Radio’s New Localness Rules

Ofcom’s announcement of their new localness guidelines is the staging post for the eventual removal of the majority of local programming rules for FM radio stations. It’s a tough subject to talk about as the implications for the jobs of people working in commercial radio are potentially pretty significant.

Of course all industries are affected by market forces and the changing natures of society, just ask the 4,000 people likely to lose their jobs from Debenhams. Mostly though, changes are subtle as companies evolve and change. Local radio, though, has always had government regulation, so any changes see a rush for radio groups to align with how they want to run their businesses.

But why is radio such a regulated business? Mostly history. The first commercial licences were awarded in the early 70s based on a beauty parade rather than a cash bid (something that has continued until today). The thinking was that spectrum was a public good and limited. You would be one of few people able to broadcast to an area, but in exchange you had to promise some public good – news, current affairs, specialist music etc – alongside the bits of programming where it was easier to make money. As an applicant you were happy to do that deal because what you were getting back was a scarce resource and massive barriers to any competition as there were few licences.

Over the years the scarcity of that public spectrum has reduced. There are three reasons for this. Firstly, the regulator advertised more and more licences. Secondly, radio consumption became multi-platform – with people listening on non/less regulated platforms like DAB/DTV and online. Thirdly, the rise of technology and the internet meant that becoming a new entrant into music, audio and any form of entertainment happened without any barriers to entry. The value of this scarce FM spectrum has been dropping and dropping, so the government has taken the view that the operators of this FM spectrum can reduce their local committments.

Indeed, the government has recently gone much further than what Ofcom have just announced. In their response to a radio consultation they stated that pretty much all localness requirements and music format rules would go. But to have that happen will need an Act of Parliament and Brexit has somewhat filled up available parliamentary time. They did say though:

In the meantime, the Government is open to and would support any moves by Ofcom to consider, in the light of the consultation responses received, whether there is scope for changes to its rules and guidance in lieu of longer-term reform.

In other words, the changes announced by Ofcom are them trying to achieve Government policy whilst legally fitting in with the current laws.

So, what have they come up with?

At the moment if you own any radio licences within any of the regions here then you’re allowed to treat them as a single radio station – that is, generally, you have to produce seven hours of local programming (between 6am and 7pm) and that must include the breakfast period. For example what used to be individual radio stations in Cornwall, Plymouth and Exeter could now be ‘Heart’ and share a single breakfast show, providing they provided local news reflecting each of the licences each hour in daytime.

The new rules see two changes. Firstly the regions get bigger, and now stations only have to broadcast three hours of local programming within that region. That local three hours can be at any time between 6am and 7pm, and doesn’t have to include Breakfast. So with our Heart example what was Cornwall, Plymouth and Exeter as well as Bristol, Gloucester, Bournemouth and Southampton could now share a single regional mid-morning show with the rest of the programming come from outside the region – say from Leicester Square, providing they provided local news reflecting each of the licences each hour in daytime.

The most common question I’ve been asked about this is “what do you think the big groups will do?”. I’m afraid I don’t know. These are big changes and it opens up lots of different scenarios. Firstly though it’s important to think about what prompts a change – and that’s generally money – this is commercial radio after all.

From a business perspective, the value of the local shows are that they can drive local audiences, that the teams can deliver local sponsorship and promotions as well as being a local face for the radio station. Now there’s some costs for delivering that – the local staff – but there’s the revenue you generate from it through things like local S&P and events. If the local revenue outweighs the costs then it makes sense to continue with local shows.

The other assumption is that the group’s always deliver the regulatory minimum – and that’s not always the case either. At the moment if you’re a regional radio station that also broadcasts the brand nationally on Digital One, then you can stop doing any local content on FM. Kiss has taken advantage of this, broadcasting their London programming on London FM as well as their regional FM licences in the East and West of England. Capital on the other hand, which has regional FM licences in the North East and Yorkshire, chooses to keep regional programming on those stations when broadcasting on Digital One means that they don’t need to.

When I look at the new regions, which are huge, I wouldn’t be surprised to see groups create their own combination of stations within the areas that better suit their businesses – I don’t think they’ll instantly create super regions with one daily show.

If they do decide that the local sponsorship and promotions money is not a fair exchange of the costs of delivering local programmes, then the other option is, of course, delivering up to eight local mid-morning programmes and the rest of the programmes coming from London, or the network centre.

These changes are also likely to have an affect on the attractiveness of independent groups and stations for acquisition by the bigger boys. We’ve seen some of it already with Bay and Juice Brighton being bought by Global and added to the Heart and Capital networks. They followed this up with 2BR, which is likely to become a Capital. The rule changes make it easier for them to deploy their brands onto more FM licences with minimal local commitments.

So is this the end of local radio and local breakfast shows? I thought I’d have a look at what the UK listens to at the moment and what is potentially under threat with these changes.

Within my RAJAR tool I’ve created some new combinations of stations – Nationals (Radio 1, Classic, Planet Rock etc), Networks (commercial brands like the Capitals, Hits Radio network etc that are likely to embrace the new opportunities), BBC Local Radio and Locals (stand alone commercial stations plus groups like Nation, UKRD and Lincs who are less likely than others to make significant changes). As people can of course listen to multiple types of stations in a week, I’m using the share of listening that these combinations have.

The thing that surprised me is how dominant national radio is at breakfast time. 68.3% of all breakfast listening is to the national stations. BBC Locals, something that isn’t affected by the changes, delivers an 8.4% share. The Networks account for 17.3% and the Locals accounts for 4.4%. So, collectively the local breakfast shows potentially under threat are consumed by just a fifth of available listeners.

Personally I’m a little torn by the changes. Fundamentally I’m a radio fan and I like that there’s a variety of presenters up and down the country delivering local and branded radio. I also lean to being a free-marketeer. It does seem crazy that in today’s world that when faced with unregulated competition from Facebook, digital television and digital radio, that local FM licences are forced to deliver specific output.

I think localness is an excellent way to win in a market. It’s a great difference that can serve audiences and the bottom line. There’s also a growing number of digital-only radio stations that have chosen to be local stations (without any regulatory encouragement) as they think that’s the way to build a business. But, of course, it’s not the only way to do it (as the success of national radio with listeners shows).

Like all great mediums, one size does not fit all and radio is no different. These new rules, taken on their own, are a big change for many. However, outside of FM, there have never been as many audio opportunities. I imagine there are more radio jobs now than there were in the peak of the local radio in the 90s. From the growth of new national digital radio stations to developments in podcasting, radio production skills have never been in demand by so many people (and listeners).

 

RAJAR Q3/2018

This is the Summer quarter – July, August, September – which tends to give bumpier results than usual, as listeners disrupt their regular patterns and behaviour. Whilst this can generate hiccups that get corrected later on, it can also be a quarter that accelerates change as the alterations in listeners’ lives (and their favourite presenters going on holls) mean they can tune around and sample new stations.

All of this crashes into the big structural shift in UK radio listening – the increasing number of stations people are listening to, driven by a larger and larger percentage of the population becoming multi-platform radio consumers. 65% of listeners have DAB Radios, the arrival of a new class of radios – the smart speaker – as well as the phone (powered by WiFi and 4G) teaching users through streaming services and podcast apps, that their device makes a pretty good radio too.

In reach terms, 71% of the UK population now listen to some form of digital radio (DAB, DTV and the Internet) each week, analogue isn’t that much higher at 76%. But when you look at the share of listening, digital has seen a bump to 52%.

This shift is starting to have a greater effect on what we think of as the traditional radio battles in different parts of the UK.

The chart below shows the reach of all the stations in London. Stations in blue are the digital stations, the black the analogue originals. The top part of the chart is as you would expect, Radio 4 and 2 sticking it out in front, Capital, Kiss and Radio 1 battling, Magic and Heart and so on. But the digital stations are starting to have more of an affect. Kisstory is bigger than stations with FM licences Absolute Radio and Capital Xtra.  Indeed for Capital Xtra who have always been hobbled by a poor FM signal, are starting to reap the benefits of their digital distribution. In London they’re in a better place than 1Xtra with nearly three times the reach and leaving Global stablemate Radio X in its wake. Nationally, the service is up to 1.8m (800k ahead of 1Xtra).

Also, on the right hand side of the chart we’re seeing that the AM coverage of specialist stations is now providing no real benefit now when compared to the digital onlys.

Also if BBC Radio London is trailing Radio 3, 4 Extra and is neck and neck with the World Service isn’t it time for some drastic changes? A station on all the platforms with significant BBC resources should be doing better than 20th.

Looking at commercial market share and the battle for number one in the capital – LBC rides high with 6.6%, Magic then at 4.4%, Kiss at 4.2%, Capital at 3.8% and Heart at 3.7%. So once again Capital can say it’s the number 1 hit music station based on reach and Kiss can say it’s bigger than Capital on market share.

In Manchester the changes aren’t as marked, but they’re coming…

Kiss as a strong digital brand is beating a local FM station XS Manchester with Kisstory, Absolute 80s and 6Music not far behind.

Manchester is an interesting market as a heritage leader in Key 103 has had its first full book as Hits Radio Manchester. This has seen its reach drop from 374k to 325k, its hours have fared worse dropping from 2.2m to 1.6m – its lowest RAJAR figures ever.

I’m not entirely surprised, RAJAR is a recall methodology, so there’s always been a certain bias to memorable stations, to heritage. You’re recalling what you’ve listened to when you fill in that diary on paper, computer or your phone, so old stations are going to be more front of mind. They’re now the challenger brand in the market with Capital and Smooth being the heritage stations. It doesn’t help that these brands are backed by strong marketing and well-programmed output. Finding a niche for Hits Radio will require more marketing and much noisier programming. I’m afraid though it’s only likely to get worse before it gets better, I don’t think we’ve seen the bottom yet.

What is interesting though is that the new format – music, networked shows and production – has been rolled out on many of the BCN/Hits Radio network FM stations. Success has been mixed. Some increases for TFM, Hallam and Radio Aire, Free Coventry, but others have seen strong declines – Viking FM dropping to 129k reach from 169k q on q and from 217 year on year, it’s also about halved its hours. Free Radio in Birmingham’s running at its lowest ever audience 254k (down from 308k q on q, 262 y on y) and losing about a quarter of its hours.

Radio City saw its audience fall back a little to 344k reach/1.9m hours, but what has been growing is its relatively new FM sister – the AC Radio City 2. It’s seen gradual growth over the past year, now with a reach of 218k and hours of 2.1m, which means Radio City 2 has a greater market share than Radio City. This strong duopoly is about to be replicated in the West Midlands as Bauer flip Absolute Radio on FM into a similarly formatted AM station.

Over at the BBC, Radio 1 has pulled back a little q on q, back up to 9.6m leaving it relatively flat year on year (9.7m). This book shows a little positive news for R1 Breakfast, which is a majority Grimmy quarter, with a few weeks of Greg – it’s now at 5.44m (up from 5.37 q on q and 5.02 y on y). The next book will see how Greg fares.

Over at Radio 2, this will be Chris Evans’ penultimate book before he moves to Virgin Radio.  He’s seen a marginal drop – 8.8m reach from 9.0m q on q (and 9.3, y on y) this change is reflected in Radio 2’s top line figure – 14.6m (down from 14.9 q on q and 15.3 y on y).

A lot’s been written about Jo and Simon on Radio 2 Drivetime, you’d assume it was bickering and tone based on the commentary. The numbers however shown some small changes. The times are slightly different for the new show (5pm to 8pm rather than 5pm to 7pm) so it’s not directly comparable. But if you compare this timeslot the current reach is 5.5m – down from 5.9m q on q and 5.8m y on y, but not something mortifying.

More to read:
Adam Bowie, Paul Easton and John Rosborough

The Audio Content Fund

I’m overjoyed that DCMS today announced the arrival of the Audio Content Fund. It’s £1m a year, from the Government, for radio stations of scale to broadcast great public service programmes from a variety of production companies.

It all came about when the Government announced they were working on a content fund for television perhaps concentrating on genres that were hard to fund in today’s society – particularly children’s programmes. As the discussions for that were happening I started talking to people about how it shouldn’t be a TV fund but a cross-media one. I felt that if you’re creating public service media for children, that just keeping it on broadcast television – especially today – seemed a little anachronistic, and that it should be open for radio and new media too. I also run a children’s radio station, so you can understand why I was quite keen that the scheme be expanded!

RIG (now AudioUK) were very supportive of this, so we worked together to start talking to more people about it. I even wrote this piece for Broadcast magazine.

As part of those discussions we started a conversation with the DCMS, who were positive, but felt that the TV fund wasn’t the vehicle to do it. So instead we started having some exploratory meetings about what an audio fund could look like. First of all I started to ask some big commercial broadcasters about whether they would be happy to run public service material funded this way on their networks – things they would like to do, but couldn’t commercial justify. They were all positive.

Me, Will Jackson from AudioUK, Phil Critchlow, Audio UK’s chair and their policy expert Tim Wilson then had an interesting meeting with some of the policy team at DCMS where we explained how radio was made (commercially and at the BBC) as well as how the commercial radio business model worked. It was definitely a light bulb meeting for them, as they realised the cost-effectiveness of making public service programmes and broadcasting them on radio stations of scale, like commercial radio, would be.

AudioUK then started working with RadioCentre and doing the hard work with the Government which has resulted in what’s been announced today. The short version – £1m per year for radio stations of scale – to commission and broadcast public service programmes. It’s the cousin project to the £20m a year TV fund for children’s content administered by the BFI. The Audio Content Fund will be managed by a new company operated by RadioCentre and AudioUK – they’ll award the money to programme makers under the guidelines set by DCMS.

I think this really is a win-win for everybody. Commercial radio gets to commission quality programmes that they want to have on their networks, but can’t afford to do day-to-day. Production companies get an outlet for public service ideas that isn’t the BBC. This means more commissions for them (and new income), but it also means some competition for the BBC for these ideas.

At the moment many of the inefficiencies in the BBC’s radio commissioning structure stem from the fact that there’s no competition for great radio ideas. In television, the commissioning process has changed for the better because the influx of competition from Netflix and Amazon has meant the BBC now needs to be faster and more flexible. From discussions with BBC colleagues, the podcast commissioning rounds have also generated very different responses than radio, because there are a far broader range of outlets and business models for great podcast ideas – the BBC is just one. Again – it’ll change how the BBC works, for the better. Whilst £1m is perhaps only around 5% of what the BBC spend on outside commissions, it’s certainly a good start and will help invigorate radio commissioning.

More good programmes on a variety of commercial radio stations will also be good for ‘radio as a product’. If you consider all of the stations on broadcast radio (BBC and commercial) and our cross-platform delivery of them as a single product that we’re presenting to consumers – something I think is essential for radios continued relevance – then the addition of great shows can only enhance our offer. More great programmes can only ever be a good thing.

I’m excited to see what this new £1m a year delivers for commercial radio and listeners.

More information about the fund: audiocontentfund.org.uk