Radio Changes and MXR

Radio in the UK has only recently been affected by significant change.

The original regulatory environment  created fixed formats, ownership limits limited expansion as did analogue frequency availability. At the same time the might of the BBC (and their ability to sit on lots of analogue spectrum) gave commercial radio little room for maneuver.

These commercial constraints kick-started DAB. In the 90s and early 00s there were a number of very competitive radio groups – GWR, Capital, Chrysalis, EMAP, Wireless Group – who were keen to expand. They were limited with what they could do on analogue radio as there were limits to how many points you could have. This basically stopped the rise of groups with any real scale. However, in the late 90s most of the groups were listed on the Stock Market and needed growth.

GWR, in particular, saw DAB as a way to leap up the charts and own more ears. When the opportunity to go for the national commercial multiplex came up they jumped at it. Initially due to be a three-way party with Virgin and Talk Radio – the take-overs by Chris Evans and Kelvin Mackenzie however soon put an end to that and GWR got together with NTL (now Arqiva) to put the bid in.

The rest of commercial radio was fairly lukewarm as well. This started to change, particularly as groups realised they may need to defend as well as attack. Local multiplexes in home territories (like Bristol for GWR or Kent for Capital) started to become key things to win. Capital, Chrysalis and GMG were suddenly a bit more concerned about GWR’s ownership of Digital One and wanted to get both platforms won and services launched, so regional multiplexes were suddenly on the agenda.

The regional multiplexes were mainly scooped up by MXR – a combination of Chrysalis (with the Arrow, Heart and Galaxy), GMG (with Real and Smooth), Choice (with Urban Choice) and Capital (with Capital Disney) alongside UBC (data), Jazz, Ford and Psion. A nice balance of bigger and smaller names and something that would be good for competition from GWR and EMAP’s local networks and GWR’s Digital One.

For listeners this was good – lots of services and competition. This plethora of stations and the under £100 Evoke helped give DAB a kick-start. It also raised the beast of the BBC who suddenly decided they really should have some new stations too and Networks X, Y and Z became 6Music, BBC7 and 1Xtra.

Fast forward and at first glance it looks like we’re going backwards. Those five MXR regional multiplexes are closing with some stations moving to local multiplexes and others coming off DAB as they can’t find any room on the local layer at the right price. All bad news for DAB? Well, not really.

The big reason this is happening is consolidation. If we take a look at what was on MXR …

  • Capital (was Galaxy owned by Chrysalis, now Capital owned by Global)
  • Heart (was owned by Chrysalis, now Global)
  • Smooth (was GMG and duplicated on Digital one, now Global)
  • LBC (was owned by Chrysalis, now Global)
  • Choice (was owned by Soul Media, then Capital, now Global)
  • Real Radio (was GMG, now Global)
  • Real Radio XS (was GMG, now Global)

…and then bits of XFM (now Global), Gold (now Global) UCB, Panjab and a couple of other stations.

MXR worked well when there were competing operators at the height of their financial success trying to build their businesses. Now, the world has changed significantly with just Global and Bauer as the big boys – they’ve got lots of brands but they focus on fewer. Suddenly some brands have graduated to Digital One and there’s room on the local multiplexes for the other key ones. This means the big boys save money and focus their efforts where the audience is.

In an ideal world new entrants would have popped up on these regional multiplexes and usually when a gap has appeared that’s what’s happened. Unfortunately so much capacity being available at one time would make it difficult to find enough solvent operators to pay for the transmission bills.

I think it’s a shame that the opportunity that the regional multiplexes provided has disappeared. However, I’m also happy about what their demise means.

Firstly their frequencies are being used for a re-plan of local coverage – this means that reception of existing local multiplexes will be stronger and some get to grow into areas there wasn’t already coverage.

Secondly – more service providers on the locals means they’re better businesses and can afford to roll-out further coverage

Thirdly – this sets us all up for another go at a second commercial national multiplex.

Really that’s the big change UK radio has seen. The rise of the national brands and their strong RAJAR performance. The ability to broadcast nationwide (just like those BBC stations) often with well-regarded brands has grown listening and listener-choice. It’s also simpler for listeners and much more cost-effective for large radio groups with well-funded national sales houses to be truly national rather than sitting on a patchwork of local coverage. At the same time, the stations that feel there’s a great opportunity to generate revenue locally have local multiplexes to often expand from their smaller radio roots to inhabit.

Digital One is now fit to burst. When I speak to people at Bauer or Absolute about their services they would all like a little more room for their stations.

So, with (in the main) local stations and regional networks getting improved coverage on the local multiplexes and a full national multiplex, it’s clearly the right time to release national spectrum for more new national stations.

Back to MXR – their West Midlands multiplex has just come to and end, so I wanted to look at what that means in the market. Is the new status quo going to disenfranchise people? So I’ve made a little chart.

West Mids

I’ve tried to look at the regional RAJAR (when they’re on it) for local/regional stations and the new national DAB stations and compare their DAB audiences.

What’s striking is that it’s the stations on the Nationals and Locals that do well. Listeners are comfortable with their local stations that have been around for years and they clearly like the new national choice.  I think what is interesting is that the MXR stations that do well have found a new home and it has tended to be the poorer performing stations that have left DAB. Choice and LBC’s disappearance will be mourned by very few. It will be interesting to see whether Radio XL stays off local DAB – I would imagine they’ll find a home. Real XS is clearly in an odd place at the moment and was not even RAJAR’d in the West Mids. It’s disappointing for UCB’s two spin-offs (though they do have national capacity for their main UCB UK).

I think it’s a shame that anyone loses their favourite stations, however, the benefits of the disappearance of this and the other MXRs do probably outweigh the losses.

Media works best when it’s flexible. The regionals were the product of a different time, It’s right that we evolve and change for today’s listeners and providers.

Arguing with Phil Riley

I’ve just been having a Twitter argument with Phil Riley – as you do – about digital radio stuff. Don’t worry, it was a pleasant one.

One of the things we were talking about was FM reach – he thought it was an important number as regards to switchover. Me, not so much. The problem is that you only have to listen to FM for five minutes in one week and it’ll appear on the FM reach tally. I think even post the switchover, with the majority of radio stations off the platform, that FM Reach will probably still be significant – though it won’t be generating many hours (ie the volume of listening).

And that’s the thing – you have to look at hours to see how much listening is on the various platforms. A big issue with ‘digital’ is that people are gradually replacing their listening locations with digital listening devices (DAB, DTV and the internet) – you don’t change everything straight away. This is quite different to digital TV – where you have a primary set where you consume most of your television. The number of radio sets that people listen on means  digital reach is around 50% and digital hours are around 30%.

I thought it might be interesting to look at digital listeners specifically and see how much of their listening is to analogue and how much is to digital.

Looking across the UK at people who listen to ‘digital radio’ at some point during a week – 53% of their hours are given to digital radio.

In London it’s 57% of their hours given to digital radio.

Therefore if you’re an analogue-only radio station, it’s not good news. The availability of people to listen you is dropping.

If you’re a station that simulcasts, your at least in both places, but in the digital world you’re facing more competition for hours – ie you need to work harder to remain in the same place.

If you’re a station that simulcasts, but to a bigger area – then you get the best of both worlds. You remain a player in you market and you’re taking the fight to others to grow your hours.

And if you’re simulcasting and have an extra product (see Absolute/BBC or even Global/Bauer) – then again, you’re in a position to grow your hours and build your business.

Update: Phil’s responded on his (new!) blog.

Notes from a digital island

Half of the UK’s radio listeners consume radio digitally at some point every week.

I’m just going to say that again. Because it’s important.

Half of the UK’s radio listeners consume radio digitally at some point every week.

Plus 29.1% of all listening in the UK is through digital radio.

The digital listening (hours) breaks down like this:

In attractive chart form:

Digital Reach:

Digital Hours:

In reach terms, the internet and digital television do a good job in expanding the universe of digital consumers. However in hours terms, it shows how much online/digital television is a minority sport. Internet is more the poorer as pretty much every UK station is on it and broadband penetration at home and work is huge. Digital TV suffers from (outside the big brands) a lack of radio content. DAB has the same issue – there’s still a fair few big local stations not on it yet, but its consumption is strong and growing faster than DTV/internet.

The internet often gets heralded as the future of radio. If you think that, some questions:

1. The vast majority of radio listening is at home/work (in-car’s only around 20%). If broadband is already in the places where most radio is consumed, there’s every UK station (plus all the ones around the world) on it, in great quality, for a long time, why are the figures still so low?

2. In the future we’ll get 4G and that will have loads of bandwidth, surely radio will be consumed that way? Well, 3G coverage doesn’t reach everyone, the 4G roll out will concentrate on the cities and then the towns. The people who have poor 3G now, are way down the list for 4G. How long will it take for coverage to reach 70 or 80% of the population, let alone 95%?

3. Unlimited data is available on some networks already – this is what will increase mobile internet usage. Ignoring the fact, of course, that even with more bandwidth you’ll still have to share it with other people in your cell. Oh, and unlimited costs. T-Mobile makes it available for £41/month. Should people have to pay £41/month to listen to the radio?

Some people say that DAB’s taken too long to take off, that it’s been superseded by other technology and that it should be killed off, that it’s a failure. Well, looking at the figures – internet radio’s bumbled around the 2% to 4% mark over four years – if we applied the same thinking to internet radio we’d have killed it off years ago!

Look, I think radio’s future is definitely multi-platform and that includes the internet and FM alongside DAB and DTV. No platform is going to ‘win’ – each has it’s pro’s and con’s and there’s money to be made and audiences to be reached through each of them. IP is great for return path and personalised services. DAB and DTV is great for broad, mass-market services.

The 50% digital reach number is a fantastic one in describing how the UK is becoming more multi-platform in their media consumption. In the commercial radio world though, it’s the hours that are important. That’s what helps it generate its money.

I thought it might be interesting to have a look at the biggest stations by hours in the analogue and digital world. I’ve made a chart:

The chart was quite hard to do as lots of stations have different versions. Heart for example has all of the ILRs, London, London plus the other Hearts in the London TSA, Heart ILR (a combo of all the ILRs), Heart Out of Area (Heart consumption outside of the analogue areas) and Heart UK (which is all Heart listening). I’ve tried to list the biggest of each and then discount any appearance by the others. It’s quite a manual job, so I may well have missed something.

So, what does it tell us? Well nothing for sure, but I think it does suggest something about the potential future of the radio market. The 50% who now listen digitally will grow their hours as they listen on more digital devices. A bit more on that Freeview box in the study, on the Radioplayer mobile app, that second DAB in the bathroom and the one in the new car. This means they could be listening more to the stations they’re only able to give a few hours to at the moment.

So, firstly, 2, 4 and 1 are still going to be pretty dominant. These are stations that have done a good job of promoting their multi-platform credentials and so they’re still owning consumers whether listening digitally or on analogue. Five Live is also doing well. It, of course, suffers on AM – in a digital world it becomes an easier radio station to listen to. The same is probably true for Absolute. Music radio is not so good on AM, so it clearly benefits. Gold though hasn’t. I think this could say something about the brand and also probably the (lack of) distribution. Gold also faces music competition from stations like Smooth, Magic, Absolute 60s and 70s – an AM upgrade is clearly not enough to fend that off.

Magic and talkSPORT are holding their own – though i’d expect that Magic with better distribution and marketing could push itself up the list. talkSPORT’s doing solidly, with around a quarter of its listening tuning in digitally – which is about the same as all radio. I think the interesting thing for Talk is whether digital has the ability to grow it some new listeners who’ve never discovered it on the analogue dial.

There are some new stations in the list that are clearly going to be players in the future – 6Music, 4 Extra, Planet Rock, 1Xtra and Absolute 80s. They’ve got great national coverage and great, unique, formats.

Heart and Capital do a pretty good job remaining high up the list. They also have a massive opportunity if they can drive their out of FM area listening. They have great products and nationwide marketing – that could really help them in areas they’re new to.

Trading

The other interesting thing that’s popped up in RAJAR are new types of figures for Absolute – each of their stations now has an additional report called Absolute Radio [Whatever] – Trading. These are the figures Absolute wants in the agency trading systems instead of their regular numbers. Why? Well, it’s their main figures but with internet listening removed.

Why? Well, it’s because they’re now going to be selling different ads on the internet streams of their stations. These will use the benefits of IP – the two way nature – to deliver demographically and geographically targeted ads alongside imagery. It’s a really good way to tackle one of radio’s problems – our ads are too cheap! Online they’ve created a premium product that, hopefully, commands a premium price.

It means they can start to get money that might be going to services like Spotify and We7. Absolute also has good internet listening figures – so they’ll have some decent impacts to sell – but with internet listening still their smallest digital platform – it’s not something that’s going to massively effect their traditional revenues.

Digital Radio UK: Ten Top Tips

Digital radio is at an odd cross-roads. It has sold bucket loads of digital radios, a third of the country are listening, people who’ve got it like it, manufacturers are making good money from the market and even radio stations are starting to write revenue on their digital stations.

I have no doubt that it will soon be difficult to buy a radio device or ipod dock without a digital radio. It even looks like in-car is going the right way with it gradually appearing, as standard, in more and more makes and models. Indeed, the only form factor that’s doing poorly is mobile.

But, it’s still happening too slowly. Being part of consumer’s replacement cycle is fine, but it will drag on the amount of money the industry is spending on dual transmission even longer.

Not that the industry has particularly helped itself. In the past two years the major UK radio groups (and to a certain extent the BBC) have been stuck in discussions with each other, Ofcom and the government to get some basics sorted and haven’t spent any time and effort promoting their new stations and the platform.

What is positive is that we’re now at a place where all the major radio operators agree that DAB is a vital part of their future. Even UTV and UKRD don’t disagree with that (their arguments have always been about structure, not direction).

With the Digital Economy Act nearly law, it’s now about getting it done. Collectively the radio industry is funding Digital Radio UK to do just that.

Now, over the years, i’ve been invovled with enough industry bodies and radio groups both in DAB and out of it, to, I think, give a Baz Luhrman-style list of advice to the Digital Radio UK team – whether it’s wanted or not! So, here goes [cue instrumental music].

1. Don’t Listen to your Board.

Their job is to keep the money coming and give their aitime to support the campaign.

They do not have experise in launching and marketing consumer electronics. They are all desperately motivated by their own self-interest and are predominantly analogue businesses. They’ve barely marketed their own digital radio stations, you shouldn’t listen to them about how to do your job.

Why should they shut up and keep the money coming? The commercial radio side has been given further licence rollovers and the opportunites to sacrifice many (expensive) local committments. The BBC get a big tick in readiness for the next charter period. The transmitter operators, when digital radio’s successful, get an (even more) profitable revenue stream from new transmitters and service providers.

2. Create an alliance with digital radio listeners.

With over 10million radios sold and a third of the UK using DAB, these are your biggest marketing assets. All the research points to them being very happy digital radio listeners -so co-opt them. Use existing data, station research and relationships to create a CRM plan that lets you reach these people on a regular basis. Incentivise them to evangelise for the platform.

3. Prioritise content.

There’s some great content on digital radio, with good brands – from 1xtra to Jazz FM and NME. Help these stations become successful. The local, regional and national split of stations is a little confusing. Do deals with Digital One to help support these stations to become true nationwide entitites. Promote their existence heavily and highlight what consumers are missing. You do not need to treat everyone ‘fairly’. If you’re successful everyone will benefit.

Stations that exisit on local and regional multiplexes are fine and will grow audience once people have a digital radio, but to get listeners through the door highlight the stations that are good, and that everyone can get.

This will also complement the BBC’s strategy of promoting Station-You-Know and Station-you-Know Extra.

4. Give every UK Breakfast presenter a (properly installed) in-car digital radio.

If you’ve got a properly installed digital radio (and not just a Highway with an aerial blu-tacked to the window) it’s an AMAZING listener experience. In-car coverage is great.

Sky gave aways Sky Plus to hundreds of celebs and they got brilliant free talk-up. In-car DAB will get breakfast shows on side and better endorsement will follow.

5. Do proper research into digital use.

I think RAJAR is generally a good methodology, when i’ve carried out research projects our data has generally matched RAJARs. It’s good at measuring listeners and listening. However, the ‘how did you listen’ question is complex to fill in and the high levels of ‘don’t knows’ shows there’s something amiss. Like Digital TV, commission a specific tracker that looks at radio’s consumption over multiple platforms.

6. Remember to get some money from the board.

Radio, like most media companies, is quite pikey about spending money on advertising (hello, contra!). The board will talk about spending money at the right time, but that time will never come. Extract a large amount of cash now and refuse to do anything until it clears the DRUK bank account. Make sure the cheque doesn’t bounce.

7. The radio airtime bank works!

Radio advertising works! Develop high quality campaigns and get guaranteed airtime from radio stations. However, mandate some sponsorships as well. If you just run ads you’ll find a disproportionate amount of them get stuck off-peak. Organise some winning weekends that run on all stations simultaneously, sponsor everyone’s weather – be bold with radio ideas.

8. Blackmail people.

The airtime bank is a great opportunity to encourage partners to do the things that you need.

For manufacturers – free airtime for radios that have EPG, colour screen, are good value and don’t look rubbish.

For car companies – airtime for manufacturers that include DAB as standard. Also fleet requirements for radio stations should mandate vehicles with digital radios as standard.

9. Get coverage sorted.

Coverage will always be a stick that digital gets struck with. Remember though, coverage is much better than the people who moan, say. More people can listen to Classic FM on DAB than will ever get it on FM.

There are good plans that exist to ‘fix’ coverage for the majority of people with problems. It’s time to push forward the discussions with Arqiva and the BBC to get this sorted out. Also, it’s time for commercial radio to play its part in that too.

10. Rapid rebuttal.

There’s lots of lazy reporting about successes and failures about digital radio, it’s mainly down to lack of information and understanding. Ensure that there’s a permanent presence on the team that seeks out this reporting and then provides the right information to journalists/commentators. It’s not about invoking an Alistair Campbell style rant at people who disagree, it’s about ensuring there’s understanding.

In most things perception equals reality. I’ve had converstaions with journalists who think DAB has failed mainly because they personally can’t pick it up in their basement flat. These are the ones that need to be educated.

[DRUK, I am just having a bit of fun so don’t take too much offence…!]

Pictures on the Radio

Pure Pic

A new radio was announced by the lovely people at Pure today – the Pure Sensia.

It’s a rugby ball of a radio with some great features. It can handle DAB, FM and Streaming (through The Lounge). It will also play music across your home wi-fi.

The interesting thing about it is it’s designed to be a very tactile device – from both the form factor but also how you navigate. It takes inspiration from the iPhone/Touch and allows elements to be selected and scrolled in a now familiar way. It also shares with Apple an app store. They’ll be providing an SDK to allow people to write applications that will sit on the unix-powered device alongside weather, twitter and facebook apps that Pure have written themselves.

The radio side also has another innovation – RadioVis. RadioVis allows radio stations (FM, DAB or internet) to associate their programmes with slides. The radio, using RadioDNS, looks up where it should get these slides from and then connects over the internet to fetch and display them on a QVGA screen. This is a good thing.

It’s good because it allows radio stations to control their own brand and deliver images in a simple way. It also allows them to deliver these things once, in one format. There will be many devices released that support RadioDNS over the coming months – and they’ll all take the same RadioVis picture feed. It looks great.

It’s the kind of thing that you expect to have. We all carry devices with us that have screens that provide information and entertainment, the fact that radio traditionally doesn’t have this content will seem more and more odd. The images that a station provides whether online, in an iPhone app or through RadioVIS is important. It helps define who you are what kind of station you are. And I don’t mean a ‘rock station’. It shows whether you’re the kind of radio station that cares enough about its listeners to provide information about who’s on, what you’re playing, what’s coming up, pictures of guests – that sort of thing.

Our firm, Folder Media, now provides a RadioViS service for many of our client radio stations including Jazz FM and NME Radio as well as our own station, Fun Kids. We’ve also been helping out a couple of other stations to get their pictures up and running as well. In fact, we’re providing a third of the stations currently broadcasting RadioVIS – other stations broadcasting pictures are Global’s Capital, Classic, XFM, Heart, Galaxy and LBC and the three stations from Absolute. It’s been fun, and stressful, finding out how it all works, but we’re now working on providing a range of tools and services to make it even more relevant to listeners.

As I said before, it’s what listeners are going to expect us to deliver.

Next Step for our Little Radio Project

I’ve just got back from the studio recording some links for Fun Kids, including the one that will ‘open’ the station at Midnight tonight as it moves, for a short time, to be broadcast nationwide on DAB Digital Radio through Digital One.

We bought Fun Kids off of Global Radio late last year, with an idea that owning a children’s radio station is not just a good thing, but something that will make some money and hopefully we can build into a children’s brand.

It’s very rewarding. And very bloody annoying. Mainly at the same time. It’s re-enforced a lot of my radio views and also opened my eyes to lots of things as well. What’s good about it, and it’s an old radio cliché, is that you can do things immediately. Also, it can be very creative. But you have to make the time to be creative. An old colleague used to block time in his diary for creative thinking. It sounds counter-intuitive but we all live such busy lives, it’s important to find a place create that ideas that make your radio station (or whatever project) special.

Fun’s a very small affair, everyone who works on it does it part-time. They all have other jobs. This has meant that we get a cross-section of people’s skills – a variety of skills we couldn’t afford if everyone was full time – plus everyone’s learning a lot of new skills too. I think it’s probably the main suggestion i’d give to anyone who has a small project that needs to be worked hard to be a success. Do whatever you can to bring in more people, skills and contacts. If you do it on your own, you’ll go mad and it won’t be nearly as good.

We’ve decided to go national for the Summer holidays firstly because we felt it’s something we could easily describe to the audience – it’s a Summer Holiday radio station! But also because it shows our intent. We’re a little station that’s determined to punch above its weight and to demonstrate to advertisers and listeners that they should spend some time with us. It also pushes us on, to be better, to work harder and make a better radio station.

I hope that you spend some time with us, but more importantly if you know people with kids under 10 and a digital radio – make sure they tune in!

Amazing Radio Launches

Earlier today, just after Midnight, without much of a fanfare, a new digital radio station appeared on Digital One’s national commercial DAB multiplex – Amazing Radio.

Amazing Radio is the sister service to the website Amazingtunes. Amazingtunes lets new bands upload music to the site so visitors can listen and buy the tracks. The revenue for these music sales is split 70% with the artists and 30% with the site itself. The radio station will play playlists (of the unsigned bands) chosen by users from their website.

Choosing to go on Digital One is an interesting move for the site. It’s not a cheap thing to do (even with the launch announced as a six month pilot) and is sure to have set them back a bit of a wedge. Looking at CrunchBase, it says that AmazingTunes raised £600k in 2006 and a further £800k in 2007. I’d imagine that to achieve this expansion they will have needed to raise additional funds.

However, it is a good way to promote their site. The online unsigned sector is notoriously competitive, but by going on DAB nationally it will bring the brand to nearly a third of UK (and slightly skewed to those who are interested in digital technologies and music).

What’s their business model likely to be? Who’s knows.

In the traditional world the station would be funded by advertising. In other words, the scale of their audience would encourage advertisers to put messages in their programming in exchange for money. This money would pay for the station and generate and additional profit.

However, I don’t expect this to be the main source of revenue. An unsigned band radio station will generate a small audience and it’s unlikely to provide a large number of hours. Even with the best will in the world, a super-specialist-muso audience is still unlikely to make the station a primary listen.

I think more likely the reason is to drive awareness and use of the main site – amazingtunes.com. The website is a direct to consumer proposition and a transactional site. They can derive ad revenue from online and music sales (as well as a maybe even a little commercial revenue on the radio station too).

Will the radio station last for ever? Will it even make it past its six month ‘pilot’? Who knows. And to be honest does it really matter if it fails? Well, for the owners i’m sure they hope it’s a success, but to me it’s about using the flexibility of the platform and doing ‘different’ things. If there’s spare capacity and they think it can drive their business, good for them. If, along the way, some listeners get further value out of their digital radio, that’s great too. Even if their model is to get more well known so they get more users so they can sell themselves to CBS (and it might well be) then I think that’s actually fine too.

If it dies on its arse, then it dies on it arse. I’d sooner we had a platform where some new ideas could fail, than not have a platform that let them try stuff out.

Many existing radio groups are floundering due to fast declining commercial revenue, a strong, well-programmed BBC and a seeming lack of forward-thinking. Their traditional models are breaking down and the main response has been to do what they’ve always done, but more efficiently. This, on its own, is unlikely to be sustainable.

Now, i’m not saying that they should replace Heart with an unsigned jukebox funded by micro-payments, but having a portfolio of diverse services with diverse revenue streams is probably a more sensible way forward.

So good luck to Amazing Radio, and good luck to other operators who want to try and do something different.

DAB Digital Radio Christmas Sales


Image from: salimfadhley

Even before such things as WiFi and DAB appeared, Christmas has always been the time of the year that the largest numbers of radios are sold. I have no real idea why. Whilst i’m sure some are bought for Christmas, they can’t all be, can they? Maybe it’s the present people like to buy themselves. Anyway, Christmas is important for those of us in the DAB business as we can see how many new radios are finding their way into people’s homes.

Well, the DRDB have just released the figures and it turns out in December alone 550,000 DAB Digital Radios were sold (that’s 22% up on last year). This puts cumulative UK sales at 6.45m. Hurrah.

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.

Freeview HD

It’s interesting times for digital platforms at the moment. Both DAB Digital Radio and DTT (Freeview) have enjoyed much success with lots of boxes out there and lots of happy viewers and listeners. However, both systems don’t have a lot of expansion left in them. They’re filling up. This means its difficult to introduce new services and technical innovations.

The main issue Freeview is grappling with is HDTV. HD takes up much more space than a traditional SD (standard definition) channel so it’s very difficult to squeeze in any of these channels.

However, Ofcom, probably under pressure from stakeholders, have issued an interesting consultation where they try to find a way through these issues to find some space for some new HD channels. Basically they’re suggesting that one of the Freeview multiplexes (indeed, one of those owned by the BBC) is emptied with its services distributed over the others. The spare multiplex could then become an MPEG4 multiplex, which means there would be more room for HD goodness (though probably just three HD channels) alongside a couple of extra SD channels too.

However, none of the existing Freeview boxes will be able to pick up these MPEG4 services, so you’ll need to get a new box.

Coincidentally the main UK broadcasters have suddenly got together to plug HD on Freeview, who’d of thought!

DAB Digital Radio is facing similar pressures. There’s a new codec that will allow a stereo station to be broadcast in about a third of the capacity that an existing station broadcasts at, for roughly similar (though potentially better) quality. In theory this means you could triple the number of stations available on the platform. However, once again the majority of the existing radios won’t be able to receive these new DAB+ stations, not that any exist or are even planned to exist at the moment.

Now traditionally radio and TV devices have lasted for decades, the concept of a replacement cycle hasn’t really existed for them. Whereas with other consumer electronic devices it certainly has, with buyers changing things like mobiles every 18 months to be able to access new services. Will consumers be happy to replace their TV and radio more often?