Monday, 7 September 2009

UK Commercial radio revenues Q2 2009

Commercial radio revenue figures for 2009’s second quarter have been published.

Q1 2009 DATA
£119.7m total revenues – lowest since Q3 1999
£34.8m local revenues – lowest since Q1 2001
£60.0m national revenues – lowest since Q1 1998
£24.8m branded content

YEAR-ON-YEAR
Total revenues – down 10.8%
Local revenues – down 6.0%
National revenues – down 16.1%
Branded content – down 3.7%

QUARTER-ON-QUARTER
Total revenues – down 6.9%
Local revenues – down 5.4%
National revenues – down 12.3%
Branded content – up 6.0%


FOUR-QUARTER MOVING AVERAGE DATA
£514.6m total revenues
Down 13.4% year-on-year (last quarter: down 13.1% year-on-year)


Whatever may be going on elsewhere in the economy, it is hard to see any green shoots of recovery in the UK commercial radio …. yet. Total revenues in Q2 2009 fell by 10.8% year-on-year to £119.7m. Initially, this might look mildly positive compared to the 19.5% year-on-year fall experienced last quarter. But remember that the downturn in UK radio first hit in Q2 2008 and had already reduced that quarter’s revenues 10.1% year-on-year. As a result, Q2 revenues in 2009 are now 20% below what they had been two years ago, a decline so significant that it will prove difficult to recapture even when the economy does improve.

National advertisers remain the weak spot for UK commercial radio, with revenues in Q2 2009 down 16.1% year-on-year. But once again, Q2 in 2008 was the start of the downturn and that quarter showed a 15.9% fall year-on-year. National revenues in Q2 2009 are now 29% below what they had been two years ago. It will be a mighty challenge to recoup such losses.

The notion that UK commercial radio is merely experiencing a cyclical blip and will quickly show recovery once the overall economy improves is a great feelgood story, but one that is not supported by the industry’s own data. Long before the ‘credit crunch’ hit us all, UK commercial radio revenues were already showing structural decline, a trend that the current economic cycle has merely exacerbated.

Nothing demonstrates the long-term trend more starkly than a glance at the year-on-year changes to commercial radio’s total revenues in recent quarters. Of the last 20 quarters, only 7 have demonstrated year-on-year revenue growth (one quarter in 2004, one quarter in 2005, one quarter in 2006, three quarters in 2007 and one quarter in 2008). The most recent quarter’s total revenues were 29% below the peak achieved as long ago as Q4 2003. If these comparisons were adjusted for the effects of inflation, the decline would look even more stark.


For the commercial radio industry, business will never be the same again. The ‘goldrush’ 1990s are never going to happen again, at least not without some kind of radio revolution (such as the BBC wilfully destroying Radio Two’s popularity, as they did with Radio One in the early 1990s). As a result, the commercial radio industry will need to change its modus operandi more substantially than ever before, not to thrive, but in order simply to survive. If it doesn’t change, we won’t have much of a commercial radio industry left at all.

The seemingly widely held belief that commercial radio MUST continue to exist in its present form because it is a highly regulated and licensed industry is simply false. If there was one lesson that should have been learnt from the implementation of DAB radio in the UK, it was that ensuring that a small group of commercial interests control a technology and the access to it counts for nothing if there is almost no demand for it. With DAB, radio broadcasting groups got what they wanted – their cartel became the licensed gatekeeper and owner of DAB. But if nobody wants your DAB, you are left being gatekeeper to a field of nothing.

It’s the same with commercial radio. If advertisers and listeners don’t want your product, there is no reason for it to exist, regardless of you waving around your scarce Ofcom licence. Not so long ago, station owners could still foist crappy radio content on the public because listeners were starved of alternatives, but digital audio and the internet have changed that FOREVER. No longer is there any market for second-rate radio. And, in commercial radio, if unwanted or irrelevant content doesn’t attract listeners, it won’t last long.

In this context, the latest Ofcom radio
consultation (“Radio: the implications of Digital Britain for localness regulation”) is a remarkably disappointing document. At a time when commercial radio is at a crossroads in so many senses (profitability, consolidation, platforms, localness, public service, interactivity, CPM, etc), this latest chapter in Ofcom’s many attempts to map out “The Future Of Radio” is no more than tinkering at the edges of existing radio regulation.

What was needed was a full-blown, courageous effort to overhaul the radio regulatory system in order to ensure that commercial radio continues to exist financially and that the diminishing number of licensees genuinely serves the public’s articulated radio needs. Instead, we have an Ofcom consultation that is no more than a grudging reaction to Lord Carter’s Digital Britain proposals, some of which are now adopted as if they were Ofcom’s own, some of which are watered down, and some of which have been ignored altogether.

The reluctance drips from every page. There are 81 uses of the word ‘if’ in this 82-page document. Almost every one of its proposals is tainted with uncertainty – “if and when new legislation is passed” or “if Parliament decides not to take forward”. Rather than seizing the opportunities that arise from the painful ‘crossroads’ when change is an inevitable necessity rather than a nicety, Ofcom seems happy to sit in the back seat and respond “whatever!” to ideas it receives, rather than grabbing at innovation and pushing it forward. It reads very much as if written by nobody who has ever themselves run a commercial business where painful life and death decisions have to be made, sometimes at breakneck speed and often without the aid of a parachute.

Ofcom continues to treat the commercial radio industry like a naughty child who, although 36 years of age now, cannot be trusted with more than a five pound note. Every Ofcom proposal continues to keep its centralised, London-based decision making about local commercial radio firmly within its own control, without trusting licensees to co-regulate in any meaningful way. For example:
· Proposal 1 requires stations to submit a request every occasion they seek a change
· Proposal 2 will lead to “a short consultation upon receipt of such a request”
· Proposal 3 requires stations to submit a request every occasion they seek a change
· Proposal 4 will lead to “a short consultation in most cases”
· Proposal 5 will lead to “short consultations in most cases”.

Only one thing is certain – Ofcom will be drowning in consultations for the foreseeable future. These five proposals alone (out of eight) multiplied by 300 stations plus DAB multiplexes yields a potential 1,000+ new consultations or requests. And yet the document claims that these Ofcom proposals are “broadly deregulatory”.

Sadly, more than anything else, the Ofcom document completely lacks any kind of vision as to what the commercial radio landscape might look like in the future, the antithesis of what the Digital Britain consultation exercise was trying to achieve. This is a missed opportunity for Ofcom. Not just this latest document, but in 2009 when the whole “what is the future of radio?” debate is probably at the most critical point in commercial radio’s history. It appears to many in the industry that Ofcom has simply disengaged from radio. This is a particular irony for an industry that prides itself on its success in one-to-one communication.

It may seem a stupid question……. If Ofcom still sees itself as the party with the skills necessary to make 1,000 potential individual decisions on the future of individual commercial radio stations, how is commercial radio presently in such a sad state of affairs as a result (partly) of previous regulatory decisions? We tend to respect and trust people who can demonstrate a positive track record. Why would I let a doctor operate on me who had killed almost every patient he had ever consulted?

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