Is broadband blazing the trail for digital radio?

DAB or online? As the debate over the future of radio escalates, Lucy Rouse investigates the relative merits of the two competing platforms.

Is broadband blazing the trail for digital radio?
Is broadband blazing the trail for digital radio?

Ever since GCap chief executive Fru Hazlitt dubbed digital audio broadcasting (DAB) a "dead duck" in her new corporate strategy, unveiled on 11 February, the radio world has been split between those who believe that the future of radio is online, and those who are keeping faith with the DAB platform.

Hazlitt feels GCap's immediate future lies in FM and broadband, which she says are "the platforms that we believe consumers want and that offer the greatest growth opportunities".

According to Rajar's Q4 figures for 2007, 10% of all radio listening in the UK is via DAB, compared to 1.9% via the internet. Of that 1.9%, the number of people that have been tuning into radio internet on a weekly basis during the three-month period was 5.7% - which equates to around 19 million hours.

Debate about which technology will dominate radio listening in the future, has been sharpened by the fact that digital transmission needs considerable investment, and that the number of people listening to digital-only stations is still small - hence GCap's decision to consider closing Planet Rock and theJazz.

In addition, advertising revenue in the radio sector has been in decline - although earlier this month, the RadioCentre reported that there had been a 2.8% rise in revenue in 2007 over the previous year, the first time revenue has increased since 2004.

DAB radio has been around for almost 10 years, but it is still in only 19.5% of homes, compared to the 53% of homes that now have broadband internet access, and the 80.5% of homes with digital TV. One major setback, as everybody in the radio industry is painfully aware, is car manufacturers' reluctance to put DAB radios into cars, where 20% of all radio listening takes place. There is also debate about the quality of the DAB signal, which was meant to improve on analogue FM transmission.

Finally, some broadcasters are ambivalent about DAB because they launched DAB stations to gain a 12-year extension to their analogue FM licences. If radio broadcasters give up the DAB stations, they also lose their FM licences.

As with all transition periods, radio broadcasters must back as many technologies as they can in the move to digital. GCap had, until this year, bet everything on DAB being the future of radio, and its attitude may change again if the company is bought by Global. In contrast, Bauer Radio, formerly Emap Radio, has services on Freeview, the internet and DAB.

The most powerful argument for online radio and against DAB is that online transmission costs significantly less than the considerable investment required for DAB transmission. GCap estimates it will save £4.7m by selling its stake in the Digital One network.

But supporters of DAB say the cost of online radio transmission spirals as the numbers of online listeners increase, whereas it costs the same to broadcast to one listener as to four million. DAB advocates also insist that radio needs to be portable, which PCs are not, although laptops and handheld devices are. And the loss of signal while a broadband internet connection "buffers" is a real problem for online radio.

"None of the digital technologies work brilliantly yet on the move," says Andrew Harrison, the RadioCentre's chief executive.

On the plus side for online radio, podcasting is, for the time being, specific to broadband delivery. Online radio can also be personalised, as with GCap's Xu service for Xfm, which allows listeners to programme an hour of the station's daytime schedule. Virgin Radio is planning to launch a similar service, My Virgin Radio, by the end of the year.

The pros and cons of the various forms of digital radio are being considered by a Digital Radio Working Group, set up by former culture and media minister James Purnell, and chaired by Barry Cox, chairman of TV switchover body Digital UK. The group is due to report to the Government towards the end of this year on how to overcome barriers to the growth of digital radio.

Of the biggest radio broadcasters, Virgin and GCap believe the internet holds the greatest promise for radio in the future. In contrast, Bauer Radio, the BBC and Channel 4, which was awarded the second digital multiplex last year and is expected to launch three DAB services over the next 12 to 18 months, are broadly supportive of DAB.

"Consumers are very comfortable with radio, and digital radio enhances that," says Nathalie Schwarz, chairman of 4Digital Radio. "Broadband is not as significant and it's not a substitute for a broadcast medium."

Mark Story, Bauer Radio managing director national brands, comments: "The problem with the internet is that it's still experimental. DAB is much more likely to be the standard means of delivery for the next 20 years, but all this stuff changes. The internet is pretty viable, but it is likely to be one of many ways of receiving radio."

In the opposing camp, fans of online radio are equally bullish. Echoing Hazlitt's commitment to broadband radio, Virgin Radio digital media director Andy Grumbridge says: "Ultimately, everything will be internet protocol. IP is the future, but it's not going to be at the expense of DAB any time soon."

There is more consensus on the eventual convergence of technologies delivering radio. Schwarz, Story, Grumbridge and analysts such as Enders' radio specialist Grant Goddard all see radio being delivered via a mix of platforms in the future.

"Radio will go digital at some point, but we can't say how or on which platforms," says Goddard. "Although DAB is not doing so well as a platform, listening on the internet is still relatively small. The important thing for radio groups is to look at different platforms and to make sure that content is available on a mix of channels."

The UK radio industry is already looking to Asia, where sets are being developed that are capable of receiving a variety of radio signals, from DAB to satellite or the internet, via Wi-Fi connections. This would render the debate about different delivery platforms largely irrelevant. "The difficulty will be inside the box," says Bauer Radio's Story. "The device will decide the best way to get what you want to you."

Meanwhile, Schwarz talks enthusiastically about the possibility of touch colour screens and electronic programme guides on digital radios, with information on programmes, weather and traffic and even storage of audio files. "This would bring radio hurtling to the forefront of convergence. We shouldn't limit it to one device," she says.

The RadioCentre's Harrison summarises: "People are realising that both the internet and DAB are important. The emphasis will differ for different groups, depending on their commitments, brands and so on. But DAB drives hours of listening, which is how the medium is sold to advertisers, while online drives revenue through additional applications."

Media buyers are largely cautious about predicting which, if any, technology will dominate radio listening in future, and are therefore hedging their bets on how digital delivery will affect radio advertising. Howard Bareham, head of radio at MindShare, says: "Listening on the net is growing, but I don't think broadband listening is going to shoot up the graph. There will be a spread of listenership and reach across all these platforms."

Bareham points out that radio has traditionally been used as a complementary medium by advertisers and agencies, but concedes that the combination of internet and radio advertising could change advertisers' attitudes to the medium.

Research from Virgin shows that 41% of adults said radio made them look something up while using the internet.

"Advertisers might use radio in a different way, in the daytime or evening while people are surfing and listening online, rather than the traditional times of breakfast and drivetime," Bareham suggests. The idea is borne out by additional research from the RadioCentre, which showed that most people (17% of the 1,001 15 to 44-year-olds surveyed) listened to the radio online in the evening, followed by 13% in the daytime, and only 5% in the morning.

For now, Julian Carter, GMG group sales director, puts online revenues into perspective, when he says online accounts for less than 5% of total turnover. "We have had significant online revenue this year and there will be more growth next year," he explains. "What's important is the traditional revenue you get on the back of online, by making radio more responsive and visual."

There are new, interactive opportunities for broadcasters and advertisers if people increasingly listen to radio online. There is also the expected growth of mobile phones and other handheld devices as a means of listening to radio.

Virgin's Grumbridge says: "With the advent of the iPod Touch and the iPhone, browsing the net on a phone is a reasonable experience. Coupled with new data plans from the operators, the mobile internet is going through the ceiling." Again, this is a view shared by GCap, which is developing new applications for the iPod Touch.

However, the radio industry is still divided between those who see the internet dominating the future of radio and those who believe in the viability of digital broadcasting.

As the Department for Culture, Media and Sport working group gropes towards some conclusions on the future of radio, reality is likely to come in the form of collaborations between broadcasters as they seek to ensure radio remains an important medium for advertisers in the digital future. With talk of Channel 4 reviewing its digital radio services ahead of the launch of the second multiplex this year, collaborations could emerge sooner rather than later.

But, as usual in a world of multimedia choice, the battle between online radio and DAB will ultimately be determined by consumers and the way they choose to listen.

Listening by numbers

24% of adults have used the internet to listen to radio
1.9% of all UK radio listening is via internet
10% of all UK radio listening is via DAB
19.5% of homes have a DAB radio
3.1% of all UK radio listening is via digital TV
8% of adults have used a mobile phone to listen to radio

ONLINE ONLY: VIRGIN RADIO'S YELL GROUP PROMOTION

Virgin Radio's Yell Group promotion

Virgin Radio claimed an industry first when it aired a promotion for Yell Group's 118 24 7 directory enquiries service every hour of every day for a week last November, giving away more than 160 prizes.

Featuring top and tail bumpers and online or text registration for the competition, the promotion aimed to increase awareness of the 118 24 7 brand and to drive call volumes to the service.

The promotion featured a dedicated microsite hosted by virginradio.co.uk, which attracted more than 100,000 entries.

Andy Grumbridge, Virgin Radio's director of digital media, said the response was "incredible" and cited the promotion as an example of the way Virgin aims to integrate on-air and online activity and to create multi-platform solutions for advertisers.

The broadcaster conducted its own research into how the use of both radio and online advertising affects brand recall. Virgin commissioned GfK to survey 3,000 Virgin Radio listeners last September, and to measure response rates to eight advertisers.

GfK found a 3.9% increase in response rates when online and traditional radio advertising were combined, compared to advertising on radio alone. "The research vindicates our decision to offer a one-stop solution for all platforms," says Grumbridge.

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