Radio Industry Regulations Should Be Relaxed Says NERA
A report conducted by National Economic Research Associates (NERA), on behalf of the Commercial Radio Companies Association (CRCA), has recommended that the current regulatory controls on the radio industry should be relaxed if the funding required for a successful launch of digital audio broadcasting (DAB) is to be achieved.
The Report On UK Commercial Radio’s Future argues that in order to successfully transfer radio broadcasting from analogue to digital, whilst maintaining standards in diversity and local content, the industry must allow a relaxation of regulations for both station ownership and programme content. The changes must be made in order to maximise the sector’s revenue and audience growth, according to NERA.
Contrary to the traditional argument for regulation, NERA says that “even if public service is the objective, the current system of regulation for commercial radio is not the best way to achieve it. It is costly to administer and opaque, and does not best serve the interests of audiences or promote a commercial radio industry sufficiently profitable to fund the intended move to digital broadcasting.”
One of the ways in which the industry may increase both revenue and audience according to NERA, is by lessening restrictions on station ownership so that more stations may be owned by a single owner; the report notes that on average companies other than the top four radio groups are hardly making any profit at all. The rationale behind this is that by allowing owners a greater number of stations there will be a tendency to provide a broader diversity of services in order to maximise audiences and profits. This approach challenges the orthodoxy of programme output which argues that the greatest audiences are often achieved by the ‘lowest common denominator’ of content rather than by a diversity of specialised stations.
NERA believes that consolidated groups will “seek to serve a greater range of the audience [by] financing more marginal areas of the market by sharing overheads with more profitable segments.”
The report argues that the transition to DAB is essential for the ‘long term health’ of the commercial radio industry, and proposes the following changes:
- the timing of licence awards: A critical mass of good quality content will be an important factor in driving take-up of DAB. In general, the greater the number of services and the sooner they are introduced, the better.
- the award of local licences: At the present time, there is insufficient capacity to allow all local stations to offer DAB. Consideration should be given to the early release of additional spectrum, should DAB services prove successful.
- the provision of additional data services is currently limited to 10% of multiplex capacity. Concern has been expressed by the industry that this is not enough to allow the development of commercially viable services. Consideration should be given to relaxing the limit.
The report also calls for longer licence durations in order to reduce administration costs which it sees as somewhat crippling at present.
Chief executive of GWR, Ralph Bernard, has welcomed the results of the report and says: “It is a tribute to the maturity of commercial radio that the industry was prepared to commission and publish this report by an independent organisation… The concepts of cash bids for licences and the reduction of central control of the formats which radio stations run would lead to a much wider choice for listeners, a stronger commercial base for the industry and a greater range of options for advertisers.”
The full report can be downloaded from the NERA website at http://www.nera.com/uk/papers.htm. Also available is a MediaTel-commissioned report on the prospects for digital radio; information on this report can be found in the Media Reports section of MediaTel’s Media Village.
NERA: 0171 629 6887 GWR Group: 0171 344 2718