I know I keep returning to this having written about it back in February when Peter Bazalgette raised the idea, and again following the Radio 3.0 conference a couple of weeks ago when GCap’s outgoing chairman Richard Eyre also raised the issue in a personal capacity.
So it was interesting yesterday that Enders Analysis who report on all things media and technological, released a paper entitled “Privatising Radios One and Two: how to kill commercial radio with kindness.” No prizes for guessing that Enders share my opinions on the issue.
I’d love to link to the full paper, but Enders is a subscription service, so I’ll just report their summary finding from their website:
The privatisation of the BBC’s two national music radio networks – Radio One and Radio Two – is in the news again and is being proposed by certain commentators as a potential solution to the current problems facing the UK commercial radio industry. This report argues that, far from being a solution, unleashing these two highly successful BBC stations on the commercial sector will imperil the existence of many stations. This would dramatically increase the volume of advertising time available, at a time of glut, and draw advertising spend away from many stations.
Enders note that if the two services were to be privatised the volume of commercial radio inventory would at a stroke increase by 66%. Even though such massive players would undoubtedly introduce new advertising money to the radio market, there’s no chance that they’d make up that colossal shortfall, particularly at a time where there’s already plenty of space available. However money would flow to the two new giants, from both national commercial radio, and also from the national commercial stations (disclosure: that’d obviously affect my employer) as well as national revenue from local commercial stations.
It’s important to explain what that means. When you listen to local commercial radio, you’re sometimes put off by the local ads for garden centres, tile centres and car dealerships. But in fact, there’s more advertising for national brands which comes via a central sales team for that group.
Here’s a chart showing just how important this cash is to a local commercial station:
Source: RAB
Losing a large chunk of that cash would be devastating to the industry. And that’s not even the whole picture. On top of that is money for promotions and sponsorship. It’s an important part of a commercial station’s revenue stream, and becoming more so.
Source: RAB
The Enders report makes some other valid points including the fact that no current radio player is probably in a position to spend the £1 billion that these stations would make. But interestingly, they see another hidden aspect to this: that perhaps Channel 4 would get ownership of them. Richard Eyre is quoted as saying ““Radio One and Radio Two should certainly not be awarded to the highest commercial bidder.” So what does that mean?
We’re back to top-slicing the licence fee. And let’s throw into the frying pan the news yesterday that the EU is minded to block the BBC’s support on C4’s switch to digital as potentially falling foul of state aid, then suddenly things don’t look quite as simple.
But returning, finally I hope, to the subject of Radio 1 and Radio 2’s proposed privatisation, I suppose the most disturbing factor is the number of people in UK commercial radio who do think it’s a good idea.
[UPDATE – I’ve removed a quote from a select committee report, which although accurately reported, might seem to imply that RadioCentre is in favour of privatising the two services.]
[UPDATE 2 – Richard Eyre’s comments are spelt out in a comment piece he wrote for this week’s Media Week. He’s still wrong.]
Comments
2 responses to “Privatising Radio 1 and Radio 2… Again”
Interesting article. But being an old git I remember when Classic FM and Virgin Radio launched in the first half of the 90’s during a recession. I know the situation then was different, in that the radio industry was not as developed as now, but there was a camp then saying the a national station would rob the local market of national revenue. I don’t recall this actually happening, just an increase in national expenditure.
I guess the thinking is that by making the national radio market larger, radio will go from being sixth on the buyer’s schedule to fourth or third. And so whilst Radio 1 and 2 might gets the lion’s share of ad revenue some healthy crumbs may fall to the others.
I think you’re right about no one being able to afford to run them. I wonder what the change in their PRS returns alone would be? Would the music industry support this without the public purse bleeding in to their pockets?
Hi Mick,
That’s a fair argument, and I’m sure that was the case when the INRs were being launched in 92/93.
That said, the commercial radio market was significantly less developed as you say, with essentially a single FM and sister Gold AM service in most major towns and cities.
Even then, the Broadcasting Act of the time ensured that the licencee that then became Classic FM was not allowed to play pop (remember – it was very nearly a showtunes station before the funding fell through), while one of the two AM services had to be predominantly speech. That service is now, of course, Talksport. Only the licence occupied by Virgin Radio was allowed to play pop.
Now if a pop service had been allowed on FM, I think commercial radio would have developed very differently, and a powerhouse brand would have developed, perhaps at the cost of later local and regional FM licences.
As things stand, Radios 1 and 2 are simply too powerful to be able to switch to being ad-funded – whether they’re sold to the highest bidder, or as Eyre suggests, they’re held in public ownership in a similar manner to Channel 4 (And of course if that model were to be adopted, as the Enders report suggests, it wouldn’t take long before someone suggested that Channel 4 swiftly take them over. Well that’d certainly get their E4/T4 service on air quickly!).
FM frequencies aside, there’s nothing to stop anybody launching a national commercial radio station today. They should be able to secure carriage on Digital One (if they’re quick), and they can get onto Sky and even Freeview if they’re willing to put their money where their mouth is. And the internet means anybody can have a go. I’m not trying to be protectionist here. This would be as damaging for GCap as it would be for Virgin Radio (or its successor).
It’s notable that even Ofcom in their Future of Radio consultation, in their final verdict, stepped from removing the format restrictions on the INR services. In other words, they recognised that even with Radios 1 and 2 remaining with the BBC, a commercial pop service broadcast of Classic FM’s frequency would be damaging to the industry as whole.
From what I’m hearing, the imminent interim report from the Digital Radio Working Group is going to make interesting listening to. If BBC services are used to lead the upgrade path to DAB/digital radio, then that’s also in commercial radio’s overall interest. The report’s due before the end of the month I believe, and the session at the Radio Festival in Glasgow should be very interesting.
Finally, in all of this I haven’t even considered the fact that 12 million or so licence payers who don’t listen to any BBC radio services except Radios 1 and 2.