ARGUMENTS TO PERSUADE THE GOVERNMENT TO RENEW NATIONAL COMMERCIAL RADIO (INR) LICENCES by GRANT GODDARD

www.grantgoddard.co.uk January 2009

Initial licences issued under The Broadcasting Act 1990 lasted for ten years. The Broadcasting Act 1996 permitted licences to be renewed once for a further eight years. The Communications Act 2003 allowed licences to be extended once for a further four years. New legislation is required for a further extension. Otherwise, The Broadcasting Act 1990 requires award [of] the licence to the applicant who submitted the highest bid except where there are exceptional circumstances. Independent National Radio [INR] licences have been significantly devalued by post-1990 developments and may no longer be commercially viable under an auction award system in the present, uncertain environment: the commercial radio landscape has changed in unprecedented and unforeseen ways since The Broadcasting Act 1990: o in 1990, there were 106 commercial stations, compared to 305 today [insert graph] o in 1990, average revenue per station was 2.1m, compared to only 2.0m today (constant prices) [insert graph] o in 1990, each local commercial station had a monopoly over local radio advertising, and 3 national stations were invoked to share national radio advertising [insert graph] o today, many local commercial radio stations have been consolidated into national or quasi-national brands that compete with the 3 INR licensees [insert graph] the media landscape has changed in unprecedented and unforeseen ways since The Broadcasting Act 1990: o AM/FM is no longer the only broadcast platform for national commercial radio 24 stations on Freeview, 29 on Freesat, 76 on Sky, 4 on DAB [insert graph] o the internet offers competing content in the form of streamed audio, on-demand audio, podcasts and personalised radio [insert graph] o portable music players and mobile phones compete with radio by offering personalised, on-demand audio content [insert graph] o universal broadband access is likely to intensify the competition for traditional broadcast radio [insert graph] audiences for commercial radio are under intense competitive pressure from new media and the BBC: o the aggregate listening share of the three INR stations is only 7%, compared to the 37% listening share of BBC Radios 1, 2 and 4 [insert graph] o the individual listening shares of the three INR stations peaked in 1994, 2002 and 2007 and have since declined [insert graph] o commercial radios aggregate hours listened peaked in 2001 and have subsequently declined [insert graph] commercial radio revenues are also under intense downward pressure: o local radio advertising revenues have not expanded, due to the population of High Streets by national retail brands [insert graph]
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Arguments To Persuade The Government To Renew National Commercial Radio (INR) Licences 2009 Grant Goddard

o national radio advertising revenues are rapidly migrating to online media [insert graph] o radio advertising is becoming a nice to have rather a must have advertising medium on a longer menu of marketing options for advertisers [attach evidence] o commercial radios aggregate revenues peaked in 2000 and have subsequently declined (constant prices) [insert graph] migration of radio listening away from AM/FM analogue to digital platforms creates uncertainties: o possible government intervention could fix a timeline for complete migration of radio o Ofcom is ending analogue licences in 2015 (or 5 years from start if later) o Ofcom will review the post-2015 use of AM/FM spectrum in 2009 and 2012 o Ofcom plans to auction INR licences for only a 5-year period

Such uncertainties create a danger that, in an imminent INR auction, some bidders might over-bid to win, and the resultant high annual payments could render their five-year businesses unviable (under any owner). This could produce a no-win situation for citizens (deprived of 3 INR services), advertisers (who would lose a valuable medium) and the Treasury (loss of licence income).

Grant Goddard is a media analyst / radio specialist / radio consultant with thirty years of experience in the broadcasting industry, having held senior management and consultancy roles within the commercial media sector in the United Kingdom, Europe and Asia. Details at http://www.grantgoddard.co.uk

Arguments To Persuade The Government To Renew National Commercial Radio (INR) Licences 2009 Grant Goddard

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