DAB Digital Radio: Licensed To Fail [excerpts]

EXCERPTS FROM FULL BOOK

The Ingenious Consulting report found that DAB‐only stations are spending £25m per annum on operating expenses.24 The above table shows that, if these stations were attracting revenues proportionate to the listening they presently enjoy, collectively they would then be profitable (£29m revenues minus £25m operating expenses). But, in fact, their revenues are presently less than £2m. The Ingenious Consulting report concluded that, as a result, the “annual negative cash flow impact of DAB” on the commercial radio sector is around £27m per annum.25

This £27m annual loss attributable to digital radio stations represents around 5% of commercial radio’s revenues, a significant impact on an industry which is only marginally profitable overall at present. The nub of the problem is this: digital radio stations presently account for 5.3% of listening to commercial radio, but digital radio stations attract only 0.3% of commercial radio revenues. Here is a massive economic disconnect that requires much more than a mere increase in productivity or some kind of performance improvement.

Doubling or even tripling these stations’ revenues would barely dent the problem.

Maybe DAB is simply not a platform where the traditional commercial radio model can be made to work – the old model of ‘give away free content, pay for it by attracting advertisers to buy on‐air spots’. Maybe DAB is not a medium from which traditional UK commercial broadcasters can generate profits from offering content, as they had anticipated in the 1990s. Commercial broadcasters are pushing no commercial product other than their on‐air brand (and some music downloads, concert tickets and click‐through purchases). Instead, perhaps DAB can only be made to work as a marketing tool to assist companies selling (non‐ radio) products. So, for example, it would make sense for Universal Music to have a DAB radio station to expose directly to the public the CDs/videos/movies they are currently selling. It would make sense for Amazon to have a DAB radio station to promote all the consumer products it is selling. Then, the £650,000 carriage cost could be considered an additional ‘marketing expense’ for these companies’ core business, rather than a direct operating expense that had to be recouped on‐air.

The other possibility is for DAB to be used predominantly by organisations whose objective is something other than breaking even financially. In January 2008, I had written:

“Worryingly, this sudden flowering of ethnic, religious and publicly‐funded radio stations on the DAB platform echoes the fate of the ‘AM’ waveband in the 1990s, at a time when the radio industry and the regulator had become convinced that audiences were deserting that platform for the improved audio quality offered by the ‘FM’ waveband. By 2002, declining audiences of ‘AM’ stations had persuaded the regulator to suggest that the platform be used in future ‘for better serving minority, disadvantaged or currently excluded audience groups, whether defined by their interests, demographics or ethnicity.’ The ‘DAB’ platform of 2008, particularly in London, is already starting to resemble the ‘AM’ platform of 1998, suggesting that ‘DAB’ might have already been written off by the sector as a means to reach the ‘mass market’ audiences that national advertisers desire from the medium.”26

This trend towards non‐commercial content has developed further since then. The national DAB platform has added BFBS Radio (government‐funded) and now Premier Christian Radio (religious), but no new permanent digital radio stations operating on a commercial model.

Local DAB multiplexes have added Traffic Radio (government‐funded), Colourful Radio (ethnic) and UCB (religious). Interestingly, UCB has taken two channels on each of the regional MXR DAB multiplexes, giving it a substantial amount of DAB spectrum. But there