One week earlier, British company Frontier Silicon, “market leading supplier of digital radio technology worldwide”, had announced that, in order to persuade four commercial radio broadcasters in Germany to persevere with DAB, it had promised them it would purchase an unspecified amount of their advertising airtime for the next four years.
Anthony Sethill, Frontier Silicon CEO, put a positive spin on an act that some might perceive as little more than legalised bribery in the face of desperation to sell DAB hardware in Germany: “We are delighted that our innovative approach to supporting the roll out will help everyone working on this new radio service to bring their efforts to fruition.”
For years, German transmission provider Media Broadcast has been eager to put into action its masterplan to lock new DAB+ broadcasters into minimum 10-year contracts, for which it will be charging €2m per annum per station by 2021. The combination of Media Broadcast’s enthusiasm for the financial returns from DAB transmission contracts, and Frontier Silicon’s enthusiasm for the potential sales in Germany of DAB receivers that incorporate its technology, plus the offer of an amount of cash, persuaded a few commercial broadcasters to take on the risk of using the DAB+ platform.
Helmut Egenbauer, CEO of Media Broadcast, said: “Having introduced Frontier Silicon to the commercial broadcasters, we are delighted to see that their discussions have led to this important commitment to DAB+ radio services.”
Those five German commercial broadcasters should understand that even Frontier Silcon’s subsidy might not prevent them losing money hand over fist for the entire ten years of their transmission contract with Media Broadcast. The evidence is already there from the UK market. Not one commercial digital-only radio station has yet made an annual operating profit from the DAB platform in the UK, even after eleven years, let alone come close to recouping its investment.
Research commissioned by RadioCentre in 2009 found that the average annual revenues of a digital radio station were around £130,000 per annum. By then, 10m DAB receivers had been sold in the UK. Yet Germany is still at Year Zero with DAB+ radio penetration. The same report for RadioCentre had noted that the “annual negative cash flow impact of DAB” on the UK commercial radio industry was around £27m per annum, or 5% of sector revenues. Can German commercial radio afford to deplete its profitability by that sort of amount, year-on-year, for the next decade?
Frontier Silicon’s press release quoted Helmut G. Bauer as a “representative of the commercial broadcasters,” saying what a fantastic deal it was and promising that “2011 will be year that DAB+ is successfully launched in Germany.” However, Bauer is not associated with the German commercial broadcasting trade body, VPRT, which has been outspoken in its condemnation of plans for digital radio switchover in Germany. Bauer is a Cologne-based lawyer who has long made pro-DAB presentations at media conferences, and pro-DAB statements to the press, as a ”consultant.”
In fact, VPRT had commented: “As we know, DAB failed in the market. Against this background, plans for the closure of FM – originally scheduled for as early as 2015, but now postponed – are absurd from an economic and social perspective and are therefore unacceptable.”
Noting the developments in Germany this week, Berlin-based Christoph Lemmer wrote in Radioszene magazine:
“With this decision, DAB will now actually be introduced by those who have succeeded, smelling a quick buck, in selling Germans a new sort of equipment, with millions to be sunk into to a new transmission network. Our old radios will be useless for DAB. Those who want to continue listening to the radio will need a new receiver.“
“It does not take a prophet to suspect that the private radio industry has shot itself in the foot by agreeing to sign the DAB contracts. A few shekels subsidy from a chip manufacturer who wants to install as many of its chips in DAB receivers – that is what has led to this. You, dear people, were not considered in the end. Do you really believe that devices with DAB will ever be as numerous as FM radios are today?”
“No one will understand what [DAB] is and why it is good. Because, with DAB, you have solved a problem that did not exist. The existing technological distribution of radio programmes is excellent and widely used. You did not have to change anything. The argument that DAB will create new radio channels with lower entry barriers is specious, as long as media regulators continue not to award licences for technically available [analogue] frequencies because they do not want additional competition in the market.”
This week, World DMB, the body marketing DAB radio globally, was so excited by developments in Germany that its web site posted seven news stories about it on 15th, nine on 16th and a further four on 17th. The overkill speaks volumes. Lacking any upturn in DAB receiver sales, the only positive news that DAB lobbyists can muster is this second attempt in Germany to launch a DAB technology that was first developed in 1981.
It is hard to recall a comparable technology whose proponents were still pushing for its launch three decades after its invention. DAB proponents argue that, simply because DAB is ‘digital’, it is inevitable that it will replace analogue radio. History indicates otherwise.
Digital Audio Tape. Introduced 1987. Abandoned 2005.
Digital Compact Cassettes. Introduced 1992. Abandoned 1996.
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