Tuesday, 17 February 2009

Localness: please, sir, can I have some less?

The government’s announcement that an independent review group will look at the ‘localness’ issues relating to content on commercial radio could re-ignite a war of words between the stakeholders that a year ago ended in a tense ceasefire. Last time, hostilities between the large radio owners and Ofcom became elevated to such an extent that the regulator’s chief executive Ed Richards even used the Annual Ofcom Lecture to chastise the commercial radio industry for its persistent lobbying to loosen its ‘localness’ obligations:

Some [radio owners] have called for a huge relaxation in relation to localness, some in the industry even call for a complete removal of all regulation. They believe that localness is either no longer valued or that its value is significantly outweighed by its cost. The problem is that the evidence is to the contrary. What our research tells us is that people continue to want to hear local programming. …. But we are not convinced that the market alone will deliver this if left to its own devices. We recognise very clearly the significant economic challenges faced by the radio sector, but our forthcoming proposals will not involve eliminating the obligation to deliver local programming or its reduction to a negligible level.”

Ofcom subsequently
published its policy statement on localness in February 2008 and although, on the surface, it might have looked as if a ceasefire had broken out between the two sides, behind the scenes the industry’s lobbying for further reductions of its ‘localness’ obligations continued regardless. Ofcom had estimated that its policy changes would save the radio sector £9.4m to £11.7m per annum from a cost base of around £620m. For the radio industry, these potential savings were simply not enough. Andrew Harrison, chief executive of RadioCentre, argued that “the heavy burden of the existing localness regulation and legislation [..] is holding back current profitability and future investment in the sector”. By December 2008, industry lobbying had succeeded in persuading the Digital Radio Working Group to recommend in its Final Report that:

commercial radio must be given greater freedom to shape its digital future to provide a sustainable future for local radio in a digital world through a relaxation of analogue localness requirements………”

and to
comment that:

“…. a model which focuses so heavily on where content is made may not be the best way to deliver either what listeners will most want in the future or allow the industry space to grow. We therefore recommend that the commercial radio sector, Ofcom and the government should look closely at the current localness regime in the coming months……..”

What proved interesting about last week’s government
announcement of the independent review into ‘localness’ was that it contained no mention of Ofcom whatsoever. Even though the press release noted that the review would examine “to what extent are the current requirements for a pre-determined number of hours of local content, and the locality in which content is produced, appropriate and sustainable”, as implemented by Ofcom, it did not mention the regulator by name. This omission is downright weird. The Communications Act 2003 states clearly that:

It shall be the duty of OFCOM to carry out their functions in relation to local sound broadcasting services in the manner that they consider is best calculated to secure: (a) that programmes consisting of or including local material are included in such services but, in the case of each service, only if and to the extent (if any) that OFCOM consider appropriate in that case; and (b) that, where such programmes are included in such a service, what appears to OFCOM to be a suitable proportion of them consists of locally-made programmes.”

Furthermore, the Act states that “OFCOM must: (a) draw up guidance….” and “OFCOM may revise the guidance from time to time”, but it “must consult” licence holders and stakeholders beforehand. The legislation is crystal clear as to where the responsibility resides. What we are seeing in the government announcement is an intervention at a higher level as a result of perceived dissatisfaction with the way that Ofcom has implemented its responsibilities on this “particularly contentious” issue, as Ed Richards described it

Ofcom’s 2007 consultation on ‘localness’ in radio had
elicited 43 responses and the regulator “noted the calls from the commercial radio industry for a reduction of locally-made programming….” Ofcom stated determinedly: “We believe that our proposed guidelines already represent a substantial deregulation of locally-made programming in many cases”. However, it looks as if further lobbying has undermined the Ofcom position, and the regulator is now being sidelined by direct government action on this issue, which could lead to new legislation or to new implementation of existing legislation.

So what precisely does the commercial radio industry want changed by Lord Carter in Ofcom’s localness requirements?

  • local commercial stations required to broadcast no more than 4 hours a day of locally made programming
  • regional commercial stations not required to broadcast locally made programming
  • local news broadcasts on local stations can be produced in centralised newsrooms
  • stations serving populations of less than 750,000 (i.e.: two thirds of the UK’s stations) permitted to locate their studios outside the area they serve
  • the 4 hours a day of ‘local’ programming can be simulcast across co-located stations and still count as locally made programming.

And what concessions would the commercial radio industry offer Lord Carter in return for its newly, co-located, networked content, ‘local’ stations?

  • news bulletins (not all local) 13 hours a day on local stations
  • news bulletins 24 hours a day (not all regional) on regional stations (13 hours a day on specialist music stations)
  • extended news bulletins (of unspecified length)
  • a commitment to safeguarding stations’ remaining local content (weather, traffic, what’s on, charity appeals, community information)

However, these demands and concessions position the ‘localness’ issue strictly in the context of content regulation. In fact, there is a much bigger game being played out, which concerns the further investment required in the DAB platform to try and make it a success with consumers. Essentially, the commercial radio industry is trying to put a gun to Lord Carter’s head and is demanding: ‘we won’t invest any more money in DAB to make it work, unless you stop Ofcom making us do local things we don’t want to do’.

The initial response to the commercial radio lobby was likely to be: ‘you acquired all these local radio stations, knowing that they had localness obligations. If you wanted a national radio station, why didn’t you buy one of those instead?’ It does seem a bit like Stagecoach begging the government to transform its local bus routes into a national coach service. However, Lord Carter is trying to grapple with the issues and forge a compromise whilst still insisting that “government can not, nor should it, be the main driving force for digital radio”.

The biggest danger here is that the ‘localness’ issue becomes a mere sideshow to the much more politically and commercially significant decision over the future of the DAB platform. As such, ‘localness’ risks becoming a mere pawn in a complex set of negotiations that are essentially designed to maintain the balance sheet valuations of the largest radio groups which have already made significant investments over a decade in costly DAB infrastructure.

Sadly, this is not the first time that the ‘localness’ issue has been invoked merely as a quid pro quo within a much bigger game. In the original Bill that became the Communications Act 2003, there was no ‘localness’ clause for local radio, just as there never had been in previous broadcast legislation. It was inserted at the last minute as what the then Minister for Broadcasting, Dr. Kim Howells MP, admitted was “the quid pro quo for greater liberalisation in the radio market”, allowing more concentrated ownership of local radio than the Bill had originally proposed. In the ensuing House of Commons debate, Michael Fabricant MP successfully stoked the flames of fear:

What if Clear Channel – a United States organisation for which I have a considerable respect, but which the [UK commercial radio] industry is rather concerned about – were to acquire a number of radio stations and found that it could pull in large audiences, based in the US, and not be all that local? Its presenters could be based in New York, for example, and it could put in pre-recorded local identifications. Everything could be done on a PC-based system. The stations would sound like local radio, even though they were not; and, because they had a good playlist, they might pull in a big audience. Would we not want back-stop powers in such a case?”

Six years later, neither Clear Channel nor its competitors have bothered to enter the UK radio market. Instead of the then touted prospect of US-financed global radio, we now have Irish-financed Global Radio wanting to run as much of its UK local radio empire as possible from Leicester Square. At the end of the day, for the listener, does the distinction matter whether a local radio station’s studio is in New York or New Bond Street? If I were a listener in NorthEast England, when I choose to listen to local radio, rather than national radio, if it does not fulfil my desire for ‘local’, then it offers me zero utility. If I am digging my car out of a three-foot snowdrift and the jolly ‘local’ radio presenter does not mention the inclement weather from her faraway studio, it simply isn’t local radio.

Surely, a ‘localness’ policy for radio should put the citizen/consumer/listener at the heart of its doctrine, something which Ofcom policies to date have failed to do. But neither does the commercial radio industry come out of this smelling of roses. I have yet to see one UK case study backed with evidential data which demonstrates that a decrease in local content on a local radio station has resulted in audience growth. Reduced costs? Yes. Improved profit margins? Yes. But local commercial radio stations have always been gifted scarce analogue radio spectrum for free, in return for their public service content commitments. A local radio station that is not trying to maximise its audience but, instead, aims to maximise profits by reducing costs, cutting local content and knowing full well that its audience will inevitably decline, would seem to be misusing valuable spectrum.

It remains to be seen whether this latest initiative to review radio’s localness requirements will result in new regulation that finally puts the listener at the centre of its policies, rather than simply responding to the needs of either the box-ticking regulator or the de-localising, large radio groups.

On a personal note, over several years I researched the issue of ‘localness’ and ‘localism’ in local radio, and I wrote an unpublished paper a year ago that examined the issues and suggested a way forward that would reinstate the local radio listener at the heart of localness regulatory policy. If the laws or regulatory regime do have to be changed, my only hope is that they are changed for the better, and not for the worse.

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