Monday, 23 May 2011

GERMANY: "DAB [radio] remains a problem child"

On 2 May 2011, a panel convened at the Central Germany Media Conference in Leipzig to discuss the future of digital radio. The panellists were: Gerd Bauer from LMS, Erwin Linnenbach from Regiocast, Christophe Montague from NRJ International Operations and Willi Steul from Deutschlandradio.

The panel felt that one of the main problems around the planned (re-)launch of digital radio in Germany on 1 August 2011 was the lack of DAB+ capable radio receivers in the market. “The left shoe is there, but not the right one,” commented Erwin Linnenbach, who was concerned that it would be difficult to persuade consumers to buy a digital radio if they did not know what they would be able to receive on it.

Willi Steul said that he had had to visit three shops before he had found one that stocked a DAB+ radio. “An ordinary customer would not make that effort, but would have bought an FM radio from the first place,” he suggested. Deutschlandradio would save €12m per annum from being able to shut down its Long Wave and Medium Wave transmitters, said Steul. However, even if DAB+ were available nationwide, he did not believe that FM switch-off was an issue.

Christophe Montague suggested that, where there were already a wide range of FM radio stations, there was no need for new channels. This was the reason why it would prove so hard to launch digital radio in France. Whereas, in many parts of Germany, Montague said that it was a “radio desert.”

The panellists agreed that the biggest problem was the lack of DAB+ radios in shops. Linnenbach did not believe that this issue could be fixed by 1 August because there was not enough time. The objective had to be to make radio listeners understand the benefits offered by DAB+. If that succeeded, he believed the chances were good for a successful launch.

The panel proceedings were reported in the German press under sceptical headlines:
“DAB Plus before launch – an uncertain outlook for success,” said Business-on
“Media conference – success of DAB Plus not guaranteed,” said Digitalfernsehen
“Media conference – DAB remains a problem child,” said Rein-Hoeren

According to the latter publication, Erwin Linnenbach had said that the monopoly of transmission company Media Broadcast was the major obstacle to nationwide digital radio in Germany. He felt that Media Broadcast’s requirements did not offer a sensible business model to potential DAB+ broadcasters [see blog Dec 2010]. Christophe Montague agreed and said he had the impression that Media Broadcast would make the most out of the DAB tender process.

Heinz-Dieter Sommer, director of radio at Hessischen Rundfunks, said that economically viable conditions had to be created to enable commercial radio companies to participate in DAB+ alongside the public service broadcasters. “Otherwise,” he said, “in ten years time, FM will still not be switched off.”

Two British digital radio companies have committed financial support to the roll-out of national DAB+ in Germany in August 2011. This follows the slow-down of DAB radio receiver sales in the UK in 2009 and 2010 [see blog].

In December 2010, Frontier Silicon 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 over the next four years [see blog].

Then, in March 2011, Pure Digital announced that it had forged “a strategic marketing partnership with Germany’s commercial radio stations in advance of the launch of the first nationwide digital radio multiplex.” It said that “the partnership and financial investment” it was providing would ensure that its digital radios would be “heavily promoted in various German media.”

Germany could be under the mistaken impression that DAB radio is already a roaring success in the UK market. It was reported in the German press last week:
“While listening in Germany is still dominated by analogue radio, the British have long joined the digital age. Figures from RAJAR have shown that, in Q1 2011, nearly 92% of the population have listened to digital radio, on average for more than 22 hours per week.” [source]
“Britain remains a pioneer in listening to digital radio via DAB. On Thursday, new RAJAR record figures were recorded. 47.3m listeners (91.6%) in the first quarter listened at least once a week to digital radio.” [source]

In fact, the most recent RAJAR research found that 43% of the UK adult population listened to digital radio in a week, and only 27% listened to DAB radio. The high percentages quoted in the German press are for listening to ALL radio via ALL platforms, not for digital radio or DAB radio alone.

I recall Frontier Silicon chief executive Anthony Sethill having been quoted in his company's press release in 2008 saying: “Digital radio is here to stay, with DAB sets outselling analogue models by six to one.”

In fact, in the UK, analogue radios outsell DAB radios by four-to-one. Mmmm. It looks as if the DAB propaganda war in Germany has only just begun.

Thursday, 19 May 2011

Government expenditure cutbacks clobber UK commercial radio

As soon as the coalition government came to power in May 2010, it implemented Conservative Party policy to make substantial cutbacks to the amount of public money spent on government marketing campaigns. Commercial radio was hit the hardest because, more than any other medium, it had become increasingly dependent upon government expenditure on advertising airtime.

In 2010, before the general election, I had predicted [see blog] that the impact of these cutbacks would prove “disastrous” for the commercial radio sector. I had calculated that a 50% cut in total public expenditure on commercial radio advertising would lose the sector £44m to £48m in revenues, equivalent to 9% of total sector revenues.

Interviewed by BBC Radio Four, I was asked if my scenario was not overstating the potential impact on commercial radio. I argued that it was not – the amount spent by the government’s Central Office of Information [COI] on commercial radio dwarfed all other radio advertisers by miles. By February 2010, government expenditure on radio commercials was greater than that of the second, third, fourth and fifth largest advertisers combined.

The Radio Advertising Bureau had put a brave face on the losses from its biggest advertiser. In June 2010, it said: “We are optimistic that radio’s strengths will be recognised as COI budgets come under ever greater scrutiny.” In September 2010, it said it was “working with a wide range of advertisers to bridge the gap” left by public expenditure cuts.

However, the latest data from Nielsen show that the impact upon commercial radio has been even greater than I had forecast. In the year to February 2011, COI expenditure on radio advertising was down 70% year-on-year, much greater than the 50% cut that had been anticipated from previous Conservative Party pronouncements. In total, commercial radio lost £44m per annum from all public expenditure on radio, compared to the previous year.

The worse news was that, as the graph above shows, the fall in COI expenditure has become steeper in recent months. As a result, the impact on the sector in 2011 is likely to be just as severe as it was in 2010. The hard fact is that this is not a temporary cyclical loss for commercial radio – these revenues will not rebound for as long as the coalition government remains in power.

The graph shows clearly that no individual or group of advertisers have been able to substitute entirely for the losses caused by government cutbacks, although some gains were made from clients in 2010 [see blog]. No commercial advertiser spends more than £10m per annum on radio, whereas the COI had spent £58m in the year to March 2010 (but was down to £17m by February 2011). This is simply too big a gap to be filled by a few individual commercial advertisers.

Media Week reported recently that “the more optimistic media owners are hoping the COI’s former spend [on radio] can be clawed back by year’s end.” It is hard to see how that can be realistically achieved, given the scale of the £44m per annum loss from public sources to date, particularly in the face of declining consumer disposable incomes.

In an attempt to offer a positive outlook, Media Week suggested: “But the situation is set to improve. From April [2011] onwards, there will no longer be any comparable year-on-year COI spend left in the system, as purdah [sic] kicked in 2010.”

Perhaps what Media Week was trying to say was that COI expenditure will level off this year once the savage cuts have been in situ for more than a year. Yes, inevitably, but that does not in any way help an industry that has just witnessed £44m per annum of revenues disappear into thin air. Remember that total commercial radio revenues in 2010 were only £523m, already down from £641m in 2004. Now a further huge 8% chunk of income has gone.

Another commentator recently noted optimistically: “The [radio] medium took £523 million in revenue in 2010, up 3.3% year-on-year, and 2011 looks like another positive year of growth, not the inevitable management of decline forecast by some.”

However, once inflation is taken into account, 2010 commercial radio revenues fell in real terms [see blog]. Far from a decline being “forecast by some,” the industry’s own data demonstrate that decline has been occurring since 2004 in real terms, long before the recent cuts to government expenditure. Adjusted for inflation, commercial radio revenues in 2010 were lower than they had been in 1998.

This is not the time for spreading unfounded optimism based on ignorance of the facts. If anything, the impact of government cuts has proven to be more than “disastrous” and will necessitate even more restructuring of the commercial radio sector in the short term. This could include the closure of further unprofitable digital ventures and of sector support agencies whose subscriptions will begin to appear increasingly discretionary when the axe has to fall somewhere.

Sunday, 15 May 2011

FRANCE: government report recommends 2-3 year "moratorium" before launch of digital radio

A new report on the introduction of digital terrestrial radio (‘DAB radio’ in the UK) in France has recommended to the government that the launch should be delayed by two to three years. In the interim, the French media regulator CSA would be asked to establish a project to investigate the “overseas experiences” of digital radio, according to the government press release.

David Kessler, former head of state radio station France Culture, was commissioned in June 2010 by the government to produce a strategic analysis of the launch of digital radio in France. His interim report, published in November 2010 [see blog], identified the “paradox of DAB radio – it is a sufficiently attractive technology to be launched successfully, but it is insufficiently attractive to successfully allow FM broadcasts to cease.”

In the final report, published this week, Kessler said that not all the conditions had been met from an economic standpoint to permit the widespread launch of digital terrestrial radio. His report identified the significantly different challenges between digital radio switchover and digital television switchover:

“An error in logic has probably contributed greatly to making the debate [about digital radio] opaque rather than transparent. The error came from having planned digital radio switchover with reference to digital television switchover, which started in 2005 and the success of which has been staggering and immediate, so that the changeover from analogue to digital TV will be completed throughout the land by 2012. Many parties imagined that the route to digital opened up by television would be followed by radio. But this plan was wrong for three reasons.

Firstly, the television market was dominated in 2005 by five channels (TF1, France 2, France 3, France 5/Arte and M6) that attracted 75% of television viewing. The transition to a score of free channels was obviously very attractive. However, as will be discussed later, the situation in radio is quite different – the current choice of stations is one of the richest that exists in the world, after the landscape opened up in the 80s. Even if the choice is not the same in every region, none of them – some near – are in a situation where only five major stations dominate the choice.

Second is the difference in receivers. Even if digital radio switchover had been launched simultaneously with that of television, where the evolution of televisions (flat screen, HD and now 3D) resulted in a faster replacement of equipment than anticipated, digital television was accessible without changing the set through the purchase of a single adaptor at a moderate price. Digital radio switchover requires the replacement of all receivers, and households have multiple radios and the market is sluggish. Without doubt, digital radio switchover could re-invigorate the market with a simple, inexpensive high-end (with screen) radio. At this point, no one can say how quickly take-up of replacement receivers will happen. Examples overseas – particularly Britain – demonstrate a relatively slow rate of replacement, and the different situation in countries where take-up is faster – Korea, Australia – make comparisons difficult.

The third reason is that the history of television demonstrates that it works through ‘exclusive changes’ where one technology replaces another quickly. Colour television pushed out black and white television. Digital television is about to push out analogue television. But experience shows that far from all media work this way. On the contrary, some go through ‘cumulative change’. Over a short or long period of time, different technologies co-exist and content is distributed through several technologies. As Robert Darnton noted about the book, we often forget that the printed word has long co-existed with the manuscript. From this perspective, the history of radio is the opposite of television: different transmission systems are cumulative rather than exclusive. This does not exclude the possibility that, in the long run, some transmission systems will decline and no longer be used, just as printing marginalised the manuscript. But what it means is that one cannot plan the launch of digital radio by imagining that all other transmission systems will be switched off, particularly FM. Even today, despite the success of FM, Long Wave and Medium Wave transmissions are still used because they reach a sufficient number of listeners not be switched off by broadcasters.

In fact, a careful examination of the launch of digital radio in other European countries shows that a ‘cumulative change’ scenario exists that we must anticipate in France too. Indeed, the launch of digital radio in other European countries had been presented as a quick substitute for analogue radio, even though the existing choice of analogue stations was less than in France, and the choice of digital stations seemed more attractive and content-rich than offered by analogue. Even if a proportion of listeners are quickly adopting digital radio, a greater proportion are still sticking with their traditional radios, with the possible exception of Norway, where analogue switch-off seems to be seriously considered at present. This leads to a situation in which the government initially adopts a goal of analogue switch-off but then, given the impossibility of switch-off, drops or postpones the switch-off date by several years. As the choice of existing radio stations is particularly substantial in France, it would appear that this situation is most likely to be repeated if digital radio were to be launched. Radio station owners are not mistaken. Very few want a quick switch-off of FM, and some do not want any switch-off.”

These points echo evidence on digital radio switchover in the UK that I had presented to the House of Lords Select Committee on Communications in January 2010:

“With television, there existed consumer dissatisfaction with the limited choice of content available from the four or five available analogue terrestrial channels. This was evidenced by consumer willingness to pay subscriptions for exclusive content delivered by satellite. Consumer choice has been extended greatly by the Freeview digital terrestrial channels, many of which are available free, and the required hardware is low-cost.

Ofcom research demonstrates that there is little dissatisfaction with the choice of radio content available from analogue terrestrial channels, and there is no evidence of consumer willingness to pay for exclusive radio content. Consequently, the radio industry has proven unable to offer content on DAB of sufficient appeal to persuade consumers to purchase relatively high-cost DAB hardware in anywhere near as substantial numbers as they have purchased Freeview digital television boxes.”

The Kessler document should offer significant food for thought to the British government for its unworkable plans for DAB radio switchover. Whereas Kessler correctly identified that TV and radio digital switchover are two very different undertakings, our public servants working on digital radio policy in the government and in Ofcom have long failed to understand these differences. The appointment of Ford Ennals as chief executive of Digital Radio UK in 2009, on the back of his work between 2005 and 2008 managing digital television switchover, should have been viewed as barely relevant experience to achieve successful digital radio switchover.

Have any of the people managing digital radio switchover for the UK ever actually worked in the radio industry? At DCMS? No. At Ofcom? No. At Digital Radio UK? No. If, like Kessler, they had radio sector experience, they would realise that all their speeches and presentations that repeatedly cite digital TV switchover as the precedent for radio are completely off-target.

Is there any wonder that failure of DAB public policy was inevitable?

Saturday, 14 May 2011

When UK radio listening figures are this good, why does RAJAR need to fib?

It is good to know that radio is still an extremely popular medium in the UK, something borne out by the latest radio audience metrics published by industry body RAJAR for Q1 2011. However, in its determination to make every quarter’s results newsworthy, RAJAR has a track record of bending the truth to achieve press headlines [see blog May 2010]. This latest quarter was no exception.

According to the RAJAR headline:
• “Total radio listening hours reach 1,058 million per week – new record.”^

RAJAR explained:
• “The total number of radio listening hours broke all previous records to reach 1,058 hours per week …”^

Fantastic news! Except that this is not at all true. RAJAR’s own historical data tell a different story:
• 1,088 million hours per week in Q2 2001
• 1,092 million hours per week in Q3 2001
• 1,092 million hours per week in Q4 2001
• 1,090 million hours per week in Q1 2002
• 1,072 million hours per week in Q4 2002
• 1,094 million hours per week in Q1 2003
• 1,066 million hours per week in Q3 2003
• 1,076 million hours per week in Q4 2003
• 1,086 million hours per week in Q1 2004
• 1,072 million hours per week in Q2 2004
• 1,068 million hours per week in Q3 2004
• 1,059 million hours per week in Q1 2005
• 1,068 million hours per week in Q2 2005
• 1,072 million hours per week in Q3 2005
• 1,060 million hours per week in Q4 2005
• 1,063 million hours per week in Q3 2006

During sixteen quarters between 2001 and 2006, total hours listened to radio were greater than they were last quarter. “New record?” No. “Broke all records”? Er, no.

The reality is that total radio listening has not yet returned to the level it had achieved in 2001. Except that, ten years ago, the UK adult population was 48.1 million, whereas now it is 51.6 million. So the population has increased by 7% over the last decade. Yet total UK radio listening is still less than it was then.

Most statisticians I know would refer to that as a like-for-like 7%+ decline in total hours listened to radio. However, to RAJAR, it is evidently a “new record” that “broke all previous records.”

Why does any of this matter? Because radio broadcasters have been progressively losing usage over most of the last decade. Initially, it was 15-24 year olds that were spending less time with radio. Increasingly, it is also 25-34 year olds. For a decade, the UK radio industry has desperately needed a coherent strategy to reverse this loss of listening. The decline in young adult listening to broadcast radio does not merely impact the NOW. If these consumers do not find anything in their youth worth listening to on the radio, they will grow old without the radio habit. Their radio listening patterns NOW are likely to influence radio listening for the next half-century.

This is why RAJAR’s continuing efforts to achieve yet another headline in the Daily Mail proclaiming “Radio listening at an all time high” are ultimately redundant. Those headlines do not impact the reality of the data collected from tens of thousands of radio listeners every month. Those data show incontrovertibly that listening is in significant long-term decline amongst younger demographics. And radio will be in mortal danger if it does not re-invent itself for the next generation.

You only have to listen to any pirate radio station in London to understand that the gulf between what young people are actually listening to and what the old fogies who run UK radio are giving them has never been wider. Chris Moyles is as passé as Dave Lee Travis was twenty years ago.

So, yes, RAJAR’s fibs and the resulting Daily Mail headline will be another opportunity for champagne corks to pop in radio boardrooms across the land. But if radio doesn’t start making itself exciting and relevant to young people, broadcast radio’s future role will be relegated to a soundtrack in old people’s homes. Complacency such as that propagated by RAJAR will only make many radio businesses redundant in the long run.


^ in a footnote this small, the RAJAR press release admits the caveat “since new methodology was introduced in Q2, 2007.”

Sunday, 8 May 2011

DAB Radio Downgrade: how is '90% of FM coverage' a sensible target for DAB to replace FM?

“Makin’ a good t’ing bad!”

Moving the goalposts. Governments are adept at doing just that to help them achieve their targets or to make figures look better than they really are. Digital radio switchover is no exception. Given the technical and financial impossibility of the task plotted twenty years ago to completely replace analogue radio broadcasting with DAB radio, it has became necessary in recent months for the civil servants and digital radio lobbyists to move the goalposts.

In a blog in April 2011, I had outlined Ofcom’s latest ruse to deliberately plan to make DAB reception worse than existing FM reception for many radio listeners. Nevertheless, Ofcom will still declare this a victory for the technical superiority of the DAB platform.

The latest proposal under consideration is to make coverage of local DAB transmitters equivalent to 90% of existing FM coverage. On the one hand, this represents a belated admission that DAB radio cannot realistically achieve the same robust coverage as FM. On the other, it is a massive kick in the teeth to radio listeners – an attempt to purposefully replace something good (FM) with something worse (DAB). Madness!

A recent presentation by DAB lobbyist organisation Digital Radio UK invoked a new, vague “local digital coverage equivalent to 90%” criterion [see below]:

“90%” of what? The government’s Digital Britain report in June 2009 had fixed the digital radio switchover criteria as:
• “When 50% of listening is to digital; and
• When national DAB coverage is comparable to FM coverage, and local DAB reaches 90% of the population and all major roads.” [emphasis added]

There was never anything in Digital Britain about achieving “90% of existing FM coverage.” It was always “90% of the population.” The goalposts are being moved to make it easier for the government and DAB lobbyists to declare that DAB has achieved the criteria. Despite this outcome making the consumer experience of radio evidently worse.

We were told that one result of the Digital Radio Summit meeting on 31 March 2011 between government, regulator and the radio industry was:

“It is understood that it will cost around £20-30m to extend the local DAB signal to 90% of the FM signal in the UK…”

At a Westminster Media Forum conference on 5 April 2011, the topic of this newly created “90% of FM” criterion was raised by several speakers:

Jimmy Buckland, director of strategy, UTV Media: “There's a DCMS [Department for Culture, Media & Sport] plan that's been referred to today that's currently on the table that would take local multiplexes to just 90% of what FM already delivers, with no commitment on major roads. If that plan’s agreed, it just about gets us to base camp.”

[…]

Neil Midgley, assistant media editor, The Daily Telegraph: “Now the briefing that we were getting last week was somewhere below £30 million for a build out to about 90% of current FM coverage. “

[…]

Daniel Nathan, director, Brighton & Hove Radio: “Just leading on from that, in Jimmy’s slide we saw the figure being an aspiration of ‘90% of the population’ and I was quite disturbed to hear that now that they are kind of moving away from ‘90% of the population’ to ‘90% FM coverage.’ When was that decided and by whom?”

[…]

Jimmy Buckland: “There were two different figures, there was originally a figure which was the criterion, at which point you would make a decision about switchover which was that the Government said that once we had ‘90% population coverage’ and ‘coverage of all major roads,’ you could make a decision and there were a couple of other criteria that go with that. The second figure which was ‘90% coverage of current FM’ for local DAB concerns what would be delivered by a proposal which is currently on the table. So to tie in with the previous point, what that £30 million delivers is a little bit more coverage at the local level, aggregated to 90% on a UK wide basis, so in some local markets it could be comfortably less than 90%, in other markets it could be higher and it doesn’t get you to the universality that you need for switchover.”

So, two questions remain unanswered:
• Who came up with the idea of ‘90% of FM coverage’ to be sneaked in as an easier criterion?
• Why are large parts of the radio industry (including RadioCentre and the BBC) not publicly campaigning against this ridiculous proposal intended to make reception of their radio stations on DAB WORSE for listeners than existing reception on FM?

It is hard not to conclude that the parties involved in this latest wheeze seem happy to treat the UK’s 46,727,000 radio listeners with utter contempt.