'Radio Format Regulation: Hail The Guys In Suits With Charts' by Grant Goddard

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Analysis of the 'service licences' introduced to regulate the formats of BBC radio stations, alongside the regulation of UK commercial radio station formats by Ofcom, written by Grant Goddard in February 2005 for The Radio Magazine.

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'Radio Format Regulation: Hail The Guys In Suits With Charts' by Grant Goddard

  1. 1. RADIO FORMAT REGULATION: HAIL THE GUYS IN SUITS WITH CHARTS by GRANT GODDARD www.grantgoddard.co.uk February 2005
  2. 2. The newly created Governance Unit at the BBC has the challenging task over the coming months of writing “service licences” for each of the Corporation’s broadcast operations. Acting on behalf of the BBC Governors, the Unit will then analyse and monitor each channel’s output to ensure that it remains within the terms of its particular licence and that it performs satisfactorily against an agreed set of objectives. If this sounds like an in-house mini-Ofcom, then that is exactly what the BBC is creating in the run-up to Charter renewal, as the Governors and management unite to resist calls for the BBC to be brought under Ofcom’s full regulatory powers. In its effort to convince us of its public accountability, BBC stations will inevitably be swamped by “guys in suits with charts and pages of numbers,” as broadcaster Garrison Keillor described the “influx of commercial people” he witnessed at US public radio. In addition to having to define its national analogue and digital services, the BBC is faced with the daunting task of creating licences for each of its forty local radio stations. The task is made harder because it would be difficult to apply a template across the whole forty, when stations serve audiences as diverse as BBC London’s multi-ethnic catchment area of ten million, and BBC Radio Guernsey’s fifty thousand rural island dwellers. Each licence will need to incorporate a requirement to satisfy “localism”, reflecting factors such as the ethnic mix, demographic characteristics, occupations, poverty levels and interests of the population within each station’s catchment area. These indicators are the bedrock of what makes one area of the country different from another, and what should make “local radio” a complementary alternative to national services in a given area. Any notion that such strict licensing of its own services is merely a publicity stunt was dispelled by BBC chairman Michael Grade’s recent comment that channel controllers could be fired for not delivering on the obligations contained in their service licence. The precise shape of these licences has not yet been revealed, but each is expected to run to several pages and include specific quantifiable targets rather than the kind of woolly statements that have previously appeared in the BBC Annual Report. To achieve these objectives, the BBC has hired a team of analysts and advisers, many from outside the BBC, to staff the Governance Unit. The commercial radio lobby has long been arguing the case for just such “service licences” to be imposed upon the BBC. Commercial stations claim that the ability of the BBC to launch new radio services and adjust the format of existing stations without recourse to a regulator has given them a competitive advantage over the commercial sector, whose station formats are prescribed and regulated by Ofcom. Now that the BBC is committed to regulating the formats of existing services through “service licences”, and regulating the launch of new services through a “public value test”, its sudden enthusiasm for self-regulation creates a glaring paradox. If the BBC follows through its intentions, its radio stations’ formats will become considerably more tightly regulated than those of commercial stations. In its early days, commercial radio had been closely regulated by the Independent Broadcasting Authority, which required franchisees to complete Radio Format Regulation: Hail The Guys In Suits With Charts ©2005 Grant Goddard page 2
  3. 3. and submit large volumes of paperwork during the 1970s and 1980s. There was no need to regulate station formats because each area had only one commercial station (except London, which had two). In the 1990s, its successor The Radio Authority started to licence additional stations in each market and required each competing station to adopt a different “promise of performance” that outlined its format. But the Authority’s avowed strategy of “light touch” regulation meant that it executed no active programme of monitoring or analysing station outputs. As the Competition Commission noted with a degree of surprise, “in ensuring compliance with station formats and its codes, the Radio Authority adopts a more reactive than proactive approach.” While the BBC’s “service licences” will run to several pages, most commercial stations’ equivalent “formats” barely fill one page, and are notorious for their imprecise language and lack of analytical content. This has created a raft of anomalies that put the whole ethos of format regulation into question. As London’s jazz fans are acutely aware, Jazz FM has never played predominantly jazz music for the last decade, simply because its licence has never required it to play only jazz. Fans of Tony Bennett might be surprised to learn that London’s Magic FM is licensed as an “easy listening” station. Birmingham’s black population might be astonished to learn that Galaxy FM is not a dance music station, but is licensed “primarily for listeners of African or Afro-Caribbean origin.” Critics of The Radio Authority accused it of interpreting “light touch” regulation as “wilful ignorance,” and of deliberately not tackling thorny issues such as effective format regulation with its licensees. A bemused Competition Commission admitted that it “received conflicting evidence on how strictly such formats were applied” by the Radio Authority. Lacking an ongoing programme of economic analysis or content analysis of station outputs, the Authority stumbled along without any of the “guys in suits with charts and pages of numbers” that a modern-day regulator requires. Because the Authority viewed format regulation as a legally required adjunct to the licensing process, rather than as a necessary economic function to maximise public utility, Ofcom has inherited a regime where too many competing stations have been allowed to move too close to each other’s format. On each occasion the Authority bowed to pressure from an individual station lobbying to make its format more “mainstream”, it failed to understand that every decision reduced the long-term profitability of the industry as a whole, and the total benefit consumers derive from it. This is one of the underlying reasons why listening to commercial radio has fallen so substantially in recent years. The stations themselves bear no blame for this outcome, because any owner will want to maximise the return to shareholders by targeting its product at the largest number of consumers. It is the responsibility of the regulator to recognise that it owes its very existence to society’s collective need to balance economic expedience with public benefit in a market where broadcast frequencies are finite and limited. Every new recruit to radio regulation should be made to study and take a test on a 28-page essay written by American economist Peter Steiner with the Radio Format Regulation: Hail The Guys In Suits With Charts ©2005 Grant Goddard page 3
  4. 4. scary title “Program Patterns And Preferences, And The Workability Of Competition In Radio Broadcasting.” Despite having been presented to a conference in 1951, Steiner’s paper has not devalued with time. It explains precisely the behaviour of radio stations all wanting to stake out the same middle ground in a common market where their number is limited. Re-reading this essay now is a wake-up call to understanding why our existing system of format regulation has proved unsuccessful in correcting market failures. Empirical evidence abounds as to the nature of these format market failures. In one randomly selected week, Music Control data shows that London stations Capital FM and Kiss FM shared the same most played record and half of each other’s most twenty played songs. In the same week, in Manchester, the identical song was the most played record on both Key 103 and Galaxy 102, while half of the twenty most-played songs on Key 103 also featured in Galaxy 102’s fifty most played songs. In the same week, in Birmingham, the four mostplayed songs on Galaxy 102.2 were amongst the twenty most played songs on BRMB, while nine of the twenty most played songs on BRMB were also in Heart 100.7’s twenty most played songs. Comparison of data four years apart shows some stations moving considerably closer to each other’s music format over time. Correction of these market failures requires that Ofcom start a process of revising the fundamental components of the “format” licences it has inherited from the Radio Authority. The emphasis must be switched to the measurement of delivered outputs and the tight definition of a target audience that interlocks each station with its commercial competitors, rather than simple prescription of how many rock songs are to be played in a breakfast show. It is essential that new, more detailed format documents provide stations with the flexibility to adjust their programming to changing consumer tastes, but also be specific enough to ensure that commercial competitors in a market differentiate their content sufficiently to extend the choice available to citizen-consumers. There will inevitably be resistance from stations to any change of their “format” (even at re-licensing time), but Ofcom’s intention should not be to change a station’s format, rather to define it in more precise terminology that befits a 21st century regulator. Alongside this re-definition of “formats”, Ofcom should apply considerably more analysis on an ongoing basis to station outputs, both to ensure compliance and to better understand market forces. Like the BBC, Ofcom might require a team of smart suits and clipboards armed with the analytical skills that the Radio Authority never acquired. In the US, economic theories such as Peter Alexander’s work on measuring product variety and Joel Waldfogel’s work analysing radio programming variety are already de rigueur tools of the Federal Communications Commission. Now that the BBC has accepted the need for regulation of its services (even if this is self-regulation), the spotlight must switch back to the commercial radio sector to keep up its part of the bargain. If the playing field is meant to be level, commercial radio “service licences” should be as rigorous as the BBC’s. This is not regulation merely for regulation’s sake. In an imperfect market such as Radio Format Regulation: Hail The Guys In Suits With Charts ©2005 Grant Goddard page 4
  5. 5. broadcasting, regulatory intervention is a necessary fact. If you ignore the economics, you experience market failure in the long run. This is a large part of the reason why local commercial radio’s market share has fallen to its lowest level since 1993, despite a doubling of the number of stations. [First published in 'The Radio Magazine', #677, 30 March 2005, pp.10-11] Grant Goddard is a media analyst / radio specialist / radio consultant with thirty years of experience in the broadcasting industry, having held senior management and consultancy roles within the commercial media sector in the United Kingdom, Europe and Asia. Details at http://www.grantgoddard.co.uk Radio Format Regulation: Hail The Guys In Suits With Charts ©2005 Grant Goddard page 5

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