This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Digital Economy Minister spoke about the strength of the radio industry and the challenges the sector faces
This is the first time I have actually spoken at the Radio Festival – I have been here twice virtually.
But it’s not the same thing and I am delighted to be with you all – in person – today.
I spend a lot of time with Absolute 80s and their incredibly long playlist –– and of course Jack FM, my fantastic local independent station which I visited recently.
One of the constants over the past five years – something often lost on Media Commentators - is that radio continues to reach 90% of all adults, who listen to an astonishing 21 hours of radio every week.
What has changed is what they are listening to, with listeners able to choose stations based on strength of the brand and the content rather than just what they happen to be able to pick up on their analogue radio.
6 Music now has more listeners (just) than BBC Radio 3. It does not need an analogue outlet to be successful;
Absolute 80s has 70% of the reach of the main Absolute Radio – no analogue;
Kisstory, on-air for around a year, is bigger than Planet Rock (age of station: 15);
Eagle Radio’s been on DAB for a couple of quarters and it’s already generating 15% of its hours from that platform.
The radio industry has been well and truly freed from the constraints of its FM shackles and local DAB roll out and the D2 national multiplex will open these opportunities further, giving listeners more choice – including over 200 community radio stations.
But the world is changing and radio faces threats on a number of fronts.
The impact of iTunes, the emergence of Spotify, Rdio and Last FM has so far been at the expense of CDs whose sales continue to decline, but they are also competitors for radio, and radio does need to continue to differentiate itself to remain attractive to listeners.
I was very interested in what Tim Cook – CEO of Apple - said recently about why Apple acquired Beats Music.
One night, all of a sudden it dawns on me that when I listen to Beat Music for a while, I feel completely different. And the reason is: they recognised that human curation was important in the subscription service. The sequence of songs that you listen to affects how you feel.
Of course, he is really talking about radio (though he might not know it) and I think his comments are very insightful.
For it is clearly not enough to ask for credit card numbers and get access to 12 million songs – there needs to be more input around curation of music, playlists and genres and linking this to human presenters with stories to tell.
It’s that magic which keeps listeners coming back, as well as radio’s ability to rethink itself and stay relevant and interesting. And add value to the listening experience for listeners:
- Take the BBC Radio 3 Brahms series which is focusing on different and lesser known works and obscure recordings – increasing the public’s enjoyment and understanding;
- Classic FM did something similar with their John Elliot-Gardiner series;
- Or Beatdown on XFM with Scroobius Pip – which won the Radio Academy award for specialist music and which pushes the boundaries of radio as a medium;
- Or Ben Mynott’s Fluidnation on Chill which finds and introduces experimental down tempo music to a weekly audience of 75,000 people;
- Or Eagle FM’s recent Surry Heroes Event – linking local artists, music, community and achievement together with radio to create something really inspiring;
- There are countless other examples from local and national stations.
So radio’s real strength is the human touch, the live presenter, the active curation of content, the engaging and entertaining formats along with trustworthy news and information and a wide choice of genres.
But there are challenges.
The first one is engagement with young people - on first glance the figures in Ofcom’s Communications Market Report look troubling, with a fall in listening for the 15-24 age group from 18.7 hours in 2007 to 15.5 hours in 2013.
But when asked about brands – Kiss, Capital XTRA or 6 Music - awareness levels are extraordinarily high and this is reflected in the reach these stations have achieved.
So is the decline in listening hours because of lack of engagement in radio or because of the way young people consume media through smartphones, the internet and through social media?
I was really interested in the analysis that Matt Deegan did recently on the links between heavy Twitter usage, heavy Facebook usage and reach based on RAJAR data.
According to his analysis 36% of Kisstory listeners, 32% of 1Xtra listeners and 29% Capital XTRA (London) listeners described themselves as heavy Twitter users.
The figures were even higher for Facebook.
Now younger people are the heaviest users of social media and stations like this are targeted to attract younger audiences.
But there appears to be more to it than just an interesting correlation. It suggests a multiplatform approach and a strong social media presence is essential for radio to increase reach and engagement with new audiences.
Something else that would help is making it easier to access radio on smart phones.
I am pleased the BBC is working with a coalition of global broadcasters which includes UK commercial radio and the EBU to research and develop ‘hybrid’ radio – a combination of internet and broadcast radio – for use in mobile phones.
New research published today by the BBC shows the majority of smartphone users want radio in their devices but have concerns around mobile data costs, battery use and reception issues when using streamed audio services.
Nearly two thirds of the mobile phone owners surveyed said that hybrid radio could be a deciding factor when faced with a choice between phones with similar specs.
They particularly valued the strengths of broadcast radio – free-to-receive, robust reception and reliability, as well as better reception coverage, longer battery life and reduced mobile data costs.
I very much welcome the Universal Smartphone Radio Project and hope the BBC build on the good work so far by continuing to support this important project.
The second issue – for commercial radio – is about realising value.
Although ad revenues have recovered since the recession, national advertising overall remains flat, though there is growth in local advertising.
The reality is that radio has struggled to get advertisers to pay– in spite of the very clear benefits of radio advertising.
The fact is that the price of radio advertising has not risen in line with inflation and it remains the biggest bargain in media today, particularly for local and medium sized companies that should be investing more in advertising to grow their markets.
I know the RAB does great work here but the industry needs get to a position where the inclusion of radio advertising in company’s campaigns becomes a no brainer.
The whole industry – including the BBC – will need to grasp the changes that big data will bring to the way in which Radio measures audiences and impacts in a way that brings more advertising.
The third of the key challenges I want to mention is about connected cars. When I arrived in office in 2010, new car installation of DAB as standard was less than 5% and in car digital listening was well almost negligible.
When you consider the future of digital radio then cars are an absolutely vital area.
The car is where 22% of radio listening occurs and digital radio in car is a much better listening experience than analogue.
And thanks to the work of Digital Radio UK and great support from the vehicle manufacturers and their trade association the SMMT.
The headline is that in September 2014 there was a record 246,000 cars fitted with digital radio as standard - which is 58% of all new car registrations.
This compares with September 2013 when 167,000 cars were fitted with digital radio as standard, which was equivalent to 42% of new car registrations.
Encouragingly new commercial vehicles also saw a strong increase with digital radio as standard. Year on year the percentage went from 1% in September 2013 to 12% in September 2014 and the numbers of commercial vehicles with digital radio increased almost 10 fold.
So good and continuing progress.
But there is a new challenge for the radio industry in the form of new connected cars.
I am sure you are all aware of Apple, Google and Samsung’s move in to the car and as more cars are connected to the internet then more on-demand, streaming services will be available.
There is of course the risk that radio, despite its on-going popularity among drivers, becomes less prominent in the car and harder to find on the digital dashboard.
Radio will need fight to maintain its prominence on the digital dashboards of the future – this will require leading broadcasters, content providers and tech companies to work together.
We have an interest here because of the vital role in-car radio still plays with traffic and travel information and in emergencies.
I will therefore convene a “Digital Dashboard summit” early next year to better understand how radio and audio in connected cars will evolve and to help ensure that the increase in connected car functionality is an addition to, rather than at the expense of, consumers.
My final challenge relates to the long-term migration of radio to Digital.
As you know I have championed this since 2010. In my view digital is inevitable, and vital for the industry’s health and well-being.
The previous Government introduced the legislation and set the targets and criteria for a future switchover.
When we came into office we established the Digital Radio Action Plan to look at what was needed for a future switchover and:
- To sort out DAB coverage once and for all;
- Bring the car industry to a point where it would invest in DAB;
- Set minimum standards of performance for radio receivers in tandem with improved coverage and help reassure consumers;
- Find solutions for smaller stations who want to be able to broadcast on the DAB platform and have alternatives to the local DAB tier.
Last December at the Go Digital conference I said it was too early to set a date for a future radio switchover.
We needed to see the majority of listening move to digital and have DAB coverage close to FM equivalence before we will be ready to be talking about switchover dates.
But what I did announce is a series of important measures that should help us achieve those criteria, potentially in the next few years.
On national DAB coverage the BBC have announced they are building 162 additional digital transmitters to take National coverage from 93% to 97%.
That programme is well underway with 80 new digital transmitters rolled out and has just reached the 95% mark.
We continue to see the expansion of local DAB multiplexes - in the last 18 months we have seen 12 licensed but unlaunched local DAB multiplexes finally come to life and on air delivering highly valued local BBC and commercial radio stations.
The first was in Oxford, the most recent in Somerset and the next is in North Yorkshire.
In parallel to this DCMS and Ofcom have been working with the BBC and the local commercial multiplex operators to develop a plan that will expand local DAB coverage from 72% to around 90% of UK homes (around 4 million extra).
I am pleased to say the major parties have agreed the principles of the local DAB coverage plan. To be clear, following intense negotiations, the funding principles and final price for the building of around 200 new local digital transmitters and the upgrade of around 50 sites have been agreed.
The “moggies” as we have described the multiplex operators collectively are almost there and subject to final agreements which we anticipate will be concluded in the next couple of weeks, the main works are due to start next March finishing mid-2016.
This programme – as I announced in December - will be supported by DCMS funding, reflecting the wider benefits of extending digital coverage for local commercial and BBC services and in helping us reach the switchover coverage criteria.
We are also allowing local Multiplex licences to be extended to 2030 as we believe this is necessary to give the BBC and multiplex operators certainty and secure the platform’s future.
Last December, I also announced that we would fund a new programme of work by Ofcom to develop a low-cost solution for small local stations to get onto DAB.
I am delighted that Ofcom are making a progress on this development and that Ofcom announced at TechCon on Monday that it will shortly be consulting on proposals to issue licences for some trial small-scale multiplexes, which will take place next year.
This is the first major step towards providing small-scale radio stations, both community and commercial, with a potential route to DAB.
Finally I announced that DRUK would be taking a lead on the launch of the digital radio tick mark scheme working with manufacturers and retailers.
This is important as it will raise the specification standard of digital radios on sale which will provide consumers with reassurance when making purchasing decisions and a better listening experience.
The majority of manufacturers have had their products tested and approved to use the tick mark and you will see these products beginning to arrive in stores before Christmas.
I am also delighted to see that the digital radio tick mark will appear on the envelopes of the 40 million car tax reminders DVLA are sending to motorists. The disc may be gone but the tick mark has arrived.
So we are seeing progress on a number of fronts but I think radio needs to stay focused on supporting the transition to digital radio, building on the work carried out under the Digital Radio Action Plan and shifting away from an analogue age which is moving into the past.
Oh – one final thing.
In my speech last December - I said we would start to look again at deregulation.
Ofcom has started its review of Music Formats. I know that there are different views here following Ofcom’s call for inputs earlier this year. Ofcom needs to ensure that any changes take account of the needs of all those affected, including listeners.
But there is a more pressing issue.
The announcement on digital radio last December means that many licences which benefitted from the Digital Economy Act’s provisions for a further and final 7 year renewal will begin to expire before a switchover takes place.
This affects the three national analogue licences - Classic FM, Absolute and Talksport - and around 60 local licences before 2020.
We have looked carefully at the issue and have concluded that there are benefits to commercial radio from having a period of stability and not having to re-compete for licences which may only last for a couple of years up the point where switchover is likely to take place.
For that reason I can say that we are planning to consult shortly on changes to further extend the durations of analogue radio licences that have received the second and final roll overs and which will start to expire from 2017.
This consultation will cover both national and local analogue licences.
Our objective will be to carry this out quickly in order to give us the option of bringing in the necessary changes before the end of March next year, subject to sufficient Parliamentary time being available.
So in conclusion, I don’t doubt that the entrepreneurial spirit that has underpinned the radio industry’s success will continue to serve the sector well, allowing commercial radio to rise to the challenges which I have described.
Momentum continues to be made towards a digital future through greater coverage, the work of the car industry, progress on small scale DAB and by other measures to support radio’s transition. This is a transition we strongly support.