Friday, 3 February 2012

Is this a five minute argument?

Matt Deegan and I have started an interesting debate on FM/DAB switch-over, with his post here.

My starting premise is that the most important number to look at is FM reach, rather than the oft-quoted digital share, as the essential prerequisite to making a switch-over decision. Digital share is moving nicely upwards across the UK, and is now nudging 30% - which is fantastic, and suggests to me that the market will ensure DAB, and digital more generally, remains and grows as an essential part of the radio landscape.

At the same time however, out of the 90% of the UK population who listen to the radio at some point each week, around 75% of them make use of FM as part of their weekly listening repertoire – and this then results in FM forming a significant proportion of their total listening – currently in excess of 60%. Whilst this share will decline over time, as listening migrates to digital platforms, the reach enjoyed by FM will remain stubbornly high – and my thesis is straightforward - I simply cannot believe the BBC, major commercial operators, or even MPs, will sit by and let current FM signals go dark whilst millions of people are still using an FM radio for at least some time during each week. 

For the BBC it would be a complete denial of their over-riding requirement to serve the whole population; for commercial operators it would be to willingly risk losing listeners and revenue for no good reason (except to save the comparatively small sum that FM TX costs); and for MPs it would mean backing a proposal which will result in many angry constituents.

And why might FM reach remain stubbornly high whilst digital share marches to 50% and beyond? Well there are two reasons. 

Firstly, in-car listening. Radio consumption in cars accounts for about 20% of all listening, but weekly reach in cars is much higher (it's currently 52% in Birmingham.) Ford Ennals at DRUK told me last week that he thinks there are 30 million cars on the road in the UK at present, so to start with we need to think about retro-fitting all of these, as only a very small percentage currently have DAB fitted either as standard or as retro-fit. My understanding is that retro-fit is improving in leaps and bounds, but realistically we must be at least 10 years, or longer, away from all of these cars being DAB-capable. Now obviously some of these cars will be scrapped each year, to make way for new vehicles, but even here it will be slow progress. Currently  21% of new cars come with DAB as standard, and this will rise - but it still means almost 80% of new cars sold this year won't have DAB installed. As every year passes with a significant percentage of new cars coming on stream without DAB automatically installed, so the base of cars needing retro-fitting remains large. Perhaps I’m being unduly pessimistic about the ability of manufacturers to develop clever retro-fit solutions which are simple, quick and cheap to install – but aerial technology alone will make this hard to achieve. For lots of listeners, in-car will remain FM for quite some time.

Secondly, we are stuck with multi-set listening – in bathrooms, bedrooms, kitchens, garages, sheds etc etc. Each secondary or tertiary set might only account for a modest share of an individual’s listening, but taken as a whole these sets add up to big weekly reach figures. Whilst consumers might well be willing to splash out on a new DAB for the kitchen or main bedroom, and then replace their second set at a later point, I suspect getting them to continue to shell out for multiple sets around the home will prove more problematic – especially with listeners for whom an FM delivering their favourite station is “perfectly adequate thank you very much.” And of course there will remain quite a substantial number of digital refusniks as well, so I think this is an issue of a different order to that faced by digital TV switch-over.

So my view is that FM will remain an essential component of listening, with FM reach remaining well into significant double figures until the mid-2020s, even though FM share might shrink more rapidly.

At this point you have to turn, certainly in the case of commercial operators, to the economics of transmission for simulcasts. And here the maths are quite revealing, because when you are broadcasting essentially the same output over multiple platforms, each platform becomes viable, and then valuable, as soon as the marginal revenue exceeds the marginal cost – and for simulcasts this means audience delivery is key, as audience size by platform is almost exactly proportionate to revenue generated. For most locals who are simulcasting on FM and DAB, I would guess annual revenues to be on average £2m+. Given a local FM transmitter probably costs £50k-£75k or less to rent each year, and a stereo slot on a local mux is likely to cost less than £100k per annum, this means as long as at least 5% of your listening is on either of those platforms – you’ll want to stick with it until forced off. It’s for this reason that even those operators opposed to DAB on principle (and I am not one of those) but who are on the platform in order to secure licence renewal, might be nervous about relinquishing their current DAB slots. As an example, given our birmingham DAB audience now represents  just under 10% of our total listening, even if OFCOM said "you can keep your FM licence and switch off digital transmission" we might be very nervous about doing so, and losing those hours. And if a 10% share on DAB means it's a "must have," that must hold true in reverse.

So we have a real dilemma here – FM reach will remain stubbornly high, meaning residual FM share will not decline as fast as digital evangelists would want, and whilst local commercial stations are attracting any decent share on FM, they won’t want it switched off – especially given the uncertainty of listening habits and retuning risk in a forced overnight march to DAB.

Ironically, in the end, given FMs comparatively low transmission cost, there being no commercial imperative to shift us off (I’m not convinced there will ever be a new, commercially attractive use for the band) and the fact we’d be encouraging Arqiva (and others) to reduce FM costs as much as possible, we commercial operators might end up wanting to eke out FM audiences at low cost for as long as possible. For national FM networks, the economics of transmission are different – but this is where the BBC dominates, and universal coverage delivery will be their acid test.

I could be wrong, and Matt right, that the impetus grows more quickly, but I can’t see FM reach dropping below 25% and share dropping below 10% for at least another 15-20 years. And for as long as that’s the case, it will remain marginally financially attractive to commercial operators to keep it on, and problematical for the BBC and regulators to switch it off.

And if we knew now for certain that it was going to take that long to get to that point, would we today still want to head down that path? I suspect that's an argument that might take the full half-hour!


  1. Interestingly enough and some may question my logic, but in a strange sense, you are both right!

    What I would add is that the assumptions being made by predicting the future, based on the past is premise that that nothing else in peoples life’s are going to have an effect on peoples behaviours e.g. ”everything stays the same, people will just use listen more/less on platform A/B etc” this isn’t the case.

    The truth is that behaviour changes on the whole, can sometimes take a while

    That said, everything does not stay the same, if something is understood and embraced as “life changing” then adoption happens quickly

    Look at the growth in smart phones over the last 5 years or so, could we have predicted that with the research to hand….no

    The same with Face book/twitter etc

    Digital radio however is taking a fair bit longer to move from the “early adopters” and the “Mainstream”

    Id also point out that RAJAR isn’t the most accurate of research studies, but it’s the major one used for radio, its based on perceived listening rather than the TV BARB model of actual listening

    Its possible using RAJAR and chucking in a few other models/factors to predict usage over the next 1-2 years and you could probably get it quite close, but who is to say the measurement system of filling in a form at the end of the week will remain and be in use in the next 10 years.

    So, taking all that into account, factor in the BBC’s charter, combine it with the commercial operators need for (one side Digital and the other side FM) we are left with a stalemate.

    We are caught in limbo land, with Digital listening in growth, but maybe without the traction people in the industry thought it might have had (and got excited about) 10 years ago.

  2. I see no reason why a die-hard listener to BRMB should switch over to DAB. The same goes for Radio 2; the same goes for Heart.

    I don't believe a government-mandated switchover makes any sense in the real world (except, perhaps, persuading the BBC to move).

    Mark: RAJAR interviews 100,000 people a year. BARB surveys 11,300 people a year. Just so you know.

  3. I own five DAB radios but only listen to DAB when I absolutely have to, the reason being it's just not as good as the alternatives. When DAB first arrived it sounded OK but since then bitrates have been slashed and it is now simply inferior in terms of sound quality to FM (at least to my ears).

    In the meantine, internet radio has improved no end, to the point where if I want to hear a digital only station and I'm at home, I'll use the web rather than DAB.

    For the car, where background noise makes the quality gap less of an issue, I have a Pure Highway plugged into the fag lighter, but not that often. It's right rigmarole to set up and worse still it makes my car look like a mini cab with bits stuck to the windscreen and aerial and power cables trailing about. It's certainly not worth bothering about for short hops or unless there's a DAB only station I really NEED to listen to.

    Also the range of the DAB signal is pants compared to FM. I can presently pick up BBC WM on FM as far down as Watford Gap and BRMB well into Coventry when commuting. On DAB I lose them (that bubble wrap popping fade known to all DAB users)when I pass Birmingham Airport. Most annoying.

    As a listener - and one who has a load of money on DAB equipment - I would prefer FM to stay and DAB to be phased out and replaced with a better digital technology.

    DAB just ain't up to the job.

  4. Out of interest do we know what percentage of tv viewing is done on non-digital platforms, before we were told we must convert or buy a new set? Probably a lot of people would have been quite happy to continue with their existing equipment.

  5. My DAB portable radio (with lots of positive feedback and 5 stars on Amazon no less) doesn't work on the train, therefore FM is my only listen on the commute, and my car is a 1976 Mini, so no DAB there either! The DAB signal needs to be seriously sorted out before they switch FM off.
    I agree with you that the BBC should keep FM to make all of its programmes accessible - to all ages and incomes! That's why is called Public Service broadcasting.

  6. What is quite heartening is that radio is so universally-loved, it probably has more delivery channels than any other media (you can even get it on your toaster:

    There is, of course, another school of thought: IP will beat DAB sooner than DAB could beat FM. Every new media device contains a radio - either an FM radio or internet radio as a downloadable app. Radio stations' own-branded applications regularly feature in the top 10 iTunes and Android app charts, and with improved streaming technology and 3G/wi-fi speeds, the audio quality often surpasses both FM and DAB.

    It wasn't so long ago that I was bemoaning the lack of FM radios available on many of the newer smartphones, stating that mobile data networks may be great in California but are often pretty ropey in the UK, especially in built-up London. However, that argument doesn't really stack up now that the mobile networks have made some pretty big improvements. Now, I can take the 10-mile, 30-minute commute into Leicester Square with very little break in service, listening to the radio virtually non-stop.

    O2 has pledged to install free-to-access wi-fi in major cities on a trial roll-out. BT already has a large network of hotspots, thanks in part to their clever wi-fi sharing system where home users of BT Broadband can allow users to piggyback onto their bandwidth. Of course, we also have 4G mobile data waiting in the wings, not to mention super-high-speed FTTC (fibre to the cabinet) home broadband.

    At home, I have two FM radios (three if you include that on my mobile phone). I have one DAB radio, an internet radio, an iPad with TuneIn Radio and the UK Radio Player app on my PC that's hooked up to the internet via a 40 meg connection. I also have a clever little bluetooth speaker. So in reality, my system could be much simpler: internet radio streamed from my mobile phone via my wi-fi network to my bluetooth speakers. I can leave my phone where it is and carry my 'radio' with me to any room in the house.

    Whilst the options for listening to the radio are greater than ever, technology is making accessing these services simpler than ever.

    So, we've established that every new media device has a radio inside it, but rather than being called FM, it's called wi-fi, and I have no doubt that the availability of low-cost or free-access public broadband will increase massively over the next couple of years, as operators continue to overhaul and upgrade their networks, and that will mark the re-invention of radio.

    Ironically, this re-invention will take us back to basics: using wireless... to deliver the wireless.

    Marconi would be proud!