Saturday, 28 August 2010

UK commercial radio audiences: one swallow doesn’t make “long-term and sustained growth”

UK commercial radio has been in the doldrums for the last decade. Its audiences have been battered by competition from the BBC, revenues have been declining, and some local stations have been forced to close or merge (sorry, ‘co-locate’). So, when a piece of good news comes along, it is natural that it will be celebrated. The latest RAJAR audience survey for Q2 2010 provided just one such fillip of positivity for the commercial radio sector. But, sometimes, what should have been a small private party gets turned into a showy public display of excess by the celebrants.

This appears to have been the case with commercial radio’s take on its latest audience figures. Maybe it was the effects of too much champagne, but the RadioCentre press release stated:

“This is a fantastic set of results for the commercial radio sector showing long-term and sustained growth by every measure.”

This might have been an appropriate thing to say to a roomful of cheering partygoers but, in the sober light of day, sticking this claim in a press release was bound to invite closer scrutiny. In the following graphs, the main RAJAR metrics for UK commercial radio are put in historical perspective. In these graphs, we are seeking what RadioCentre told us is “long-term and sustained growth” in “every measure.”

UK commercial radio adult weekly reach hit an all-time low of 60.9% as recently as Q3 2009, then subsequently made gains in three consecutive quarters to 63.7% in Q2 2010. Growth? Yes (three consecutive quarters). Sustained growth? Not really. Long-term growth? No.

UK commercial radio total adult listening hit an all-time low the previous quarter (Q1 2010) of 419m hours per week, then bounced back in Q2 2010 to 445m hours per week. Growth? Yes (one quarter). Sustained growth? No. Long-term growth? No.

UK commercial radio average hours listened per adult listener hit an all-time low of 13.0 hours per week the previous quarter (Q1 2010), then bounced back in Q2 2010 to 13.5 hours per week. Growth? Yes (one quarter). Sustained growth? No. Long-term growth? No.

UK commercial radio’s share of adult listening hit an all-time low of 41.1% in Q1 2008 and, since then, has bounced up and down. Last quarter (Q1 2010), it had hit its second lowest level ever (41.3%) before rebounding to 43.2% in Q2 2010. Growth? Yes (one quarter). Sustained growth? No. Long-term growth? No.

UK commercial radio absolute adult reach is the only metric that is presently at an all-time high of 32.9m adults per week in Q2 2010. It jumped up that quarter because once a year, in Q2, RAJAR increases all its adult totals to account for the 1% per annum UK population increase. It is positive that more people are listening to commercial radio but, at the same time, as the result of population growth there are also more people listening to BBC radio, and more people not listening to radio at all. However, commercial radio’s absolute reach has not grown sufficiently in the long term to even keep pace with the increasing UK population.

So, in total, it seems impossible to locate commercial radio’s “long-term and sustained growth” in the latest RAJAR data. I point out these facts because I want to see commercial radio succeed. The sector desperately needs to attract more hours listened in the long term if it is to improve revenues and return to profitability. This has not yet happened. There is no point pretending that it has.

As for RadioCentre, an inaccurate statement of fact is an inaccurate statement of fact is an inaccurate statement of fact. Telling the world that your industry is enjoying “long-term and sustained growth” might be good propaganda for rallying your troops, but surely it must undermine the commercial radio industry trade body’s credibility with the rest of the world if it clearly is not true.

What is to be achieved for the radio sector by the RadioCentre press release crossing that line between hype and untruth?

Saturday, 21 August 2010

Download The First Annual Not ‘The Ofcom Digital Radio Progress Report’ Report

Download this report here

In July 2010, Ofcom had published its first annual report on the progress made in the UK with take-up and usage of digital radio. I criticised the report in this blog for being selective with data and distorting the real picture of the slow take-up of DAB radio.

Ofcom responded to two of my criticisms in a subsequent news article in Media Week. Ofcom explained that it had “categorised ‘unspecified’ listening as ‘analogue’ rather than ‘digital’ listening because it did not want to exaggerate ‘digital’ listening.” What?

This response seems only to confirm my assertion that Ofcom invented the numbers it published. There are two possible scenarios: either Ofcom did not realise that deliberately mis-stating the results of market research breaches the Code of Conduct of the Market Research Society; or Ofcom did realise this but decided to do it anyway. I am uncertain which scenario is scarier. If Ofcom’s invented RAJAR statistics had been included in an advertisement, it would be banned by the Advertising Standards Authority. Adding the ‘don’t know’ answers to either the ‘for’ or the ‘against’ totals in any consumer survey is a crime against statistics.

Secondly, Ofcom responded to my criticism that it had not published historical data to demonstrate how close we are to achieving the 50% digital listening criterion set by government. Ofcom said that it “did not set historical figures next to the forecasts because they are not formal criteria”. What?

I suggest that Ofcom stops daydreaming about a DAB future and starts listening to the words of its government paymasters. To take just one example of dozens, on 8 July 2010, Culture Minister Ed Vaizey said very plainly:

“We will only consider implementing a Digital Radio Switchover once at least 50% of all listening is already on digital or, to put it another way, when analogue listening is in the minority.”

Besides, Ofcom’s report itself had noted (in two places) that:

“A decision on switchover could only made once two criteria had been fulfilled [sic]:
• when 50% of all radio listening is via digital platforms; and
• when national DAB coverage is comparable to FM …”

The Ofcom Digital Radio Progress Report published last month was required by the Digital Economy Act 2010 to inform the government how close the UK is to achieving this 50% criterion. Yet, bizarrely, the very numbers the government wanted to see were missing from the relevant Ofcom graph.

In the spirit of constructive action, I have collated a short collection of graphs and tables in a presentation titled The First Annual Not ‘The Ofcom Digital Radio Progress Report’ Report. It can be downloaded here for free. All of the data within are derived from freely published industry sources to which Ofcom had access.

The first section of the report demonstrates that none of the radio industry forecasts for UK digital radio take-up stand a chance of being achieved, whether those predictions were made by the government, its committees, Ofcom, RadioCentre, Value Partners or whomever. These forecasts were not just wrong – they were wildly wrong.

The inability of forecasters to observe the reality of slowing DAB radio take-up in the UK was underlined by a forecast published in August 2010 by a US company that predicted:

“By 2015, the worldwide installed base of digital radio receivers, excluding handsets, is expected to reach nearly 200 million units. … ‘The adoption of DAB radios in Europe has been led primarily by tabletop radio sales in the UK,’ says [Sam] Rosen. In addition to the US and the UK, Switzerland, Denmark, and Norway all have significant broadcast infrastructure in place, with Australia, Germany and France to complete the majority of their infrastructure in 2011.”

Yes, and pigs will fly. It has taken a decade for 11 million DAB radios to be sold in the UK, and they still only account for 16% of radio listening. Far from the UK’s DAB broadcast infrastructure being almost complete, there is an impasse about who will stump up the money to render it fit for purpose. France is still debating whether to go digital at all. Germany abandoned its first effort and is planning a second attempt. Besides, the US, UK, French and Australian technology systems for digital terrestrial radio are each mutually exclusive. There is no globally agreed standard for digital terrestrial radio, so there is no universal ‘digital radio’ receiver, and nothing like 200 million digital radios (of all types) will be sold by 2015.

But a woefully inaccurate, over-optimistic forecast is always a good excuse for writing fantasy news. In the US, Media Post reported:

“HD digital radio is poised for rapid growth over the next few years … with much of the increase coming abroad, especially in Europe, where various governments have established HD radio as the national standard. … US consumers have purchased 4 million HD radio sets, while European consumers – led by the UK – have purchased about 13.5 million.”

Oh dear. Lie One: the American HD radio system is not a national standard in any European country. Lie Two: not a single HD radio has been sold in the UK. Lie Three: maybe 13 HD radios have been sold in Europe, but certainly not 13 million.

Consequently, US broadcast industry trade body NAB summarised this completely inaccurate news story ("... the real growth is happening overseas, where governments have already established HD [radio] as a standard technology") and sent it to everyone on its mailing list. The whole of the US radio sector must be amazed that Europe, led by the UK, has embraced American HD radio technology so warmly, while it is failing so dismally in its homeland. Wrong! In reality, no consumer in Europe has even heard of HD radio (except for a few techies testing it in Switzerland).

Closer to home, the continuing failure of the DAB digital radio system to impress European consumers seems to have impacted thinking at the European Broadcasting Union [EBU], which has supported Europe-wide implementation of DAB since 1986. In outlining the agenda of its fourth Digital Radio Conference [DRC10], the EBU came close to acknowledging that DAB is no longer ‘the future of radio’:

“Where previous [conference] editions have focused on the relative merits of the different digital radio platforms and their roll-out across Europe, DRC10 will focus on radio's position within a pluralistic distribution model. That the discussion of digital radio's future has, to date, been weighted towards different platforms is understandable given the uneven pace of Eureka 147 (DAB/DAB+/DMB) adoption and the rapid deployment of internet to European homes. Indeed, technical development has now reached something of a plateau. … The debate has moved forward from which platform might 'win' to how best to chart a digital future for radio on multiple platforms. … A more fundamental question then is 'what is the case for digital radio?'. This is about business and social arguments for and against the development of digital radio in all its forms. It involves the economics of radio revenues and costs, the social value, the mix of public and commercial broadcasters, as well as the quality and variety of the offering.”

“Uneven pace”? “Plateau”? “Multiple platforms”? Am I the only one to smell EBU back-peddling here on the DAB issue? At last year’s EBU conference, I seemed to be the only speaker exploring “the economics of radio revenues and costs” amongst a sea of technologists whose enthusiasm for DAB remained unsullied by the constraints of the economics of radio. Maybe the penny has dropped – a platform remains no more than a platform if you cannot afford to fill it with compelling, exclusive radio content, and convince consumers to use it, and generate a profit from it.

Here in the UK, while the biggest commercial radio owners have already baled out of most of their DAB commitments (and the BBC is trying to close two of its digital stations), the digital minnows are left suffering the economic consequences of a platform that has effectively been thrown to the dogs. Passion For The Planet, an independent digital-only station that has persevered on the DAB platform since 2002, announced in August 2010 that it will no longer broadcast on DAB in London. Managing director Chantal Cooke explained:

“DAB is a great medium for radio, but squabbling within the industry and a lack of clarity and direction from Ofcom leaves us worried that radio may well have missed a great opportunity. I believe London has too many stations, and the signal on the ‘London 3’ multiplex has always been, and continues to be, very poor. The lack of a robust signal has hampered independent services from the start, yet neither the multiplex operators nor Ofcom has taken the problem seriously. Passion for the Planet has spent a small fortune broadcasting on ‘London 3’ because we believed in the platform but, while there are still so many issues to be rectified, further investment in DAB in London has become increasingly difficult to support.”

The writing on the wall for DAB’s impending failure is writ so large now that Ofcom staff must have to leave work under cover of darkness not to see it. Large parts of the radio industry evidently have no faith in DAB ever replacing analogue radio. However, over at Ofcom HQ, the futile work continues to try and convince consumers and the government that DAB is still ‘the future of radio’. We will probably never know how much public money and time has been wasted on these foolish endeavours.

[many thanks to John Catlett and Eivind Engberg for their valuable contributions]

Wednesday, 4 August 2010

Lies, damned lies and … Ofcom’s first digital radio progress report

Ofcom quietly published its first Digital Radio Progress Report in July 2010, without fanfare or a press release. This report has been a remarkably long time coming, given that DAB radio has been with us more than a decade. During that time, Ofcom has published 26 Digital Television Progress Reports, starting in 2003.

Here was an opportunity for Ofcom to demonstrate that it is acting in the public interest by publishing solid, objective data about the progress of digital radio in the UK. Did it take that opportunity? No. Instead, Ofcom published a set of data that are so selective and so distorted that they misrepresent the progress (or lack of it) made to date in advancing the UK towards the ‘digital radio switchover’ that our government is determined to execute. Why? Because Ofcom (like the government’s DCMS department) seems determined to persuade us that its totally unrealistic plan for DAB radio has not been an unmitigated disaster with the citizen/consumers on whose behalf it is supposed to be working.

It might appear pedantic to pick over the details of data represented in this feeble 24-page Ofcom report. However, it must be stressed that this is no nitpicking exercise. The Digital Economy Act 2010 insists that this very document submitted by Ofcom (and another by the BBC) to the government will decide whether the UK will progress to ‘digital radio switchover’. It is these data that will decide whether we can continue to receive BBC network radio stations on the 100 million analogue radios that are out there. It is these data that could mean we have to replace perfectly satisfactory analogue radio receivers in every household across the country, at a cost of millions to consumers.

To note the issues in the order they appear in the Ofcom report:

This Ofcom graph purports to show that:
• Digital platforms’ share of radio listening increased from 12.8% to 24.0% between 2007 and 2010 (this is TRUE)
• Analogue platforms’ share of listening decreased from 87.2% to 76.0% between 2007 and 2010 (this is FALSE)

The four figures cited in Figure 1 for the analogue platform – 87.2% in 2007, 82.2% in 2008, 79.9% in 2009 and 76.0% in 2010 – are an Ofcom invention. These false data seek to demonstrate that a rapid decline in analogue listening has taken place. This is not true. As the graph below shows, analogue listening has remained remarkably static over this timeframe.
The situation is complicated by two facts: a significant proportion of radio listening remains ‘unspecified’ by respondents in RAJAR listening surveys, and that this proportion has varied greatly in size in different surveys. However, this does not detract from the falsehood of Ofcom’s attempt to demonstrate that analogue listening is in sharp decline.

This Ofcom graph purports to show that:
• 54% of 15-24 year olds use digital radio
• 57% of 25-34 year olds use digital radio
• 56% of 55-64 year olds use digital radio
• 46% of 65-74 year olds use digital radio
• 29% of 75+ year olds use digital radio.

In fact, the fine print explains that Ofcom had asked the question ‘Have you ever used digital radio?’ This ensured that the results were almost meaningless because they tell us nothing whatsoever about current usage of digital radio. For example, a 68-year old who, on a single occasion ten years ago, had listened to digital radio for 10 minutes will have answered ‘yes’, despite having made no further usage during the last decade.

Ofcom’s objective here seems to have been to highlight the large size of the resulting numbers, without indicating that they derive from an almost useless question (garbage in, garbage out). If you were to ask people ‘Have you ever bought a banana?’, almost 100% would respond ‘yes’. Their answers tell you absolutely nothing about the current market for bananas. Exactly the same is true of digital radio usage. In this context, the resulting numbers seem remarkably low because only half the population has ever tried digital radio (even once in their lifetime).

This Ofcom graph purports to show that:
• 53% of adults use digital radio
• 63% of adults in socio-economic groups AB use digital radio
• 55% of adults in socio-economic group C1 use digital radio
• 48% of adults in socio-economic group C2 use digital radio
• 42% of adults in socio-economic groups DE use digital radio.

Just as in Figure 2, the fine print explains that Ofcom had asked the question ‘Have you ever used digital radio? The same issues apply here as with Figure 2.

This Ofcom graph shows digital platforms’ share of total radio listening, but the data omit:
• A comparison with the analogue platform
• A time sequence to show how fast the market is changing.

The following graph demonstrates the slow growth of digital platforms and their low level in comparison with analogue. It also demonstrates that a proportion of the growth in digital platform usage is the result of a statistical technicality caused by a reduction of ‘unspecified’ listening in recent quarters.

The following graph demonstrates the slow growth of individual digital platforms since 2007, using the same scale as applied in the preceding graph.

This Ofcom graph purports to show that:
“five digital-only services generated a weekly reach of 1 million+ listeners in Q1 2010.”

However, the fine print explains that the Ofcom data refer to “all listeners [aged] 4+”, whereas the radio industry’s standard metric is and always has been 'adults 15+'. Indeed, all RAJAR audience data used in this same Ofcom report refer to 'adults 15+', except for Figure 8.

Once the graph is re-worked using '15+' instead of '4+' data (see above), it is evident that:
• Only three digital-only radio stations generate a weekly reach of 1m+ adult listeners
• BBC World Service was included in the Ofcom graph (and was one of the five stations cited as exceeding 1m weekly reach) even though it is not digital-only, being available across a large part of the UK on 648AM
• BBC Asian Network was omitted from the Ofcom graph (also available on analogue but limited to the Midlands)
• Not only are Panjab Radio and NME Radio no longer available on the national DAB platform (as the Ofcom text notes), but Q Radio is no longer on DAB, and the BBC has proposed the closure of Asian Network
• These weekly reach data for digital-only stations should be considered in the context of analogue radio stations – for example, BBC Radio 2 has a weekly adult reach of 14.6m.

This Ofcom graph purports to show that:
• Digital radio’s current share of listening is “broadly in line with the organic growth outlined on the [government’s] forecast chart.”

Bizarrely, the Ofcom graph displays the government forecasts but has omitted the historical data that would show how successfully the forecast has been achieved to date.

The forecast published in June 2009 predicted that, by year-end 2009 (a mere six months later), digital platforms would account for 24% or 26%, the latter the result of a concerted ‘drive to digital.’ In fact, the year-end figure was 21%. The likely reason that Ofcom has failed to include the historical data is that neither of the two forecasts (‘organic growth’ or the ‘drive to digital’) has any chance of being realised. If the current growth rate is extrapolated, the 50% criterion will be reached by year-end 2018, and certainly not by either 2013 or 2015, as the forecast (credited to Value Partners) predicted.

This Ofcom graph and accompanying text assert that:
• “DAB sets made up over a fifth (21%) of all radio sales by volume” in the year to Q1 2010
• “In the portable market, DAB sets accounted for 65% of sales.”

However, Ofcom omitted to point out that:
• Fewer DAB radios had been sold in 2009 than in 2008
• DAB radios were a lower proportion of total radios sold in 2009 than in 2008
• Its reference to “the portable market” is limited strictly to ‘portable radios’ of the type used in kitchens. There is not a single mobile phone on sale in the UK that includes DAB radio, and the vast majority of portable media players that include radio do not have DAB radio.

In fact, the data in the graph above demonstrate that:
• DAB radio receiver sales volumes peaked in 2007/8 at 2.2m per annum and have declined 13% since then to 1.9m per annum
• Analogue radios contributed a greater proportion of total radio receiver sales in 2009 (79%) than they had in 2008 (78%)
• DAB has not invigorated the market for radios, with fewer radios sold now than ever, perhaps due to evident consumer confusion about ‘digital radio switchover’.

The Ofcom graph shows that:
• 17% of adults say they are likely to buy a DAB radio in the next 12 months.

However, the Ofcom graph does not offer a historical perspective. The graph above demonstrates that the propensity to purchase a DAB radio has diminished over time. In 2006, 17% of respondents said they would be likely to buy a DAB radio within the next six months. In 2010, 17% said they would be likely to buy a DAB radio within the next 12 months. This would translate into a significant reduction in DAB radio receiver sales. Additionally, the proportion of respondents who say they do not know if they will purchase a DAB radio continues to increase over time, perhaps a further symptom of market confusion or DAB indifference.
Given that Ofcom has had the luxury of several years to prepare this first Digital Radio Progress Report, the result is a travesty. It should not be the regulator’s role to selectively highlight and distort data that support its own policies in a document specifically requested by government in order to inform a parliamentary decision on digital radio switchover. We deserve better from our public servants. Otherwise, they might as well go and work for Digital Radio UK, the lobby group (funded by commercial interests and the BBC) busy pumping out propaganda to try and persuade consumers that they need DAB radio.

On page 5 of this first Digital Radio Progress Report, Ofcom notes:

“Our principal general duty, when carrying out our radio functions, is … to further the interests of citizens in relation to communications matters.”

Exactly how are citizens' interests being furthered by Ofcom distorting the facts about digital radio take-up?