Wednesday, 17 June 2009

Radio in Digital Britain - sense and sensibleness

In the 13-page radio section of the Digital Britain Final Report published yesterday, there was not one mention of the word ‘switchover’ in the context of ‘digital radio switchover’. Neither was there a single mention of the word ‘switch-off’, as in ‘FM radio switch-off’. Throughout the document’s radio section, the new buzz phrase is ‘Digital Radio Upgrade’, meaning a drive to make DAB radio better and improve its consumer take-up. In Digital Britain, the notion of switching off FM radio broadcasting, notably for local stations, has been buried for good.

Not that you would have realised this fundamental policy shift by reading some of the press reports. “FM radio switched off by 2015”, said the headline in
The Telegraph. “Government sets 2015 as digital radio switchover date”, said the headline in Media Week. “Digital radio switchover set for 2015”, said the headline in Broadcast. “Analogue radio switch-off set for 2015”, said the headline in The Guardian. These bold press assertions are contradicted by the Report’s recommendations that “FM spectrum is to be re-planned to accommodate the current MW services” (paragraph 43) and that “a new tier of ultra-local radio [which] will occupy the FM spectrum” (paragraph 39). The report is perfectly clear that FM is not to be switched off (at least, not in my lifetime).

It was almost as if the lobbyists for FM switch-off – the large commercial radio groups, most notably Global Radio – had written the press headlines the way they had wanted the outcome, regardless of the actuality. This was reinforced by an article that appeared in
Media Week yesterday morning – only hours before Digital Britain was published – in which “a well-placed source” predicted “a schedule for the shutdown of FM radio” under the headline “Digital Britain to give radio licensees guaranteed protection”. That source proved not to be so well-placed.

The Media Week headline referred to the owners of the three national commercial stations who had been lobbying to have their licences extended by another term in order to avoid the impending auction of their frequencies, as required by existing legislation. I have written
previously about Global Radio’s determination to seek an automatic renewal of its Classic FM licence, which otherwise expires in September 2011. So did Digital Britain give Global, TIML and UTV the renewals that they wanted?

The answer appears to be both ‘yes’ and ‘no’. Digital Britain will:
· extend all commercial radio licences, national and local, “up to a further seven years” for stations that simulcast on DAB
· insert a two-year termination clause into all new licences
· review all licences in future and determine whether the Digital Radio Upgrade is likely to be achieved by the end of 2013
· terminate licences if the Digital Radio Upgrade is not achieved
· then re-advertise the national licences under the existing auction scheme.

Not only does this add considerable strings to licence extensions of “up to” seven years, not only does it allow those extended licences to be terminated at two years’ notice, but it also puts the onus squarely on the licensees to make sure that the DAB platform succeeds (something which has not been achieved in the last decade). If the Digital Radio Upgrade does not hit its targets, the licensees lose their stations. This is a poker game that, whilst offering national stations a potential second life, also threatens to take that life away not so far down the line. For an owner trying desperately to convince its bank lender of the long-term value of its national commercial radio licence, Digital Britain has not offered anything in the way of future guaranteed revenue streams. As a result, indebted radio owners now have two guns pointed at their head – one from their bank manager and the other from Lord Carter.

Worse, even the licence renewals proposed by Digital Britain require new legislation to be enacted. If there is renewed turbulence in government, and with the ever-present threat of a snap general election, it is looking doubtful whether media legislation will be a priority in a Parliamentary timetable that will be rushing to legislate more significant political issues during this government’s final days. If new legislation doesn’t happen soon, then Ofcom will have to rush to advertise the Classic FM licence in an auction by early 2010 at the latest.

Furthermore, even if digital platforms do succeed in accounting for more than 50% of radio listening by the end of 2013, which station owner (either commercial or BBC) is going to be prepared to switch off their analogue signal and lose 50% of their listening at a stroke? In the case of a commercial station, losing 50% of listening would mean losing 50% of revenues, an idea that nobody will entertain. In this way, regardless of the speed with which the 50% criterion is reached, the outcome is the same – stations will have to simulcast on both analogue and digital broadcast spectrum for many years to come, a necessity that is almost doubling transmission costs during a period when sector revenues are falling precipitously.

For smaller local analogue radio stations, the future remains rather unclear. Another Digital Britain proposal (paragraph 26) to amalgamate local DAB multiplexes into bigger geographical units makes sense in order to bring economies of scale to multiplex owners, but unequivocally transforms DAB into a large-scale broadcast platform for national or regional operators. A local analogue station in Bridlington, for example, will find it even more expensive and inefficient to be on a ‘Yorkshire’ multiplex, thus restricting that local station’s future distribution platforms to FM broadcast and online. Neither will such a local station benefit from the automatic analogue licence renewal promised only to stations simulcasting on DAB. If anything, such stations’ predicament will ensure that FM continues to be the consumer platform for local radio, which still accounts for 40.7% of all radio listening [RAJAR Q1 2009].

Digital Britain’s acceptance of the important citizen benefits of local radio broadcasting is underlined by its (unexpected) proposal to license “a new tier of ultra-local radio” on FM and to re-plan the FM waveband if existing stations (ever) migrate from FM to DAB. Although the report is at pains to explain that it does not intend to “blur the lines between commercial and community stations”, it makes sense in the long run to consolidate a third tier of radio with the flowering of a whole new set of radio stations that genuinely want to serve local communities. With many small local commercial stations now barely breaking even, it might make sense to turn some of them into companies limited by guarantee and thus let them seek public subsidy from local councils and regeneration schemes.

Such an expansion of radio content in local markets could potentially invigorate the entire radio medium, making ‘local radio’ more of a ‘must have’, particularly following cutbacks in local news provision by local newspapers and regional television. It is also a potential antidote to the continuing transformation of many of our former local commercial radio stations into regional or quasi-national services (see the example of Radio 210 in my previous
article on ‘Heart-ification’). As Digital Britain commented: “Today’s radio industry has been shaped more by the scarcity of the analogue spectrum than by market demand” (paragraph 4).

On the issue of public subsidy, the biggest disappointment for commercial DAB radio owners/operators must be Digital Britain’s insistence that “the investment needed to achieve the Digital Radio Upgrade timetable will, on the whole, be made by the existing radio companies” (paragraph 44). The report acknowledges that “this will require a significant contribution from the commercial operators” (paragraph 21) but suggests it should be funded by:
· savings from the negotiated 17% reduction in transmission charges as a result of the Arqiva/National Grid Wireless merger (paragraph 22)
· future savings from the ending of simulcast analogue and DAB transmission (paragraph 22)
· cost savings from the anticipated relaxation of co-location rules and the automatic extension of analogue licences (paragraph 25).

Although there is a brief mention of “residual access” to some of the funds left over from the BBC’s Digital Switchover Help Scheme being used to support DAB infrastructure build-out, the overwhelming message is ‘you guys are on your own to make DAB work’. The worry is that, when times were relatively good in the late 1990s/early 2000s, commercial radio did not manage to develop sufficient traction for the DAB platform. How is it ever going to succeed now in an environment where sector revenues are falling so rapidly?

So the conundrum continues, same as it ever was. Everybody wants DAB to work. Nobody except the BBC wants to pay for it. Commercial radio simply isn’t making a profit anymore. We can argue about how/why it got to that desperate situation, but nothing changes the fact that there is no surplus cash slopping around ready to invest in either DAB infrastructure or exclusive digital content. Without an ongoing commitment to both, even the limited migration of national radio services from analogue to digital transmission proposed in Digital Britain is unlikely to ever happen. Consumers follow content, not platforms (or, as Digital Britain says: “consumers will adopt new technologies when they are affordable and the benefits are clear” (paragraph 8)).

This is not at all to imply that Digital Britain does not offer a lot of sensible recommendations. Whereas the
outcome of the Digital Radio Working Group in December 2008 was a remarkably theoretical report that appeared to bypass the harsh economic realities of the radio sector, the Digital Britain document is realistic and pragmatic, telling the radio sector that much of what it needs to do to make the DAB platform a success is in its own hands. How the radio sector moves forward with these issues in the coming weeks will determine how much further we continue to plod along the long DAB road. There is an increasingly stark choice for commercial radio – to give up now and accede the DAB platform to the BBC and Arqiva, or to press on and further endanger the viability of the entire commercial radio sector.

Lord Carter proffered a lot of home truths in Digital Britain and he threw down this gauntlet: “Any good business will invest in its future if it understands that future and the potential returns from its investment” (paragraph 8). What he did not do was throw commercial radio a map to get it to the buried treasure.

On a purely personal level, I was pleased to see Digital Britain embracing several policies I had advocated for the radio sector:
· the two-year pilot scheme for an output focused radio regulatory regime takes up the idea of the Local Impact Test I
proposed in November 2007
· the proposal to use the surplus from the Digital Switchover Help Scheme and the savings from the Arqiva/NGW merger for DAB infrastructure build-out was a strategy I
suggested in October 2008
· the notion that ‘localness’ will prove a commercial radio station’s Unique Selling Point in the future global media village is a scenario I have included in client briefings and conference presentations for several years.

For the purpose of transparency, I contributed radio sector analysis to two documents that were part of the Digital Britain process – a pre-consultation
overview and the regulation of local radio.


Richard said...

On the technical options things seem as muddy as ever, with digital radio standards multiplying (DAB, DAB+, T-DMB), and an unresolved chicken/egg problem with too little exctra content & too few receivers.

For the twitterati, the very idea of broadcast transmission may seem quite quaint, and it's not too hard to imagine a world where everyone is connected with an always-on, broadband-ish feed, whether in car, home or train, giving access to 'unlimited' streamed content.

Sadly, I can't imagine such a network being sufficiently ubiquitous or cheap for a decade or so to be a replacement for FM coverage, so an interim solution is required.

Despite the anguish of audiophile purists, DAB is pretty good and could be better if more spectrum was found. Listening in the car is a joy in areas where FM is badly distorted due to multipath and fading, but coverage needs a significant boost.

As for local radio, does the new-ish DRM standard offer a digital migration path? This would free operators from the tyranny of the multiplex structure, and there's no reason why transmission costs should be greater than FM. The obvious wee drawback is that there are no receivers out there...but perhaps this will change with a new generation of DAB/DAB+/DRM chipsets.

All in all, an interesting & complex situation, but scary times for commercial operators, and increasingly bland ones for listeners!

Grant Goddard said...

I've had some informal, follow-up queries asking me if the government really intends to take away the promised analogue licence renewals from national commercial radio stations if digital radio take-up does not proceed fast enough. This quote appeared in The Telegraph yesterday:

A spokesman from the Department for Culture, Media and Sport, said: "Under the proposals in the Digital Britain report the national licences will not go to auction. However, we have been clear that if the digital radio upgrade timetable were to be delayed significantly we would revisit this decision and if appropriate licences would be re-advertised."

Hope that helps,

Radio Can Be Annoying said...

I count myself lucky to live in a part of the world where DAB doesn't exist - the Channel Islands. If it sounds as bad as the music on Sky box radio channels, I simply won't listen. Thank God for mp3 players and decent bitrate files!

However, I will tolerate a certain slight amount of slushy swishy sound quality to listen to the news on the hour, and comedy on R4.

I refuse to listen to annoying adverts, the same old boring wishy washy ancient hits on commercial radio, and distorted ultra-compressed music on R1.

There's no way commercial radio is going to make a listener out of me - thank God for the BBC :)

Anonymous said...

FM just works. It doesnt always work well, but it degrades gracefully. Also, it is inexpensive to receive and involves a lot less complexity to transmit and receive. Not to mention all the FM receivers around and the ease of use in an emergency. FM needs to be maintained. The idea of more local stations is good though.

Anonymous said...

The report may not have used words like "switchover", but it did seem to imply that result with "all services carried on the national and local DAB multiplexes will cease broadcasting on analogue." (#10)

If all the stations people currently expect to find on FM can only be received using DAB in the future, is that not effectively a switchover?

Grant Goddard said...

Thanks, Anonymous (25 June), for your comment.

Of course, you are right that the report said "all services carried on the national and local DAB multiplexes will cease broadcasting on analogue." Does this not mean that stations SIMULCASTING on analogue and FM will be expected to cease broadcasting on analogue? But it still leaves a quantity of local analogue stations that are not simulcasting on DAB because the cost of DAB is prohibitive and/or there is no space on their local DAB multiplex and/or their 'local' multiplex will now be far too large geographically following the proposed merger of DAB multiplexes into larger units. Those analogue stations cannot be expected to switch off analogue transmission simply because they are not "carried on the national and local DAB multiplexes". They will have to be incorporated into Digital Britain's plan "to create a new tier of ultra-local radio which will occupy the FM spectrum", the most categoric statement that FM radio is certainly not going to disappear.

Your caveat is that "all the stations people currently expect to find on FM" will migrate. My original comment remains - any station owner (BBC or commercial) that is prepared to turn off a legacy platform still used for 50% of its listening is either incredibly brave or prepared to commit commercial suicide.

Check what happened in 1992 when the BBC threatened to turn off Long Wave simulcasting of Radio Four, at a time when FM radios had already been on sale for 40 years.

Seventeen years later, switchoff has still not happened. If Long Wave (with only one UK station) is still with us, what's the chance that FM will still be with us a long while. FM is cheap, it works well, and it's as close to 'universal' coverage and set penetration as we will ever get. It makes no sense to replace it with something that is worse in all those departments.


Grant Goddard said...

I am still getting asked why I persist in writing that Digital Britain is not planning to switch off FM radio.

I offer the words of Tony Moretta, CEO of the Digital Radio Development Bureau, interviewed on BBC Radio 4's 'You & Yours' show on 23 June 2009:

"Analogue radio isn’t going to vanish. There is still going to be some local services on FM, there is going to be a new tier of community radio running on FM as well. …. By having the national and larger local services migrate to digital, that creates more room for those sort of local radio services. And so analogue radios will still work."

Hope that clarifies,

NetworkGuy said...

Have only just come across your blog via some article... Will have to devote some time to read other posts, however for now, a few brief points:

1) If vehicles are to be fitted with these DRM-compatible radios, it will surely 'push' the figures towards that magic 50% threshold, not from listener choice, but lack of it!

2) I'm not against digital in principle, but why on earth, with 99% (OK, 90+%) of countries on DAB+ has that not been considered as a better option - I heard an argument about upsetting 9m DAB radio owners, but there are some 50m to 150m FM capable sets which might be affected, and we will be left with DAB while mass market products will all be going to DAB+

3) while we're at it, how soon does one expect the likes of Nokia, Motorola, etc to make mobiles with FM _and_ DAB - pretty much every phone I own has FM built it, and this will render them obsolete (for my needs) if national channels like R4 go off FM.

Some of my phones have been used for 7+ years - eg Nokia 8310, same numbers for 12+, and we're not all changing phone every 9 months like teenagers.

4) From the gist of your post, I've the feeling that commercial stations will be very unhappy if forced to switch, because of their analogue audience being a good 50% and them struggling to stay afloat, but going back to (1) they could find they have no choice once the magic 50% is achieved...