadcasters, and unless lower cost digital alternatives are found, these will remain analogue. The other issue is the alleged extra choice that DAB gives you. In reality, while you do have a number of stations not available on analogue FM, so many are simply simulcasts of the FM broadcasts. With networked Heart’s and Capital’s everywhere. There is a future including digital, but it will be a mixture of DAB, DAB+, Internet and analogue radio. All can co-exist. DAB doesn’t give you any advantage over analogue per se, and indeed with many stations resorting to mono streams for economy, we are dumped back into the 60s in terms of quality. This cannot be right. Likewise the cost of DAB is artificially inflated to benefit the ‘big boys’. It’s been proved that it’s possible to run small DAB Muxes based on software and simple exciter/PA systems. This latter option may well accelerate the move to digital. But at the end of the day, as the government have agreed, it needs to be totally based on what the consumer wants. And nationally, at the last RAJAR, only 23% of radio listening was via DAB. Which means that 77% was via other means. Not a convincing figure for cash strapped stations pondering whether now is the time to invest in DAB.

  7. In the late 2000s many of our friends and family went out and bought DAB radios once both Premier Christian Radio and UCB UK had taken up the opportunity to broadcast nationally as by then the Communications Act 2003 had removed the ban on faith-based stations broadcasting on DAB.

    The cost of broadcasting on DAB nationally is high and therefore these stations run telethons in order to raise money from their listeners to stay on the platform.

    In the longer term it is this extra choice of stations available on DAB that will drive further take-up of DAB radio sales outside London & South East where already those listeners have a much wider choice of available listening.

    Let us trust that the second national commercial multiplex will provide this wider choice for those of us living in other parts of the country.

  8. Great post, Matt.

    I think the idea that a migration of large national and regional FM stations onto DAB would enable FM spectrum to be freed up for community radio is a deceptively seductive one.

    Yes – if Radio 1-4 and Classic (for argument’s sake) were shifted off FM and onto DAB, it would free up vast amounts of spectrum, we could have community radio stations in abundance. The current severe issues with frequency availability would be largely solved. But who would then be listening to FM?

    Just like one of the big pluses for the current local TV project is the channels’ positioning high up the Freeview EPG, next to the BBC and ITV channels, one of the attractions of an FM community radio licence is that your service is right there, next to Radio 2, Heart and Kiss, easy to stumble across and tune to.

    Move these large operators off the FM dial, and the listeners will go with them. I don’t switch from DAB/FM to AM to listen to the local Magic, and in a post-switchover world, people won’t switch from DAB to FM to listen to small local stations.

    I’m not arguing against an eventual migration, but I do think the idea of “migration = loads of spectrum for community radio to grow” is overly simplistic, which is why it’s important that we’re looking at small-scale and (importantly!) low-cost digital solutions for small radio operators.

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