Analysis of the progress achieved by the United Kingdom government's policy to replace analogue broadcast radio transmission with DAB (Digital Audio Broadcasting) and the relevant issues that required solutions to combat its apparent lack of success, written by Grant Goddard for Enders Analysis in October 2007.

1. DIGITAL RADIO SWITCHOVER:
SOMEWHERE OVER THE
RAINBOW?
GRANT GODDARD
October 2007

2. ExecutiveSummary
For the radio industry, the transition from an analogue broadcast system to a
digital one is not going particularly smoothly. Data from the latest RAJAR
audience survey, the first to track platform usage, showed that listening to
digital radio stations remains stubbornly low. While the television industry has
an agreed roadmap that includes a firm date for complete analogue switch-off,
the radio industry has yet to determine such a date and appears mired in
Ofcom consultations over the future shape of the commercial radio sector.
This report examines the progress made so far towards ‘digital’ in the radio
sector, and it explores the issues that require solutions if the industry’s
migration is to prove successful.
At present, ‘DAB’ radio is the most popular platform for digital radio listening,
although receiver sales are not growing at the rate anticipated by the industry,
and they continue to be out-sold by analogue radios. Construction of the
‘DAB’ platform has required significant investment from the radio industry,
though it has yet to generate either substantial listening or revenues, even
after almost a decade. Furthermore, the technology used for ‘DAB’
transmission is already anachronistic and is in danger of being overshadowed
by newer platforms, such as wi-fi enabled ‘internet radios’, that can offer
consumers considerably more choice of content than can DAB.
At the turn of the millennium, most of the commercial radio industry banked its
future on the DAB platform, and is now only just coming to terms with the
realisation that ‘DAB’ will be only part of the sector’s digital future, rather than
the whole of it. The future prosperity of the industry had been staked on the
notion that it not only owned the DAB platform, but that it controlled the
‘gatekeeper’ function too, determining which content is carried on the DAB
platform. Additionally, the commercial sector was eager to control more digital
terrestrial spectrum than the BBC, which it felt would help it combat the BBC’s
dominance of the analogue platform. However, commercial radio failed to
follow through by investing substantial sums in original content for broadcast
on its digital platform, the result of which is that consumer and advertiser
interest has remained lukewarm.
Lacking a date for digital switchover, and with no prospect in sight for a return
from its investments in digital, commercial radio owners are in a state of
paralysis. Burdened for the foreseeable future with the costs of maintaining
parallel analogue and digital transmission systems, debilitated by declining
audiences and revenues, and pre-occupied with further industry consolidation,
commercial radio is lacking a cogent strategy to address these pressing
issues (other than continuing to demand less regulation from Ofcom). The
hardest questions for the industry to face are: did it bet on the wrong horse
(‘DAB’)? And 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.

3. Introduction
Radio broadcasting in the UK is part way along the transition from analogue to
digital transmission. However, unlike the television medium, for which a firm
timetable has been determined for the complete conversion to digital, there is
as yet no agreed date for the final switch-off of the analogue radio
broadcasting system. This report examines how far along the route to digital
the radio industry has progressed, and at what speed that transition is taking
place. It also analyses the extent of listening to digital radio and looks at the
prospects for growth across different digital radio platforms.
These issues are particularly significant for the financial wellbeing of the
commercial radio industry. At present, many of the sector’s offerings are being
broadcast simultaneously on both analogue and digital systems, and the
industry is having to bear the ongoing costs of this dual transmission at a time
when its revenues are falling. The largest radio owner, GCap Media, has
reported that its analogue transmission costs are £7.4 million per year, whilst
its digital transmission costs are £15.1 million “and growing”.1 Audiences for
digital radio remain relatively small, and advertisers do not yet perceive digital
radio as having gained sufficient momentum to warrant attention.
Profits from commercial radio owners’ analogue stations had initially been
allocated to cover the launch costs of digital radio, but the sector’s ‘heritage’
stations are no longer the ‘cash cows’ they once were, having suffered
considerable audience and revenue erosion over the last decade (see UK
Commercial Radio Consolidation [2007-88]). At the same time, owners
have shown reluctance to invest in significant content for their newly launched
digital-only radio stations, preferring to wait until audiences have grown to
sufficient numbers. Our opinion is that this has created a classic ‘chicken and
egg’ situation, in which the growth of the digital radio platform has been held
back by the lack of compelling content for consumers. The danger for the
commercial sector is that the BBC, whose investment in digital radio has been
unhampered by the size of its audiences, could come to dominate the digital
radio platform, just as it already dominates the analogue radio platform.
Despite Ofcom having published six consultation documents to date on the
future of the commercial radio sector, the industry continues to stagnate and
has so far failed to find practical solutions to its myriad problems. The
requirements for improved consumer take-up of digital radio would appear to
be clear: “What there does need to be, as Freeview and digital satellite has
shown in television, is simply a sufficient combination of services, technology,
simplicity and price or discount to provide a value proposition for the
consumer”.2 These were the words of Stephen Carter, then Chief Executive of
Ofcom, in 2004. Sadly, three years later, that need remains the same.
Digital Radio Today

4. Last quarter’s RAJAR radio audience survey (Q2 2007) was the first to include
a question asking each respondent which platform they were using to listen to
a radio station. Until then, the only research on radio platform usage had been
a small-scale survey conducted separately by RAJAR, the results of which
had not been publicised. The positive results from the new research were
touted by headlines such as ‘Six Million Make Switch To Digital Radio’;3
‘Radio Days Are Here Again As Britons Tune, Click And Plug Into Digital
Age’;4 and ‘Radio Fans Turned On To Digital By Wealth Of Specialist
Programmes’.5 This press coverage celebrated the fact that 26.2% of the
adult population (almost 12 million people) listen to digital radio on a weekly
basis.
However, beneath the headlines, the data on digital radio is looking far less
rosy than radio industry press statements have indicated. Unlike the television
medium, the radio industry and Ofcom have yet to agree a date when
analogue radio will be switched off, and there are no signs yet that consumers
are being enthused by digital radio to the same degree that they have been by
the Freeview proposition for TV. In Q2 2007, 1.9 million Freeview boxes were
sold, compared to a mere 299,000 DAB (Digital Audio Broadcasting) radios.6
In that quarter, 3.6% of radio listening was to digital-only radio stations,
whereas 36% of TV viewing was to digital-only TV stations (Table 1).7 Faced
with this evidence, commercial radio owners are beginning to develop cold
feet about the DAB platform, having been burdened with its additional costs
for almost a decade, and having seen almost no financial return yet from their
investments.
Table 1
Listening to digital-only radio stations (commercial + BBC combined)
[Source: RAJAR/Ipsos]
The new RAJAR data showed that, although digital radio is succeeding in
reaching 26.2% of the adult population weekly, it accounts for only 12.8% of
all radio listening (Table 2). Furthermore, within that percentage of digital
usage, only 27.9% of listening is to stations that require a digital receiver,

5. implying that the remaining 72.1% of listening via digital platforms is, in fact, to
stations that the user could already receive via their existing analogue
hardware. This is the nub of the industry’s problem – a prerequisite for rapid
take-up of digital radio is the need to motivate consumers’ hardware
purchases through radio content that is exclusively available to them on the
digital platform. This simply is not happening on the scale or at the speed that
it has in the TV medium, where the wide choice of digital TV stations has
successfully driven the demand for Freeview, cable and satellite.
Table 2
Radio listening by platform (% share of total listening)
[Source: RAJAR/Ipsos, Q2 2007]
Digital radio can be received via digital TV (Freeview, cable and satellite), the
internet, DAB radios, or via 3G on mobile phones (although listening via the
latter platform is not yet measured separately by RAJAR). The platforms for
receiving digital radio are now examined in more detail.
The ‘DAB’ Platform
Development of the DAB platform started in Munich in 1981 and was adopted
by the European Union as a research project (‘Eureka 147’) in 1987. In the
UK, the BBC started DAB experimental transmissions in 1990, although
consumer hardware did not become generally available until 1999. The UK
market for DAB is the most developed in Europe, with a total of 5.1 million
DAB receivers sold by Q2 2007 (Table 3).8
Table 3
DAB radio receiver cumulative sales (000)

6. [Source: GfK, Digital Radio Development Bureau]
The new RAJAR survey found that the DAB platform attracts the lion’s share
of digital listening (7.0% of the total 12.8% digital listening - Table 2). The
important role that DAB hardware plays in the uptake of digital radio has
meant that the radio industry cannot afford to simply wait for digital radios to
replace analogue radios as part of the natural replacement cycle. The Digital
Radio Development Bureau (DRDB) estimates that there are 112.5 million
radio receivers in the UK, with the average household owning 4.5 radios, and
that each household replaces one of its radios every two years.9 Despite the
introduction of the DAB platform in the last decade, sales of radio receivers
(analogue and DAB combined) have not ‘boomed’, but rather have declined
from a peak of 12.4 million units per annum in 2005 to 9.7 million units per
annum by June 2007.10 Unlike newer technologies such as mobile phones,
radio receivers have enjoyed a replacement cycle that can exceed ten years,
making a complete switchover to digital through natural replacement unlikely
within the next decade.
Worse, the DAB platform was incorporated into only 16% of new radio
receivers sold in Q2 2007, so that the replacement cycle remains
overwhelmingly dominated by the analogue platform.11 Frustration has grown
within the retail electronics trade at the strategies emanating from the DRDB,
which is responsible for the marketing of digital radio and is owned jointly by
the BBC and commercial radio digital multiplex owners. One trade publication
commented: “Some manufacturers believe there have been mixed messages
with regards to DAB, which in turn is leading to a great deal of confusion,
something manufacturers don’t want to burden dealers with, as this is also
leading to consumer confusion”.12 Intellect, the trade association of the
electronics industry, advocated that “the commercial opportunities presented
by DAB can only be realised if the whole supply chain, from broadcasters to
retailers, carries the same messages to consumers about the full benefits of
DAB”.13 Laurence Harrison, Intellect’s Director of Consumer Electronics, went
so far as to warn that the consumer market for DAB radios might stall unless
retailers can communicate the benefits of the technology to the public.14

7. So where are the new, exciting digital content offerings that might persuade
consumers to accelerate their replacement of analogue radios with DAB
receivers, whose average retail price is still as high as £97?15 The BBC
completed the launch of its portfolio of five digital radio stations in 2003 and
has no plans to add further stations. Commercial radio currently offers 34
digital-only brands (some national, some only available locally), having started
earlier than the BBC in 1999, although the sector has recently started to
rationalise this portfolio (see UK Commercial Radio Consolidation [2007-
88]). There is a belated realisation within commercial radio that its investment
to date in digital radio content has been spread too thinly to compete
effectively either with the BBC, or to complement its own analogue stations.
GCap Media Strategy Director Will Harding has acknowledged that, in digital
radio, “there is too much which seems to be like the same old kind of pop
music made out of a template that already exists”.16
Ofcom is pinning its hopes for accelerated DAB take-up on the launch in 2008
of Channel 4’s national digital radio multiplex. Peter Davies, the regulator’s
Director of Radio & Convergence, said: "I was heavily involved with the launch
of Freeview when I was at the BBC as Controller of Corporate Strategy. We
are potentially almost at a Freeview moment with digital radio with the second
multiplex".17 Ofcom has forecast that digital radio listening will rise from its
present 12.8% of radio listening to 50% by 2010 and to 90% by 2016 (Table
4), which it believes offers an opportunity to switch off analogue radio during
the next decade. However, our opinion is that an increase in the supply of
digital radio, such as the new Channel 4 multiplex, will not necessarily
produce an equivalent increase in demand for digital radio, unless the new
content has substantial consumer appeal (see Channel 4: radio ambitions
aim too high [2007-58e]).
Table 4
Digital radio listening (as % of total radio listening): actual and Ofcom
forecast
[Source: RAJAR/Ipsos, Ofcom]

8. Initially, DAB had been hailed by the industry as the universal successor to
analogue radio, but this strategy has had to be revised recently in recognition
of the slowing take-up of DAB hardware. BBC Audio & Music’s Controller of
Multimedia & Interactive, Mark Friend, has admitted that the DAB platform
“[has] got issues” and that the cost of extending the Corporation’s DAB
network to cover the whole country would prove “prohibitively expensive”. He
suggested that, instead, there is a need for a “hybrid technology solution to
maintain the BBC objectives of universal delivery” and that “other technologies
like wi-fi radio and satellite radio may be part of the solution”.18 In the
commercial sector, GCap’s Harding has similarly agreed that “DAB is part of
the digital future, but it is not all of the digital future”.19
The costs of launching and sustaining digital radio over the last decade are
continuing to hurt the commercial radio sector badly at a time when its
revenues are in decline. Phil Riley, former chief executive of Chrysalis Radio,
estimates that digital radio is costing the commercial radio industry £25 million
per annum, although he is optimistic that breakeven will arrive by the end of
the decade: “We have still got two, three or four more years probably of pain
in the form of investment in keeping those [digital] transmitters going and
investing in the talent and content, but the gap between what it’s costing us
and what we’re getting back is going to shrink dramatically over those three or
four years, and we’ll get to breakeven or profit in 2010 or 2011”.20 Mark Story,
EMAP’s Managing Director of Radio Programming, agrees that DAB is
“bloody expensive to deliver” and asserts: “It’s pretty painful because, at the
moment, we are taking revenue-generating analogue listeners and converting
them into less revenue-generating digital listeners”.21 GCap Chief Executive
Ralph Bernard has been particularly vociferous: "GCap spends £10 million a
year on digital transmission. Just imagine if we could put that money into
content. We could give half of it back to shareholders, and still have enough to
hire [BBC Radio Two presenters Terry] Wogan or [Chris] Evans”.22
More than other radio owners, GCap has long been criticised for waiting for
revenues from its digital stations to grow sufficiently before making the
decision to invest in original content for broadcast on them (see GCap Media
[2005-23]). Although GCap has now started to hire presenters for some of its
digital stations and is increasing these channels’ ‘live’ programming,
transmission costs continue to account for 80% of the group’s digital radio
overheads.23 GCap’s Harding admits that the commercial sector’s digital radio
policy had previously been: “We’ve got this technology called DAB, so let’s
broadcast a whole load of radio stations”.24 Two years ago, GCap’s Bernard
said that the group’s digital radio stations had been only “doing slightly more
than keeping the transmitters warm” and, referring to GCap’s national digital
station Planet Rock, admitted that “there’s virtually no investment going into it
at the moment”.25 GCap Operations Director Steve Orchard even boasted
how the company’s strategy for Planet Rock had been entirely conceived in
The Lamb Inn, Marlborough: “Going into a pub with Ralph Bernard, my boss,
listening to the classic rock jukebox and coming out, several pints later, with
Planet Rock sketched out on the back of an envelope”.26

9. With so little investment in content to date, it is hardly surprisingly that, as
GCap’s Harding admits, “digital radio audiences are small” and “to grow those
audiences is going to require even more investment”.27 Harding
acknowledges that the industry’s previous strategy had been “arse about face”
and that the digital radio model has “got to start with the consumer, and has
got to start with the listener first and figure out what they want”.28 This
strategy, or rather the lack of it in the commercial sector, is likely to be one of
the reasons that the BBC’s five digital radio stations have attracted more
substantial audiences than most of commercial radio’s offerings (Table 5) –
the launch of the BBC’s digital radio portfolio was preceded by extensive
market research and consultations to establish that demand existed for its
proposed services.
Table 5
Listening to digital-only radio stations (ranked by share)
[Source: RAJAR/Ipsos, Q2 2007]
The commercial challenge facing radio owners is: why, at a time when old
fashioned commercial radio continues to reach a mass audience of 32 million
adults per week, should advertisers choose to use digital radio to reach a
much smaller sub-set of that audience? This explains why, for example,
GCap’s national digital radio station TheJazz has generated more revenues
from its website advertising to date than it has from selling on-air
advertising.29 GCap’s Harding admits that, as yet, “there is no market out
there for digital radio advertising” and says: “I don’t believe that anybody is
making substantial sums of money as a broadcaster out of DAB yet”.30

10. The client view is that digital radio has not yet gained sufficient momentum to
warrant specific attention from media buyers. Jonathan Barrowman, Head of
Radio at agency Initiative Media, says: “Audiences are migrating away from
analogue and into digital, but is the advertising [spend] migrating with it? I
would argue ‘no’”. Advertising on digital radio proves a particularly difficult sell
because, according to Barrowman, radio “has always been a discretionary
and secondary option on media schedules” and has “always been in the ‘nice
to have’ camp as opposed to the ‘must have’ camp”. Barrowman says that
“the ‘must have’ choice now is ‘online’, and that tends to be at the expense of
radio”.31 Precisely how much revenue is accruing to the sector from
advertising or sponsorship sold on digital stations is hard to determine. Ofcom
initially reported that advertising revenues from digital radio were £1 million in
Q4 2004, but the information flow has gone distinctly cold since then.32
For consumers, the motivation to purchase DAB receivers should be the
breadth of content on the digital platform that is unavailable elsewhere, but
even GCap’s Harding asks: “Is there enough there for people to go out and
buy another new radio set? That’s the fundamental question for the
broadcaster”.33 The number of stations touted as being available from the
DAB platform has proven to be somewhat illusionary. Around 85% of the UK
is covered by the two national digital radio multiplexes, one each for BBC and
commercial services.34 London is the only area of the country to support three
additional local commercial digital radio multiplexes, offering consumers a
total of 51 stations on the DAB platform, but only 28 of these are services that
are not already available on analogue radio in the city. Most other large cities
are covered by only two local commercial digital multiplexes, offering
consumers in, for example, Manchester 19 digital-only stations (out of the total
37 services on DAB), Birmingham 22 (out of 39), Glasgow 21 (out of 38), and
Liverpool 22 (out of 36). Outside such conurbations, the choice available from
DAB is much more limited.
GCap’s Harding agrees that “the more stations we can get on to DAB, the
better,” though he admits: “When I look at the [DAB] map at the moment, it is
not always being used terribly effectively”.35 An example of this is Chrysalis
Radio’s decision in 2006 to broadcast its London analogue talk station LBC on
DAB multiplexes in Northeast England, Northwest England, South Wales,
West Midlands and Yorkshire in which it is the main shareholder. Although
LBC’s licence specifically requires its output to be “for Londoners”, Chrysalis’
then chief executive Phil Riley explained: "It is our view that, with suitable
embellishment and editing, which is what we are going to have to do for the
regions, it will be a very attractive addition to what you can hear on digital
radio for most of the rest of the country".36 LBC is one example of what are
known as ‘quasi-national’ digital stations – existing analogue stations that are
relayed on the DAB platform (sometimes in slightly different form) to serve
cities outside their original, licensed coverage area. Radio groups have two
motivations – to add additional listeners without investment in additional
content costs, and to prevent potential competitors from using the DAB
capacity on the digital multiplexes they control. Unsurprisingly, this strategy
has not attracted significant audiences to the DAB platform.

11. The DAB platform could support many more stations, though owners of
existing digital stations would not relish greater competition. The DAB
broadcast system in the UK currently uses an encoding technology called
‘mp2’ which was developed in 1993. If the industry decided to adopt a more
contemporary encoding system, such as ‘AAC+’, then the present DAB
spectrum could support three times as many radio stations. However, the five
million DAB receivers sold to date in the UK were not designed to accept
software upgrades, so their owners would have to purchase new replacement
models in order to receive stations using ‘AAC+’ encoding. With this issue in
mind, the industry is desperate to maintain consumer confidence in the
existing (though anachronistic) ‘mp2’ technology for DAB, even though such a
policy is preventing the industry from being able to switch to a system that
could offer consumers a much wider range of content. This is a further factor
that is holding back the platform’s growth because, as GCap’s Harding
acknowledges, “choice is critical to making sure that DAB does realise its full
potential”.37
As the industry reluctantly begins to acknowledge that take-up of the DAB
platform is unlikely to grow at the exponential rates that had initially been
anticipated, the spotlight will inevitably switch to other platforms that support
digital radio. EMAP DAB Radio Director Grae Allan says: “There’s never going
to be a single replacement for analogue [radio] broadcasting. DAB forms a
part of the future of radio. It’s the ‘what proportion?’ question that [is] left
unanswered”.38 At present, DAB accounts for more than half of digital radio
listening (Table 2), but that proportion could reduce dramatically, heralding the
added danger that the DAB platform could be increasingly marginalised.
Other Digital Radio Platforms
At present, the most notable alternative platform for digital radio is Freeview,
which presently offers 26 radio stations, 18 of which are not available on
analogue nationally. Freeview hardware is considerably cheaper than DAB
radios (Tesco started retailing one Freeview unit for £10 in August 2007) and
offers consumers both digital TV and digital radio. Although the digital
television platform (Freeview, cable and satellite) presently accounts for only
2.6% of radio listening (Table 2), its significance is likely to increase as ‘digital
switchover’ is rolled out across the country. Whilst 84% of UK households
currently receive digital television, and therefore have access to the
accompanying digital radio stations, only 9.5% of the adult population are
using their TV each week to listen to radio stations.39 Ofcom has found
considerable confusion amongst the public concerning digital radio – only
36% of adults believe they have access to digital radio – and concluded that
the discrepancy between this figure and the 84% reality “highlights a lack of
awareness among consumers of the ability to listen to radio via digital TV and
internet”.40 Admittedly, the main digital TV set in living rooms is likely to be
used more for family TV viewing than for radio, but our opinion is that
secondary sets in bedrooms offer greater potential for radio listening, which is
more of an intimate, solitary medium than TV. Only 30% of secondary TVs
have so far been converted to digital, offering considerable scope for greater

12. consumption of digital radio once higher conversion rates are driven by the
impending redundancy of analogue TV receivers by 2012.41
Another potentially significant platform for digital radio is the internet. Until
now, listening to radio via the internet has largely tied the consumer to their
computer, negating one of the main benefits of radio – its portability. This
explains why the majority of online radio listening presently takes place during
work hours on weekdays, at times when users are ‘tied’ to computers on their
office desks. The recent introduction of ‘internet radios’ that receive their
signals via a wi-fi network, combined with the increasing take-up of home wi-fi
networks, has freed online radio listening from the confines of a computer.
Retailer Argos already stocks five models of ‘internet radio’ (priced from
£89.99 to £149.99), whilst competitor Currys is presently discounting one
model to £39.99, a lower price point than all but two of its 23 stocked DAB
radios. All these models are what the industry calls ‘kitchen portables’,
meaning that they require a mains electricity supply. However, in July 2007, a
Scottish company called Revo launched the UK’s first truly portable ‘internet
radio’ that works on a rechargeable battery and presently retails for £149.95
(stockists include House of Fraser and John Lewis). Orange retails a similar
product, the ‘Liveradio’, from its mobile phone stores in France for €149, and
is considering a UK launch.
The immense challenge facing the UK commercial radio sector is that truly
portable ‘internet radios’ offer consumers what Revo refers to as “massive
choice, no subscription charges and no international boundaries”.42 Whereas
DAB radios or Freeview offer the consumer, at most, two dozen new services,
internet radios offer thousands of stations, unbounded either by geography or
by Ofcom regulation. The danger is that, once the consumer price of portable
‘internet radios’ falls to around the same level as DAB radios, consumers will
be likely to choose the option that offers them better value for money in terms
of the widest range of content (and all DAB stations are also available on the
internet platform). UK commercial radio companies have been particularly
slow to date in developing their online presence, and they still offer nothing
comparable to the diversity of ‘internet radio’ content available from the likes
of Yahoo!, Real Networks, Pandora or Last.fm (see Radio: Last.fm is not the
problem [2007-60e]). In the US, 75% of those with wi-fi access say they have
used it to listen to ‘internet radio’, a sobering thought when wi-fi enabled
devices are forecast to ship 249 million units globally in 2011, compared to
only 40 million in 2006.43
Further into the future, the prospect of in-car wi-fi availability (already offered
in seven US locations by Autonet Mobile Inc.) is likely to impact the market for
traditional in-car radio usage, which reportedly accounts for 18% of all radio
listening in the UK.44 One study predicts that in-car wi-fi “should reach more
than 50% of the US population after nine years of market availability” and
concludes that it “poses a significant threat to traditional… radio”.45
Paradoxically, in the UK, it is the in-car market that has proven most
problematic for DAB radio adoption, with DAB only incorporated in 1% of car
radios sold (equivalent to 9,000 units in Q2 2007).46

13. Against this background of new technologies offering substantially increased
content choices to consumers, it is no surprise that the annual forecasts for
DAB receiver sales produced by the DRDB have been downsized for the
second consecutive year (Table 6). For the first time, its 2007 forecast
(published in September 2007) looks only one full year ahead, instead of the
customary four. The DRDB explains that this is because “there are too many
variables” to forecast accurately if, as is suggested by its research, “DAB
moves into other form factors such as mobile phones, docking stations, mp3
[players], mp4 [players], etc”.47 DRDB Chief Executive Ian Dickens insists that
“the growth of DAB is in line with expectations” and, like some in the
commercial radio industry, he believes that “switching off analogue radio
[forcibly] would provide a valuable roadmap to work to”.48 The reality facing
the DRDB is that unit sales of DAB radios grew by only 12% per annum in the
year to June 2007, a far cry from the 46% growth experienced a year earlier,
and the 144% growth rate one year before that.49 The trend has been
inexorably downhill since monthly sales data were first published in January
2003 (Table 7).
Table 6
Cumulative DAB receiver sales (million): actual and DRDB forecasts
Actual
[Source: GfK, Digital Radio Development Bureau]
Table 7
Year-on-year change in DAB radio receiver unit sales

14. [Source: GfK, Digital Radio Development Bureau, Enders Analysis]
ProspectsFor Change
The commercial radio sector now finds itself boxed into a corner. In the 1990s,
it was persuaded by the then regulator, The Radio Authority, to make
substantial investments in the nascent DAB technology. In return, the
broadcasting legislation effectively transferred the regulator’s former
responsibility for selecting which radio stations are allowed to broadcast to the
digital multiplex owners (all but one of which are controlled by combinations of
the six largest radio owners).50 At the time, these radio companies loved the
idea because it guaranteed them direct access to digital spectrum, whereas
access to analogue spectrum had always been controlled by the regulator (or
by the BBC). The opportunity to simultaneously control the means of digital
distribution, and the gateway to it, proved irresistible. After a ‘land grab’, the
radio groups filled the digital spectrum with their own digital radio stations,
expecting listeners to flock to channels that initially offered little more than
back-to-back music. ‘Build it and they will come’ was the maxim. But the
crowds never came, and now the radio companies are gatekeepers to fields
that are almost barren.
Undoubtedly, the digital spectrum that DAB occupies still holds considerable
intrinsic value in the long run. The short-term challenge for its owners is how
to monetise that spectrum, at the same time as having to continue to bear the
ongoing costs of transmission of their existing analogue networks. Even an
attempt to rent out some of the digital spectrum for mobile TV usage came to
nought, after BT Movio’s service with Virgin Mobile was shuttered in July
2007. GCap Media took the unprecedented step of advertising available
space on its Digital One national multiplex to all-comers this year, spectrum
that it has until now always coveted for its own digital ventures. GCap’s
Bernard has even threatened that his company will consider removing its
stations from the digital platform unless Ofcom fixes a firm date for digital
switchover: “Without a date for the switch-off, there’s no incentive for anyone
to invest in the business because there’s no firm idea of when they’ll get any
payback. If we had a date, even one far in the future, we could work towards
it”.51
The diminishing prospect for digital switchover is nowhere more evident than
in public pronouncements by the regulator. Three years ago, Ofcom’s Senior
Partner (Content & Competition), Kip Meek, told the radio industry: “We’re
aiming for 2010 to 2012 in digital switchover in TV, and I don’t think it will be
that long thereafter [for radio]”.52 Contrast this with the vagueness of the most
recent comment by Ofcom’s Partner (Strategy & Market Developments), Peter
Phillips: “We don’t see any immediate need for there to be a switchover from
analogue to digital radio but clearly, in the longer term, it’s possible that it’s
something that may be sensible to consider”.53
As a result, the short-term outlook for commercial radio stocks remains bleak.
The digital spectrum ‘land grab’ these companies indulged in over the last

15. decade successfully made them ‘king of the (digital) hill’. But all they have
done is increased their costs hugely, whilst only increasing their revenues by
a tiny amount. To top it all, for all their greater number, listening to digital-only
commercial stations is soon likely to be eclipsed by listening to the BBC’s
digital offerings (Table 8). The competitive situation in digital radio could soon
mirror the status of the analogue platform, where the BBC attracts 54.3% of
listening, compared to the commercial sector’s 43.5%.54
Table 8
BBC and commercial radio shares of listening to digital-only stations
[Source: RAJAR/Ipsos, Radio Advertising Bureau]
While the BBC can continue to afford to invest £38.1 million per annum in its
five-station digital radio portfolio, without requiring any financial return, the
commercial sector is caught between the devil and the deep blue sea.55 Even
if one commercial radio group decided to invest heavily in its digital radio
content, there is no guarantee that take-up of DAB receivers would increase
dramatically as a result. If the sector as a whole chooses not to invest more in
digital content, it will undoubtedly relinquish market dominance of digital radio
to the BBC. There is no way out for the commercial radio industry. For its
shareholders, the next few years will continue to be a bumpy ride.
[First published by Enders Analysis as report 2007-99.]
© 2007 Grant Goddard
Published by Radio Books
http://www.radiobooks.org
http://www.grantgoddard.co.uk
1 GCap Media, written response to Ofcom ‘Future Of Radio’ consultation, 29 June 2007.
2 Stephen Carter, speech to Social Market Foundation seminar, 15 August 2004.
3 The Independent, 17 August 2007.
4 The Guardian, 17 August 2007.

16. 5 The Times, 17 August 2007.
6 Ofcom, ‘The Communications Market: Digital Progress Report’, 20 September 2007;
GfK/Digital Radio Development Bureau.
7 RAJAR, Q2 2007; BARB, 2007 to date.
8 GfK/Digital Radio Development Bureau. Digital Radio Switchover October 2007
9 Digital Radio Development Bureau, email, 26 March 2007.
10 GfK/Digital Radio Development Bureau.
11 GfK/Digital Radio Development Bureau.
12 ERT Weekly, 15 February 2007.
13 Intellect, ‘Manufacturers Focus On Realising The Full Potential Of DAB Digital Radio’,
factsheet, January 2007.
14 ERT Weekly, 25 January 2007.
15 GfK/Digital Radio Development Bureau, June 2007.
16 Radio 3.0 conference, 17 May 2007.
17 The Sunday Herald, 2 April 2007.
18 Westminster Media Forum, 5 June 2007.
19 Radio 3.0 conference, 17 May 2007.
20 Radio 3.0 conference, 17 May 2007.
21 Radio 3.0 conference, 17 May 2007.
22 The Telegraph, 2 July 2007.
23 GCap Media, analyst briefing, 30 May 2007.
24 Digital Radio Show, 11 June 2007.
25 Guardian/MediaTel Digital Radio conference, 6 December 2005.
26 The Independent, 9 January 2006.
27 Digital Radio Show, 11 June 2007.
28 Digital Radio Show, 11 June 2007.
29 Digital Radio Show, 11 June 2007.
30 Digital Radio Show, 11 June 2007.
31 Digital Radio Show, 12 June 2007.
32 Ofcom, ‘The Communications Market 2005’, July 2006.
33 Digital Radio Show, 11 June 2007.
34 Ofcom, ‘Communications Market Report’, 23 August 2007.
35 Digital Radio Show, 11 June 2007.
36 Press Gazette, 3 August 2006.
37 Radio 3.0 conference, 17 May 2007.
38 Radio 3.0 conference, 17 May 2007.
39 Ofcom, ‘The Communications Market: Digital Progress Report’, 20 September 2007;
RAJAR, Q2 2007.
40 Ofcom, ‘The Consumer Experience’, 16 November 2006.
41 Ofcom, ‘The Communications Market: Digital Progress Report’, 20 September 2007.
42 Revo, press release, 14 May 2007.
43 Bridge Ratings, ‘The Impact Of Wireless Internet’, 12 September 2007; ABI Research.
44 Arbitron, ‘Shifting Gears: The In-Car Study’, 23 October 2003.
45 Bridge Ratings, ‘The Impact Of Wireless Internet’, 12 September 2007.
46 GfK/Digital Radio Development Bureau.
47 Digital Radio Development Bureau, e-mail, 24 September 2007.
48 Oliver Milman, ‘Has Digital Radio Stalled?’, mad.co.uk, 15 August 2007.
49 GfK/Digital Radio Development Bureau.
50 The dominant shareholders in 46 of the 47 digital radio multiplexes are combinations of
GCap Media, EMAP Radio, Chrysalis Radio, Guardian Media Group, UTV Radio and Scottish
Media Group, who collectively account for 85.1% of commercial radio listening (RAJAR, Q2
2007).
51 Financial Times, 13 July 2007; Broadcast, 7 September 2007.
52 The Radio Festival, 13 July 2004.
53 Ofcom, media analyst briefing, 19 September 2007.
54 RAJAR, Q2 2007.
55 BBC Annual Report & Accounts 2006/2007.