'DAB Radio Switchover In The United Kingdom' by Grant Goddard

Grant Goddard
radio specialist
www.grantgoddard.co.uk
DAB radio switchover in the UK
Bauer Radio
January 2012

DAB Radio Switchover In The UK © Grant Goddard: January 2012 for Bauer Radio 2
Grant Goddard
radio specialist
Grant Goddard is a London-based media analyst/consultant specialising in the
radio broadcast sector:
 30 years’ experience in media management and consultancy, UK & overseas
 Transformed KISS FM London from pirate to commercial youth radio brand
 Launched India’s first commercial FM radio network for News Corporation
 Launched Hungary’s first national commercial station for Metromedia Int’l.
 Radio licence regulation for Radio Authority/Ofcom
 Invited to submit oral/written evidence on radio sector to Competition
Commission and House of Lords Communications Select Committee
 Commissioned to research/write reports for Digital Britain and BBC Trust
 Author of 1,000+ published articles, analyst reports and books
About me

Grant Goddard
radio specialist
 Prologue: DAB radio overview & market data
 Bauer Radio questions
 Epilogue: Ofcom market data
 Discussion
Agenda

Grant Goddard
radio specialist
DAB radio overview

Grant Goddard
radio specialistDAB radio timeline
 1981 : DAB radio development starts in Germany
 1985 : First DAB test transmissions in Germany
 1993 : First UK DAB demonstration at Radio Festival, Birmingham
 1999 : DAB launched commercially in UK
Digital consumer technology comparisons:
 Compact Disc: launched in US in 1983, global sales decline started in 1999
 Digital Audio Tape: launched in US in 1987, discontinued in 2005

Grant Goddard
radio specialistThe difficult questions
“The hardest questions for the [commercial radio] industry to face are:
 Did it bet on the wrong horse (‘DAB’)?
 How can it either monetise or extricate itself from the substantial DAB
platform infrastructure it has created?
In the future, digital radio is likely to be delivered by a more varied mix of
platforms (notably Freeview and the internet) that remain outside of
commercial radio’s direct control.”
Grant Goddard, ‘Digital Radio Switchover: Somewhere Over The Rainbow?’, Enders Analysis Ltd. report no.
2007-99, published 2007

Grant Goddard
radio specialist‘Build it and they will come’
“The mistake [with DAB] by [UK] broadcasters was in not understanding that
‘build it and they will come’ is no longer practical in this integrated
technological age.”
Quentin Howard, President, World DMB Forum, ‘DAB Digital Radio – A Recipe For Success’, EBU Technical
Review, July 2005

Grant Goddard
radio specialist
UK digital radio industry forecasts

Grant Goddard
radio specialist
3.9
4.4
4.5
5.3
8.1
9.1
10.5
11.1
13.6
15.3
15.3
16.0
19.5
20.3
21.7
22.3
27.3
27.3
28.7
29.7
32.1
33.0
32.3
33.4
34.5
35.3
35.4
35.8
38.2
38.9
39.4
0
5
10
15
20
25
30
35
40
45
50
55
2004Q1
2004Q2
2004Q3
2004Q4
2005Q1
2005Q2
2005Q3
2005Q4
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
RAJAR actual (% adults) DRDB 2007 forecast (% households)
[source: RAJAR, Digital Radio Development Bureau]
UK digital radio forecast – Digital Radio Development Bureau
DAB receiver penetration (% adults, % households)
DAB receiver
penetration far
below forecast

Grant Goddard
radio specialist
2.72
4.44
6.45
8.53
10.52
12.46
1.29
0
5
10
15
20
25
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
actual
2004 DRDB forecast
2005 DRDB forecast
2006 DRDB forecast
2007 DRDB forecast
2010 DRUK forecast
UK digital radio forecast – Digital Radio Development Bureau
[source: Digital Radio Development Bureau, Digital Radio UK]
Cumulative DAB receiver unit sales (million at year-end)
DAB receiver unit
sales lower than
all forecasts

Grant Goddard
radio specialist
5.9
11.0 12.5
16.6
18.3
20.9
25.0
28.2
0
10
20
30
40
50
60
70
80
90
100
2004
2005
2006
2007
2008
2009
2010
Q32011
2012
2013
2014
2015
2016
2017
2018
2019
2020
actual (RAJAR year-end) Ofcom forecast (November 2006)
UK digital radio forecast - Ofcom
[source: RAJAR, Ofcom]
Radio listening via digital platforms (% of radio listening at year-end)
Radio listening
via digital much
lower than
forecast

Grant Goddard
radio specialist
5.0%
11.0%
14.0%
18.1%
19.0% 19.7%
24.0%
26.8%
16%
30%
50%
0%
10%
20%
30%
40%
50%
2004 2005 2006 2007 2008 2009 2010 Q3 2011
actual (RAJAR year-end)
RadioCentre target (Jan 2007)
UK digital radio forecast - RadioCentre
Commercial radio listening via digital platforms (% of commercial radio listening at year-end)
[source: RAJAR, RadioCentre]
Commercial radio
listening via digital
much lower than
expected

Grant Goddard
radio specialist
5.9
11.0
12.5
16.6
18.3
20.9
25.0
28.2
50
0
5
10
15
20
25
30
35
40
45
50
55
2004
2005
2006
2007
2008
2009
2010
Q32011
2012
2013
2014
2015
2016
2017
2018
2019
2020
actual (RAJAR year-end)
DRWG aspirational timetable (Jan 2009)
trendline
UK digital radio forecast – Digital Radio Working Group
[source: RAJAR, Digital Radio Working Group]
Radio listening via digital platforms (% of radio listening at year-end)
Industry forecast of
digital radio listening
unlikely to be
achieved

Grant Goddard
radio specialist
8%
13%
18%
20%
22%
21%
23%
50%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1
actual (DRDB four-quarter moving average)
DRWG aspirational timetable (January 2009)
trendline
UK digital radio forecast – Digital Radio Working Group
[source: Digital Radio Development Bureau, Digital Radio Working Group]
DAB radio receiver unit sales (% of total radio receiver unit sales)
Most recent
government
forecast of DAB
radio receiver
sales not achieved

Grant Goddard
radio specialist
24%
28%
33%
38%
43%
49%
56%
26%
31%
36%
43%
50%
58%
68%
28%
0%
50%
2004Q4
2005Q4
2006Q4
2007Q4
2008Q4
2009Q4
2010Q4
2011Q4
2012Q4
2013Q4
2014Q4
2015Q4
2016Q4
2017Q4
2018Q4
Digital Britain (organic growth) Digital Britain (drive to digital)
historical data (RAJAR) historical data trendline
UK digital radio forecast – Digital Britain
[source: RAJAR, Digital Britain]
Radio listening via digital platforms (quarterly % of radio listening)
Digital Britain
forecasts of digital
radio listening not
achieved

Grant Goddard
radio specialist
Bauer Radio question #1:
When do you think switchover will take place?
Will it ever take place?
A: Never
A: No

Grant Goddard
radio specialistBauer Radio question #1
The criteria for the government to decide to implement digital switchover are:
 “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”
However, these criteria are not included in the Digital Economy Act 2010, in
which the government is only required to:
 “Have regard to any report submitted by Ofcom or the BBC”
As a result, the government could decide upon a switchover date without
reference to the agreed industry criteria

Grant Goddard
Digital radio switchover will not happen because:
 Consumer demand for DAB radio stalled from 2009 [see slides pp.9-15]
 Criteria will not be met by 2013 [see slides pp.9-15]
 In-car DAB receiver penetration remains far too low (~1% of car parc)
 There is insufficient spectrum on local DAB multiplexes to accommodate all
existing analogue radio stations
 BBC cannot abandon universal reception of national radio (BBC Charter)
 Commercial radio cannot afford to discard half its hours listened
 Abandoning FM spectrum would precipitate unprecedented pirate radio
activity
 Switchover criterion is for “digital radio” rather than “DAB radio” 
 Consumer confusion over accurate platform reporting to RAJAR 

Grant Goddard
radio specialist
Confusion between ‘digital radio’ and ‘DAB radio’
Bauer Radio question #1

Grant Goddard
radio specialist
One of the UK government’s criterion for switchover to DAB is that:
 Digital radio’s share of total radio listening must exceed 50% (rather than
“DAB radio’s share of …”)
However:
 ‘Digital radio’ comprises listening via Freeview, FreeSat, IP-connected devices
and DAB
As a result:
 The major criterion for switchover to DAB is not directly connected to
consumer usage of the DAB platform

Grant Goddard
radio specialist
64.9%
28.2%
18.0%
6.9%
0%
10%
20%
30%
40%
50%
60%
70%
80%
all analogue all digital digital: DAB unspecified
2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2
2010Q3 2010Q4 2011Q1 2011Q2 2011Q3
Radio listening via digital platforms (% share of total radio listening)
[source: RAJAR]
The DAB platform accounts
for 64% of digital listening,
according to RAJAR
However, within RAJAR,
‘internet radio’ listening is
underestimated [3.7% in Q3
2011] because its definition
excludes ‘listen again’ /
’catch up’, podcasts and
online radio (such as Spotify)

Grant Goddard
radio specialist
2.7
3.6
7.3
9.3
11.9
14.0
13.3
16.8
17.9
17.5
18.9
19.9
20.6
20.5
20.4
23.1
23.5
23.8
24.4
26.5
26.3
26.8
13.5
17.8
15.3
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
2002Q3
2002Q4
2003Q1
2003Q2
2003Q3
2003Q4
2004Q1
2004Q2
2004Q3
2004Q4
2005Q1
2005Q2
2005Q3
2005Q4
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
internet platform DAB platform
Weekly reach of radio platforms (% of adults 15+)
[source: RAJAR]
This separate annual RAJAR ‘MIDAS’ survey (which
included non-linear radio consumption) demonstrated
that internet-delivered radio reached almost as much
of the UK population as the DAB radio platform in 2007
In reality, internet radio
reach now might equal DAB
radio reach in the UK,
particularly with the recent
growth in IP-connected
devices

Grant Goddard
radio specialist
55
60
76
81 82 85 82
38
34
20
16 14
12
11
6 5 4 2 4 3
7
0
25
50
75
100
15-18 15-24 25-34 35-44 45-54 55-64 65+
live radio non-radio catch-up radio podcasts unclassified radio
Share of listening by age and by source (% share of all audio sources)
[source: BBC, 2009]
Almost half of 15-18
year olds’ consumption
of audio is not live radio

Grant Goddard
radio specialist
Consumer confusion exists in the reporting of platform usage to RAJAR:
 I have a DAB radio, therefore all my listening must be ‘DAB’
 My ‘digital’ [clock] bedside radio says ‘digital’ on the front
 The presenter keeps talking about ‘digital radio’ so I must be listening on
digital
 RAJAR shows local FM commercial radio stations achieving listening on the
DAB platform that do not simulcast (past or present) on DAB

Grant Goddard
radio specialist
The danger is that, even once this criterion is ‘apparently’ achieved:
 Digital radio’s share of total radio listening must exceed 50%
…… in reality, less than 50% of radio listening might be being derived from the
DAB platform.
In this situation:
 Switch-off of FM transmitters could prove disastrous for broadcasters
 Huge volumes of radio listening might be lost

Grant Goddard
radio specialist
What will the commercial radio landscape
look like after that decision?
A: Current trends will continue

Grant Goddard
radio specialist
Current trends will continue:
 Much of the commercial radio sector will continue to be unprofitable
 Young people will continue to spend less time with broadcast radio
 Broadcast radio without a Unique Selling Point will lose listener traction
 For content delivered to connected devices, the distinctions between
‘broadcast radio’ and ‘internet radio’, between ‘live’ and ‘on-demand’
content, between Ofcom/BBC radio and unlicensed radio, and between UK
content and foreign content will increasingly blur
 Unless broadcasters add significant value to music offerings, their output
becomes less attractive than Spotify or Last.fm or We7 (where the user
experience can be customised)
 Curated programmes, rather than playlisted music streams, will increasingly
be radio’s strength

Grant Goddard
radio specialist
Without a definite date set for switchover to DAB:
 Standalone DAB radio stations (such as Planet Rock), none of which have
apparently yet proven profitable, will close
 Group-owned DAB radio stations will be subjected to cost-benefit analysis to
determine their futures
 Consumer sales of DAB radio receivers are likely to decline further
 The continuing requirement to ‘simulcast’ local analogue commercial radio
stations on DAB will becomes the industry’s most pressing issue
 The return on investment anticipated from DAB across the value chain since
the 1990s will have to be written off
 The future for radio will be multi-platform

Grant Goddard
radio specialist
The UK industry requires a strategy for increasing growth in IP-delivered audio
content (viz UK Radioplayer):
 The BBC has already digitised and added metadata to its archive radio content
[BBC Trust approval required for public offering]
 The UK commercial radio sector has to adopt a forward-looking strategy for
content delivered by IP, rather than merely simulcasting
 For example, a 1991 David Rodigan reggae show on KISS FM could offer better
monetisation prospects on-demand online than a playlist-based daytime show
from last week
 Commercial radio could have invested in aggregating online audio on-demand
had it not been pre-occupied with DAB

Grant Goddard
radio specialist
In the long run:
 The ‘intermediary’ role of commercial radio will become less valuable (viz
record companies in the music marketplace)
 Presenters/curators (Gilles Peterson or Ricky Gervais) are serving content to
users globally and directly via IP without the need for radio stations
 Listening will increasingly fragment away from live mass broadcast shows (the
Chris Tarrant show’s success on Capital Radio will never be repeated)
 Genuinely local content will remain a Unique Selling Point for local radio,
more so following closures of local newspapers and local TV news
 Commercial radio has to think of itself as a producer of (unique) content, with
distinct programme strategies for broadcast and online

Grant Goddard
radio specialist
The commercial radio industry has spent years of time and shareholder
resources pursuing an ambition that was backward-looking (DAB as a UK
closed broadcast platform), rather than focusing on the business potential
offered by accelerating growth in IP-delivered content (the internet as a
global open platform)
If UK commercial radio does not update its strategy, it will continue to decline

Grant Goddard
radio specialist
What, in your view, is the likely
Government decision next year?
A: No switchover date will be fixed

Grant Goddard
radio specialist
What is the government decision?
“Digital switchover
97A. Date for digital switchover.
(1) The Secretary of State may give notice to OFCOM nominating a date for
digital switchover for the post-commencement services specified or
described in the notice.
(2) When nominating a date, or considering whether to nominate a date, the
Secretary of State must have regard to any report submitted by OFCOM or
the BBC under section 67(1)(b) of the Broadcasting Act 1996 (review of
digital radio broadcasting).
(3) The Secretary of State —
(a) may nominate different dates for different services, and
(b) may give notice to OFCOM withdrawing a nomination under this section.”

Grant Goddard
radio specialist
I believe that, in 2013, the government will postpone fixing a switchover date
Why?:
 None of the switchover criteria have been met
 No prospect of the criteria being met within this government's lifetime
 Broadcasting minister Ed Vaizey receives more consumer complaints about
DAB radio than any other issue
 Easier politically to kick DAB into the long grass than to scrap switchover
 Government can easily blame:
 the radio industry for not fulfilling the Digital Radio Action Plan
 the recession for declining DAB radio receiver sales
 the advertising market for reducing commercial radio’s profitability
 the Licence Fee settlement for BBC cutbacks

Grant Goddard
radio specialist
The Conservatives have been adamant that DAB switchover will only happen if it
is supported by the consumer:
 “If, and it is a big if, the consumer is ready, we will support a 2015
switchover date. But, as I have already said, it is the consumer, through their
listening habits and purchasing decisions, who will ultimately determine the
case for switchover.” Ed Vaizey, Minister for Broadcasting, July 2010
 “Government’s new emphasis on consumers should provide the focus to
ensure consumer concerns and needs regarding digital radio are addressed,
thereby reducing the barriers to voluntary take-up.” Consumer Expert Group,
September 2010

Grant Goddard
radio specialist
Before forming a government in 2010, the Conservatives had been critical of
DAB switchover plans:
 “We have got to be concerned that people will be ready before any
switchover takes place and that there won’t be literally millions of analogue
radios which suddenly become redundant. As you know, the government has
set a provisional target date of 2015 and we are sceptical about whether
that target can actually be met.” Ed Vaizey, March 2010
 “We have also got to think about consumer anger. Consumers are people that
the radio sector needs. It’s going through a very tough patch. We don’t want
to switch off listeners by suddenly saying that we are not going to – that we
are going to force you to have a new radio, and there’s a real danger, if we
do that, that they might start listening to their iPods and their CD players
instead. … At the moment, we seem to be getting into this mindset where we
want to force it on the public, even though the public can’t really see what
the benefits are.” Jeremy Hunt, July 2009

Grant Goddard
radio specialist
How would the government and its ministers benefit from announcing a
switchover date in 2013:
 ?
The resultant outcome for the radio industry of postponement would be:
 Prolonged uncertainty
 Prolonged simulcasting and prolonged expenditure on dual transmission

Grant Goddard
radio specialist
What are the significant value considerations
for Bauer as a broadcaster and MUX operator?
A: 

Grant Goddard
radio specialist
429401
0
100
200
300
400
500
600
700
800
900
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
commercial radio DAB cumulative expenditure (est. £m) BBC cumulative DAB expenditure (est. £m)
Cumulative P&L expenditure on DAB by UK broadcasters (£m estimated excludes R&D)
[source: Grant Goddard estimates from BBC accounts, commercial radio analyses]
By 2012, UK broadcasters
will have spent ~£1bn on
the DAB platform
(transmission contracts and
content costs)

Grant Goddard
radio specialist
Considerations for Bauer Radio as a broadcaster:
 Bauer acquired EMAP Radio in 2007 for £422m (3.0x pro forma 2007
revenues, 23.4x pro forma 2007 operating profit) with a 13% operating margin
and earnings of £25 per 1,000 hours listened
 In its balance sheet, what proportion of the value of Bauer Radio’s intangible
assets is ascribed to FM radio licences (their scarcity value), rather than the
brands that broadcast via those licences?
 In contrast to FM, the intrinsic value of a DAB radio licence is zero (no
scarcity)
 FM transmitter switch-off could have considerable balance sheet valuation
implications

Grant Goddard
radio specialist
 Conversely, a government decision to postpone a switchover date would
prolong the balance sheet values of Bauer Radio’s FM radio licences
 If a government decision were made to abandon DAB switchover altogether,
the valuation of existing FM radio licences would be maintained (though
eroded in the long run by declining sector revenues)

Grant Goddard
radio specialist
 The DAB platform alone is not going to prevent the continuing decline of
broadcast radio listening any more than would the FM platform
 The disruptive impact of IP, mp3’s and connected devices upon broadcast
radio will likely accelerate
 The notion that DAB could create a ‘walled garden’ for UK broadcasters is
dead
 A comparison between DAB and the success of Freeview in the television
medium is misguided [see later for supporting Ofcom market data]

Grant Goddard
radio specialist
 ‘Managed decline’ must be the appropriate strategy for the broadcast
platform
 Additional investment in content/stations specifically for DAB (as a
replacement broadcast platform) offers no ROI
 The development of a strategy for IP-delivered radio that is wholly distinct
from its broadcast radio operations is necessary
 Bauer Radio should explore IP-delivered radio as a ‘new’ venture in a ‘new’
medium that is separate from existing broadcast businesses, but continue to
leverage the power of its successful brands

Grant Goddard
radio specialist
 Shareholder value cannot be maintained in the long run by focusing solely on
shoring up the valuations of existing radio broadcast licences
 The DAB platform does not change this
 Bauer Radio’s portfolio has been created largely by M&A activity, rather than
by building radio businesses from scratch
 Either Bauer has to allocate funds to acquisitions/shareholdings in IP radio
initiatives, or start its own R&D/development programme in IP radio

Grant Goddard
radio specialist
Considerations for Bauer Radio as a local DAB multiplex owner:
 Unless the DAB platform generates incremental revenues and operating profits
for content producers, the platform will prove economically unsustainable in
the long run
 To date, the platform has provided no significant economic returns to content
producers
 Funds have flowed in one direction to the end of the value chain (Arqiva)
 Most current economic activity is the result of dual transmission simulcasts

Grant Goddard
radio specialist
A government decision to postpone switchover would prolong simulcasting:
 Good news for multiplex owners, but bad news for station owners hit with
continuing dual transmission costs
A government decision to implement switchover might initially be good news for
multiplex owners:
 However, FM switch-off is likely to impact the volume of radio listening
significantly, reducing station revenues, forcing some stations out of business,
and thus reducing multiplex owners’ revenues in the long run
 Only BBC local radio carriage fees are guaranteed in the long run for multiplex
owners (£4m per annum)

Grant Goddard
radio specialist
 Funds flows between multiplex owners, multiplex partners and content
producers are far from transparent externally
 Bauer Radio Limited recorded a £694k post-tax profit contribution from its CE
Digital Limited DAB multiplex joint venture in 2010 (£767k in 2009)
 Bauer Radio Limited received a dividend of £2.8m from CE Digital Limited in
2009 (nil in 2010 and 2008)
 Another multiplex joint venture, EG Digital Limited, owed Bauer Radio
Limited £3.9m at year-end 2010 (nil in 2009, £1.7m in 2008)

Grant Goddard
radio specialist
 In order to entirely rescind their financial commitments to the DAB platform,
it has been suggested previously that DAB multiplex licensee companies could
be placed in voluntary liquidation
 The implications on group P&L accounts and corporation tax would have to be
considered by company accountants
 Without a relevant local DAB platform on which to simulcast, local commercial
radio licensees could no longer be required to pay DAB carriage fees, and
existing carriage contracts could be reneged
 DAB local multiplex licences would then be returned to Ofcom, rather than
acquired by Arqiva (viz Channel 4’s DAB multiplex licence)

Grant Goddard
radio specialist
What would your SWOT of Bauer business
establish and recommend?
A: 

Grant Goddard
SWOT analysis:
 Strong, long established radio brands
 Genuine localness in local radio stations (42)
 Established specialist music networks
 Significant spectrum on Freeview
 Existing brand extensions (TV, magazines)
 Strong online presence of broadcast brands
 Excellent broadcast sales channels
 EMAP’s track record of innovation
 Significant holdings in DAB multiplexes
 Numerous digital-only radio stations (7)
 Online radio presence mostly broadcast brands
 Spot radio advertising model in decline
 Limited recent radio content innovation
 Recorded operating losses reduce trade value
 Competitors reducing localness in local radio
 Global Radio & GMG Radio seeking trade sales
 BBC cutting its radio budgets
 Online space relatively undeveloped for radio content
 Increasing monetisation of radio archive content
 Increasing connectivity of consumers to IP devices
 Radio, as a passive medium, ideal for multi-tasking
 Local newspapers closing or reducing local content
 Cyclical downturn in UK media advertising
 Structural decline in broadcast radio market
 Fragmentation of consumer audio consumption
 Globalisation of available audio content
 Increasing competition for consumer leisure time
 Uncertain future of DAB platform
 Online radio increasing traction with young people
 German economic downturn
STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATS

Grant Goddard
radio specialist
Some recommendations:
 Maintain localness in local radio brands
 Maintain specialist music broadcast brands
 Cost-benefit analysis of long-term value of digital-only brands
 Cost-benefit analysis of DAB multiplex joint ventures
 Develop a strategy for online radio distinct from broadcast radio
 M&A opportunities from Global Radio and GMG Radio trade sales

Grant Goddard
radio specialist
What is your view on the MOU and the suggested switchover criteria?
Are the criteria appropriate and in the best interest of Bauer?
A: 

Grant Goddard
radio specialist
The Memorandum Of Understanding:
 Too little, much too late
 Neither the BBC nor commercial radio are in a current financial position to
invest further funds in transmission infrastructure, particularly when both
have long ago achieved excellent existing FM coverage for the same brands
 Poor DAB local multiplex coverage was a problem that needed to have been
solved at build-out

Grant Goddard
radio specialist
The Digital Radio Action Plan requires:
 A significant increase in the number of local DAB transmitters
 To achieve increases in coverage to equal existing FM coverage
DAB multiplex location
no.
households
no.
transmitters
% indoor
households
% mobile
coverage
no.
households
no.
transmitters
% indoor
households
% mobile
coverage
% increase
households
% increase
transmitters
Liverpool 737,738 3 72.8 951,964 8 86.7 92.8 29% 167%
Tyne & Wear 586,358 2 71.8 60.5 776,848 13 95.1 91.2 32% 550%
Edinburgh & Borders 568,756 5 77.2 63.5 713,221 18 96.9 92.7 25% 260%
N. Ireland 512,327 6 74.9 72.6 637,035 17 93.1 90.1 24% 183%
S. Yorkshire 477,447 2 64.6 51.6 701,167 9 94.8 90.2 47% 350%
Leeds 388,697 4 62.8 62.2 597,637 6 96.6 97.7 54% 50%
Teesside 359,311 2 74.7 72.0 458,604 7 95.3 93.6 28% 250%
Lancashire 333,794 2 49.1 73.5 664,716 15 97.9 96.3 99% 650%
Humberside 301,467 3 71.6 49.8 395,781 9 94.1 83.8 31% 200%
Tayside 184,584 4 80.9 63.9 218,118 11 95.7 79.8 18% 175%
N. Scotland 65,171 1 35.9 12.5 160,256 33 85.5 53.6 146% 3200%
Glasgow 7 18
CURRENT COVERAGE OFCOM PROPOSED COVERAGE CHANGE

Grant Goddard
radio specialist
Ofcom research demonstrated that:
 Current local DAB multiplex coverage is deficient in many areas
 The consumer experience of DAB has evidently been poor for many years
 The unknown cost of fixing these coverage issues could prove prohibitive
DAB multiplex location
no.
households
no.
transmitters
% indoor
households
% mobile
coverage
no.
households
no.
transmitters
% indoor
households
% mobile
coverage
% increase
households
% increase
transmitters
London CE 4,511,590 8 82.0 91.3 5,124,093 22 93.2 92.2 14% 175%
Birmingham 968,328 4 81.9 78.5 1,135,687 8 96.1 87.8 17% 100%
Manchester 944,951 2 66.4 55.2 1,409,086 17 99.1 96.1 49% 750%
Stoke 429,417 4 82.3 84.0 464,497 10 89.2 79.7 8% 150%
Bradford & Huddersfield 390,838 3 78.3 69.6 457,756 10 91.7 84.2 17% 233%
Swansea 237,459 3 73.5 62.7 311,849 18 96.9 94.9 31% 500%
CURRENT COVERAGE OFCOM PROPOSED COVERAGE CHANGE

Grant Goddard
 “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”
Are these switchover criteria appropriate for Bauer?
As a broadcaster, ‘no’ because:
 The 50% criterion is unrelated to DAB usage [see pp.19-25]
 Continuing dual transmissions will remain expensive
 FM switch-off could lose considerable radio listening [see pp.19-25]
As a multiplex owner, ‘no’ because of:
 The cost of achieving the criteria and the slow timescale for implementation

Grant Goddard
radio specialist
The adopted criteria for DAB switchover should be:
 Directly related to consumer take-up of the DAB platform, not ‘digital radio’
 Implemented in order to ensure that the volume of listening to radio is not
impacted negatively by FM switch-off
 Implemented so as to ‘persuade’ consumers to switch to DAB, rather than
compel them

Grant Goddard
radio specialist
What are the value considerations of other interested parties?
Government, Ofcom, commercial operators, BBC, UK households?
A: 

Grant Goddard
radio specialist
The value considerations of government:
 Not to alienate voters (politicians)
 To fulfill the switchover policy objective (DCMS)
The value considerations of Ofcom:
 To avoid embarrassment (management)
 To fulfill the switchover policy objective (radio team)

Grant Goddard
radio specialist
The value considerations of commercial radio:
 Corporate objectives for trade sale (Global Radio)
 Reducing costs of or ceasing DAB simulcasts (small stations)
 Prolonging its own existence (RadioCentre)
The value considerations of the BBC:
 Maintaining positive attitude of Licence Fee payers/listeners (radio creatives)
 To fulfill the switchover policy objective (technologists)
 To implement government/DCMS policy (leadership)

Grant Goddard
radio specialist
The value considerations of UK households:
 Continuing access to existing radio services
 No compulsion to throw away existing household FM radio receivers
 Cost of multiple FM radio receiver replacement

Grant Goddard
radio specialist
What do you think Bauer’s lobbying angles might be?
A: 

Grant Goddard
radio specialist
Since DAB radio was initially planned in the 1980s, the media landscape has
changed beyond recognition:
 The success of new technologies is determined by consumer take-up, not by
government edict
 The media market has changed from a controlled ‘walled garden’ UK-
restricted environment into a global free-for-all
 The UK is a relatively small market in the global marketplace for the
adoption/dissemination of new technologies
 Competing technologies for digital radio in world and European markets have
undermined DAB’s potential universality

Grant Goddard
radio specialist
The DAB platform will have to be viewed in strategic terms as a digital platform,
rather than the digital platform for radio:
 Like the Freeview, Freesat and internet platforms, radio station owners
should be able to decide on the basis of cost-benefit analysis and strategy
whether they wish to broadcast via the DAB platform
 The DAB platform needs to evolve as an incremental platform for radio, rather
than as the replacement platform for FM radio
 The regulatory ‘carrot & stick’ of automatic local radio licence renewals in
exchange for compulsion to broadcast on the DAB platform has prevented DAB
from being a ‘free market’ platform
 Forced simulcasting of local radio stations on DAB has held back the platform
as consumers view DAB as offering little that is different or new

Grant Goddard
radio specialist
As a broadcaster, Bauer Radio would benefit from the end of enforced
simulcasting by:
 Saving on DAB transmission fees for local stations once existing carriage
contracts expire
As a multiplex owner, Bauer Radio would:
 Suffer reduced revenues once existing carriage contracts expire
 Carriage costs for DAB would settle to a price justified by consumer usage of
the platform (viz Freeview)
 Question: would the savings as a broadcaster outweigh the reduced revenues
as a multiplex owner?

Grant Goddard
radio specialist
Bauer could lobby government/DCMS to announce in 2013 that:
 Compulsory switchover to DAB is no longer in the best interests of consumers
 Local radio stations require certainty for their businesses, which DAB and
simulcasting have hampered. Licence renewals should be 12 years
 The Minister should direct Ofcom to relax the contractual compulsion for
analogue local radio stations in receipt of licence renewals to additionally
broadcast on DAB
[see detail in attached one-sheet ‘Securing Radio’s Digital Future’]

Grant Goddard
radio specialist
Bauer Radio would benefit politically from:
 Providing government/DCMS with a pragmatic solution to the DAB issue that
helps ministers/Ofcom/the radio industry ‘save face’ by avoiding embarrassing
‘DAB is failure’ headlines
 Showing itself to be the natural leader of the commercial radio industry,
arguing for a solution for the entire sector, rather than the self-interest
demonstrated by Global Radio (and supported by RadioCentre)
 Showing that it genuinely wants to put the radio listener at the centre of its
strategic thinking, rather than only paying lip service
 Advocating a strategy that has already been approved by the smaller
commercial groups and small independent commercial stations
 Having ministerial influence in the run-up to a new Communications Bill

Grant Goddard
radio specialist
The attached document ‘Future Strategy For Radio Platforms’ concludes that:
 Although legislation requires the insertion of a condition into the local radio
licence contract at the point of automatic licence renewal “requiring the
licence holder to do all that he can to ensure that” a DAB service is broadcast
“throughout the [licence] period,” there is no specific legislation forbidding
this condition from being varied subsequently
It may be possible for the Minister to direct Ofcom either:
 To vary the contracts of all local licensees that have already received
automatic renewals to remove the clause
 To not litigate any subsequent breach of this clause in the contract by the
licensee
 To interpret the phrase requiring the licensee “to do all that he can” as
loosely as possible (i.e. in consideration of the financial constraints to the
licensee of DAB carriage)

Grant Goddard
radio specialist
Ofcom market data

Grant Goddard
radio specialistHousehold penetration of technologies
The majority of
smartphone
users have
purchased it
during the last
year
DAB radio
receivers have
been available
to consumers
for 12 years
Household penetration of technologies
All households

Grant Goddard
radio specialistAccess to digital radio
Consumer
access to digital
radio platforms
other than DAB
is relatively
high

Grant Goddard
radio specialistConsumer satisfaction with choice of radio stations
93% of consumers
are satisfied with
their existing
choice of radio
stations

Grant Goddard
radio specialistIntention to purchase DAB radios
79% of the population
is not likely to
purchase a DAB radio
receiver during the
next year

Grant Goddard
radio specialistSales of radio receivers
Sales of radio
receivers – analogue
and DAB – are in
decline in the UK

Grant Goddard
radio specialistDAB radio receiver ownership
[source: RAJAR 2008 Q4, taken from presentation ‘UK digital radio overview’ by John Ousby, BBC, 19 March 2009]
DAB awareness and ownership (% of each demographic)
The average age of a
DAB receiver owner
is 46 years

Grant Goddard
radio specialist
Discussion

'DAB Radio Switchover In The United Kingdom' by Grant Goddard

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