A presentation that analyses the UK commercial radio industry, written by Tom Andrews, Henry Devereux, Grant Goddard in July 2003 for The London Institute M.A. Media Management course.

1. UK Commercial Radio
Industry
UNIT 1.2 MEDIA MARKETING & CONTENT
Media Industry Analysis
Tom Andrews, Henry Devereux, Grant Goddard
July 2003

2. UK COMMERCIAL RADIO INDUSTRY ANALYSIS
1. Political
2. Economic
3. Social
4. Technological
* Footnote
Source: Source
1

3. POLITICAL FORCES
•
The Communications Bill
•
The existing regulatory environment
•
The political environment
* Footnote
Source: Source
2

4. RADIO IS CURRENTLY HIGHLY REGULATED
Summary of existing radio legislation contained in 1990 and 1996 Broadcasting Acts
• Points system restricts ownership of local commercial stations by one owner to
maximum 15% of national radio revenue
• Cross-ownership of radio stations, ITV licences and newspapers is restricted
• No cross-ownership between national commercial radio licences
• Foreign (non-European Union) ownership of radio restricted to maximum 30%
stake
• Analogue (AM and FM) radio licences run for 8 years
• No community radio
• Regulated by the Radio Authority
* Footnote
Source: Source
3

5. THE INDUSTRY IS EXPECTED TO MOVE TO A
DEREGULATED MODEL
Summary of proposed regulation from the current (2003) Communications Bill
• Minimum 2 owners of local commercial radio stations allowed in a local market of
at least 3 local stations; Smaller markets - no limit
• Stronger cross-ownership restrictions across TV, radio & newspapers
• Cross-ownership of national commercial radio licences allowed
• Removal of foreign ownership restrictions
• Analogue (AM and FM) radio licences run for 12 years
• Community radio introduced on permanent basis
• Regulated by new convergent regulator Ofcom
* Footnote
Source: Source
4

6. OFCOM WILL BRING ABOUT SUBSTANTIAL
CHANGES IN APPROACH TO THE RADIO SECTOR
Radio Authority remit
Ofcom remit
Development of radio medium has been Development of radio medium is
market-driven
industry-driven
• Licences awarded to competing
applicants on "beauty contest" basis
• No ongoing obligation on local radio
stations to:
 Broadcast local programming
 Employ local people
 Train staff
 Place studios in transmission region
• No audience research commissioned;
no responsibility to consult
stakeholders
* Footnote
"Light touch"
Source: Source
•
regime
• Licences awarded to competing
applicants according to market
evaluation & business plans
• Ofcom requires local radio stations to:
 Broadcast local programming
 Employ local people
 Train staff
 Locate studios in transmission area
• Ongoing audience research;
Requirement to consult stakeholders
on policy issues
• “Super-regulator" of converged media
industries
5

7. THE MEDIA IS VERY CLOSE TO THE HEARTS OF
POLITICIANS!
Political priorities affect speed of development of radio medium
•
Regulatory ethos affects industry viability
•
Increasing commercialisation of the BBC has a big impact on
commercial radio industry (BBC is exempt from much of
Ofcom’s remit)
•
Innovation and take-up of digital radio delivery affected by
outcome of recently announced DCMS enquiry
•
Next general election could change course of media policies
* Footnote
Source: Source
6

8. UK COMMERCIAL RADIO INDUSTRY ANALYSIS
1. Political
2. Economic
3. Social
4. Technological
* Footnote
Source: Source
7

9. RADIO INDUSTRY VALUE CHAIN
Spectrum /
licensing
Who
Government
/ regulator
License
holder
Radio station
Example Radio
Authority*
Capital Radio
Function Award
licences to
broadcast
Programming
Marketing
Transmission
Audience
Revenue
Demographics Advertisers
Tower,
satellite, cable
TV
16-24 males
Unilever
ntl, Astra,
Telewest
Platform for
Advertising
Distributes
sales
station either advertising
sales
terrestrially,
from satellite or
though fibre /
Radio is a B2B
coaxial cable
business
* Radio Communications Agency shares some of the regulatory burden with the RA
* Footnote
Source: Source
8

10. RADIO REPRESENTS 4% OF UK DISPLAY
ADVERTISING
2001 100% = £ Billion
Other*
Television
9%
Radio
4%
Directories
Business &
Professional
Consumer
Magazine
16%
7%
9%
22%
National
Newspapers
6%
27%
Regional
Newspapers
* Other includes Internet, Outdoor, Transport and Cinema
* Footnote
Source: Advertising Association Yearbook 2002
Source: Source
9

11. RADIO IS VERY POPULAR WITH FMCG*
AVERTISERS
Major Advertiser Product Categories
Radio
% of all advertising
Total Display Advertising
% of all advertising
Media & ent
14
Retail
14
Motors
8
9
13
Business
11
11
7
8
Gov., Soc., Pol.
Finance
7
Household Equ.
4
7
3
6
Travel
Food
14
5
3
Other
* moving
* Fast Footnote consumer goods
Source: Source
Source: Nielson Media Research
6
17
34
10

12. RADIO ADVERTISING IS VOLATILE
Year-on-year growth %
30
25
20
15
10
GDP
5
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
80
-5
19
82
0
-10
Radio
-15
-20
* Footnote
Source: Office of National Statistics, Advertising Association Yearbook 2002
Source: Source
11

13. LONG TERM RADIO ADVERTISING FORECASTS
ARE BULLISH
Year-on-year change % constant 1995 prices
10
5
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
0
-5
GDP
Radio
-10
-15
* Footnote
Source: Analysis
Source: Source
of Advertising Association Long Term Advertising Forecasts 2002
12

14. M&A IN RADIO SECTOR
Price (£m)
Price/Sales
18.0
4.8
25.5
8.0
2.0
146.0
105.5
225.0
21.4
42.0
5.3
24.7
18.3
15.9
25.0
20.9
5.8
6.5
13.4
13.2
4.3
4.6
4.8
5.6
3.5
2.8
3.5
4.5
6.9
6.9
3.9
Date
Target
Acquirer
Nov 2001
Jun 2001
Jun 2001
Mar 2001
Mar 2001
Jun 2000
Apr 2000
Jan 2000
Oct 1999
Jul 1999
Jun 1999
Oct 1998
May 1998
May 1998
Feb 1998
Jan 1998
Wave 105
Peak 107
Scot FM
Bucks/Sun FM
Lite FM
DMGT Radio
Border Radio
Ginger Radio
Independent R
R Partnership
Plymouth Sound
Talk Radio
Red Dragon
Xfm
Melody FM
Essex Radio
Scottish Radio Holdings
Forever
Guardian Media Group
Radio Investments
Forward Media
GWR
Capital Radio
Scottish Media Group
The Wireless Group
The Wireless Group
GWR
The Wireless Group
Capital Radio
Capital Radio
EMAP
DMGT
* Footnote
Source: KPMG
Source: Source
13

15. UK COMMERCIAL RADIO INDUSTRY ANALYSIS
1. Political
2. Economic
3. Social
4. Technological
* Footnote
Source: Source
14

16. WE HAVE ANALYSED THREE SOCIAL FORCES
1. Radio listening
2. Radio’s position in leisure activity
3. Radio demographics
* Footnote
Source: Source
15

17. WE HAVE ANALYSED THREE SOCIAL FORCES
1. Radio listening
- Time spent listening to radio
increasing
- Commercial radio listening in
decline
- Local and national commercial
radio listening in slow decline
2. Radio’s position in leisure activity
3. Radio demographics
* Footnote
Source: Source
16

18. RADIO LISTENING IS INCREASING
Average weekly hours of listening and viewing
30
TV
25
Radio
20
15
10
5
19
92
19 Q4
93
19 Q3
94
19 Q2
95
19 Q1
95
19 Q4
96
19 Q3
97
19 Q2
98
19 Q1
98
19 Q4
99
20 Q3
00
20 Q2
01
20 Q1
01
20 Q4
02
Q
3
0
* Footnote
Source: Analysis of BARB and RAJAR figures to Q1 2003
Source: Source
17

19. THE BBC RETAINS A STRONG POSITION
Audience Share %
70
60
50
40
BBC
Commercial
30
20
10
19
92
19 Q4
93
19 Q3
94
19 Q2
95
19 Q1
95
19 Q4
96
19 Q3
97
19 Q2
98
19 Q1
98
19 Q4
99
20 Q3
00
20 Q2
01
20 Q1
01
20 Q4
02
Q
3
0
* Footnote
Source: Analysis of RAJAR figures to Q1 2003
Source: Source
18

20. BOTH LOCAL AND NATIONAL COMMERCIAL
RADIO ARE LOSING SHARE
Audience share %
60
50
BBC nat
40
Local comm
30
20
10
Nat comm
19
92
19 Q4
93
19 Q3
94
19 Q2
95
19 Q1
95
19 Q4
96
19 Q3
97
19 Q2
98
19 Q1
98
19 Q4
99
20 Q3
00
20 Q2
01
20 Q1
01
20 Q4
02
Q
3
0
BBC local
* Footnote
Source: Analysis of RAJAR figures to Q1 2003
Source: Source
19

21. WE HAVE ANALYSED THREE SOCIAL FORCES
1. Radio listening
2. Radio’s position in leisure activity
- Increasing competition for leisure time
- Radio benefits as secondary medium/background activity
- Radio benefits as portable medium
- Radio benefits as solitary experience
- Radio benefits from simultaneous media usage
- Radio benefits from close relationship with listener
- Penetration of radio receivers is nearly 100%
- Marginal cost of listening to radio to consumer is low/zero
3. Radio demographics
* Footnote
Source: Source
20

22. TOTAL MEDIA CONSUMPTION IS INCREASING
Average minutes per week
3500
3000
Total
media
2500
2000
1500
1000
TV
Radio
500
Online
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
0
* Footnote
Source: Screen Digest
Source: Source
21

23. RADIO BENEFITS FROM BEING A SECONDARY
MEDIUM
% share of media consumption by day part
Magazines
Newspapers
TV
4.5
0.9
5.7
3.1
0.8
1.2
14.6
0
5.4
1.9
8.4
3.4
15.6
29.8
22.7
2.5
22.5
5.8
5.7
4.8
4.4
4.6
6.9
4.5
1.3
3.5
5.6
4
2.8
1.1
9.9
31.1
35.3
29.5
72.4
58.2
41.1
Radio
48.2
37.9
After Lunch
Lunch
Morning
* Footnote
Source: Source
Breakfast
Source: RAB Radio Days 3
Pre
Breakfast
12.7
7.8
Late
evening
53.6
74.3
Early
evening
63.3
5.8
7.5
0.8
12.8
During
night
Internet
22

24. RADIO IS A PORTABLE MEDIUM
41
% people listening to radio at work
35
32
27
34
31
36
30
29
25
22
19
Adults 16-24
25-34
35-44
45+
27
24
ABC1 C2DE
* Footnote
Source: RAB
Source: Source Radio Days 2, Radio Days 3
23

25. RADIO LISTENING CAN BE SOLITARY
Radio listening in home %
92
Total home
65
Kitchen
63
Living room
53
Bedroom
20
Garden
Bathroom
14
* Footnote
Source: RAB
Source: Source Radio Days 3
24

26. RADIO CAN BE CONSUMED WITH OTHER MEDIA
Radio listening accompanied by other media consumption %
38
36
13
8
Reading
Reading
Whilst on
newspapers magazines internet
Watching TV
* Footnote
Source: RAB
Source: Source Radio Days 3
25

27. RADIO ENJOYS A CLOSE RELATIONSHIP WITH
THE LISTENER
Listener interaction with radio station %
22
Any activity
Gone to concert /
road show
15
Called a phone in
13
Sent in a
dedication
7
Visited radio
website
5
Called station info
line
Visited station
3
2
* Footnote
Source: RAB
Source: Source Radio Days 3
26

28. WE HAVE ANALYSED THREE SOCIAL FORCES
1. Radio listening
2. Radio’s position in leisure activity
3. Radio demographics
–
–
–
–
Radio stations target specific demographics
Radio stations target ethnic minorities
Radio stations adopt more specialised formats
Young people use commercial radio more than BBC radio
* Footnote
Source: Source
27

29. RADIO STATIONS ARE WELL SEGMENTED
Age and social class map
Younger
Younger
Xfm
Kiss 100
Virgin
Choice
Heart
95.8
106.2
Capital FM
Sunrise
Magic
Premier
Jazz FM
Capital
TalkSPORT
Gold
LBC 97.3
More upma
Up market
Classic FM
* Footnote
Source: RAB
Source: Source analysis of BARB / RAJAR data March 2003
28

30. AND INCREASINGLY TARGETING ETHNIC
GROUPS
* Footnote
Source: Source
29

31. AND SEGMENT THEIR BRANDS
* Footnote
Source: Source
30

32. YOUNG PEOPLE USE COMMERCIAL MORE
THAN BBC RADIO
* Footnote
Source: RAB
Source: Source analysis of RAJAR data 3 months ending in June 1999
31

33. UK RADIO INDUSTRY ANALYSIS
1. Political
2. Economic
3. Social
4. Technological
* Footnote
Source: Source
32

34. DAB IS EXPECTED TO CONTINUE TO GROW
Cumulative digital radio sets sold
1,000,000
500,000
20
99
15,000
30,000
00
01
85,000
02
F03
F04
* Footnote
Source: Digital Radio Development Bureau
Source: Source
33

35. TECHNOLOGICAL FORCES
New platforms for radio
listening
• Digital audio
broadcasting (DAB)
• Television
- satellite
- cable
- digital terrestrial
television (DTT)
• Mobile phones
• Internet
Increase in number of
radio stations
• Specialist stations
• Additional information
embedded in broadcast
stream
• Greater geographical
coverage
* Footnote
Source: Source
34

36. SUMMARY
POSITIVES
1. New technology offers more platforms to content providers
2. New regulatory environment
3. Overall radio audiences are healthy
4. Radio advertising tends to recover faster than other sectors
NEGATIVES
1. Commercial radio audiences are vulnerable to competition from BBC
2. National commercial radio overall has not proven to be a success
3. New regulatory environment likely to see further consolidation
* Footnote
Source: Source
35

37. APPENDIX
* Footnote
Source: Source
36

38. COMMERCIAL RADIO IS HIGHLY FRAGMENTED
1990 license number is made up, you need to get aud share…
Radio Audience Share
%
UK Local Radio Licenses
Label 5
67
10
Label 4
10
45
45 BBC
Label 3 15
30
20
20
Label 2
90
94
98
02
* Footnote
Source: No
Source: Source bleedin clue gov
37

39. RADIO INDUSTRY VALUE CHAIN
Spectrum /
licensing
Who
Example
Function
License owner
Transmission
Government /
regulator
Radio Authority*
Radio station
Tower, satellite, Demographics
cable TV
16-24 males
ntl, Astra,
Telewest
Award licenses
to broadcast
Sales advertising Distributes
and sponsorship station either
terrestrially, from
on basis of
audience
space or though
fiber / COAX
Programming
cable
Capital Radio
Audience
Consumer goods
companies find it
hard to reach
this segment
* Footnote
Source: Source
38