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!
