Analysis of the award by United Kingdom media regulator Ofcom to Channel 4 Television of a new licence to build a national transmission network for DAB digital radio broadcasting that highlighted (correctly) significant flaws in its intended strategy, written by Grant Goddard for Enders Analysis in July 2007.

1. CHANNEL 4: RADIO AMBITIONS
AIM TOO HIGH
GRANT GODDARD
July 2007

2.  Ofcom has awarded the UK s second national commercial digital
radio multiplex to Channel 4 Television, having rejected a competing
bid from National Grid Wireless
 Channel 4 will launch ten new digital radio stations in 2008 that are
intended to re-invigorate the commercial radio sector and to offer
more effective competition for listeners to speech-based radio that is
presently dominated by the BBC
 Some of Channel 4 s proposed radio station formats have previously
failed in the marketplace, and its content partners include those
same commercial radio companies who are already losing the battle
with the BBC for audiences
Ofcom received two applications to build and operate the UK s second
national digital radio multiplex that it advertised in December 2006. Of the two
applicants, Channel 4 Television s high-profile proposal to offer ten digital
radio stations attracted the most attention and was heralded both as a
potentially profitable diversification strategy (‘Radio is riding to the rescue of
Channel 4’, The Guardian, 1st April 2007) and as a panacea for the ailing
commercial radio industry (‘An attempt to rejuvenate commercial radio
listening’, The Guardian, 29th March 2007). To some observers, this notion of
a Public Service Broadcaster offering both television and radio channels, as
does the BBC, holds a certain attraction, although critics, such as former ITV
chief executive Charles Allen, demanded to know: “When was the decision
taken that the UK wanted or needed another publicly-owned radio company?”
[MacTaggart Lecture, 25th August 2006]. The other application, from National
Grid Wireless, one of the UK’s two dominant transmission network providers,
attracted less attention because it focused more on building a digital platform
for radio than on offering a portfolio of specific radio channels.
Ofcom’s decision to award the multiplex to Channel 4 would seem to satisfy
the widely articulated appetite for a Public Service competitor to the BBC’s
increasing dominance of both the ‘talk radio’ and ‘music radio’ formats. In its
comprehensive and aggressive marketing campaign to win support for its
application, Channel 4 correctly identified many of the burning issues that
currently afflict the commercial radio sector, and it criticised the existing
commercial radio sector for its lack of creativity and competitive spirit.
However, its plans to produce “compelling new stations, content and services”
involve several partners, whom it refers to as “the leading commercial radio
operators in the UK”, and whose own track record in connecting with
audiences has proven less than impressive. For example: Virgin Radio is
struggling with a 1.4% share of listening (less than half what it had achieved in
1998); TalkSport currently registers only a 2.0% share (an all-time high);
Emap has lost substantial listening to its flagship ‘Big City’ stations; and
Sunrise Radio’s share of listening to its main London station has halved
during the last three years (see Virgin Radio: a pig in a poke [2007-40], UTV
and SMG merger could revive commercial radio sector [2006-e42] and
Emap: pick up the pieces [2007-56] for details) [RAJAR, Q1 2007].

3. At question is the ability of such partners to produce what Channel 4 promises
will be “a viable alternative to the BBC with in-depth news and current affairs,
dramas, comedy and documentaries,” when these radio companies have
evidently failed in recent years to compete successfully with the BBC for
audiences, even in music radio (see Commercial radio: out of tune with
London [2007-e44]). The financial resources required to produce speech-
based radio are considerably greater, and the commercial sector’s track
record in the speech format, which is offered by only 1% of licensed stations,
is hardly inspiring. Another of Channel 4’s partners, Chrysalis Radio, acquired
London news/talk station LBC in 2002 with the intention of building a national
network of speech stations, though the idea was quietly dropped once it found
it could not return LBC’s audience levels to their 1980s’ heyday or make the
station profitable, even in the UK’s largest local market.
Worryingly, several of Channel 4’s proposed channels offer formats that have
already failed in the radio marketplace. ‘Talk Radio’, the planned all-speech
service, sounds identical to national analogue station ‘Talk Radio’ that closed
in 2000 after five years; ‘Sky News Radio’, a rolling news station, is almost the
same as national digital station ‘ITN News Radio’ that closed in 2002 after two
years; ‘Virgin Radio Viva’, a female lifestyle station, seems remarkably similar
to London analogue station ‘Viva Radio’ that closed in 1996 after two years;
and ‘Radio Disney’, a service for 8-12 year olds, is branded almost identically
to ‘Capital Disney’, a digital radio station that closed in 2007 after five years. In
addition, although the Channel 4 application includes market research
intended to demonstrate the listener appeal of these and its other proposed
channels, the methodology used to convert respondents’ intention into
listening would appear to incorporate the same optimism that has been the
trademark (and downfall) of so many previous radio licence applicants.
Neither does the digital landscape into which Channel 4 will launch its
multiplex appear particularly inviting at present. Whilst television is busy
preparing for digital switch-off to be rolled out region-by-region between 2008
and 2012, the radio industry has yet to establish a firm date for its switch to
digital, despite the first national commercial digital radio multiplex licence
having been awarded as long ago as 1998. Listening to radio via digital
multiplexes is still low (6.6% of all radio listening; RAJAR Platform Survey, Q4
2006) and the huge growth in digital radio receiver purchases witnessed in
winter 2004/5 has slowed considerably since then (year-on-year unit sales up
16% in the year to April 2007, compared to 153% in the year to April 2005,
source: GfK). Digital radio has yet to penetrate the in-car market (1.3% by
volume, April 2007, source: DRDB) and its share of the clock/radio sector is
still frustratingly low (11.3% by volume, April 2007, DRDB), both environments
which are key for radio listening.
Financially, digital radio has added significantly to the problems of the
commercial radio sector. Already, half of all analogue stations lose money or
make an annual profit of less than £100,000, and digital radio has incurred
significant investment costs whilst not yet proving profitable for any channel
operator or multiplex owner. Even worse, digital radio has generated very little
revenue to date. Like television, radio remains of most significance to

4. advertisers wanting to reach a mass market and, while analogue commercial
radio delivers 31 million adults per week, no comparable data is yet published
for digital commercial radio, which advertisers presently consider too niche a
medium [RAJAR, Q1 2007].
Finally, diversification into the financially challenged radio industry might
appear to be far from expedient when Channel 4 has already predicted it will
suffer a funding gap of up to £100 million per year by 2011, due to increased
competition from digital media. Although its proposals for the multiplex
concentrate on the radio channels it will launch, it is the national spectrum
itself that is likely to become an increasingly valuable asset for Channel 4.
Additionally, the digital multiplex can also be used for broadcasting television
services to mobile devices (BT Movio has leased bandwidth for this purpose
on the first national commercial radio multiplex since 2006), an innovation that
could offer Channel 4 a technological advantage over the BBC and ITV in the
race to connect with users ‘on the go’.
[First published by Enders Analysis as report 2007-58e.]
© 2007 Grant Goddard
Published by Radio Books
http://www.radiobooks.org
http://www.grantgoddard.co.uk