Adventures in CyberSound

The Future of U.K. Commercial Radio
in the U.K.
Sandra Dickinson, 1996

Introduction
There have been many predictions over the last forty years that radio's golden age has gone and that it will decline in popularity. These have largely been prompted by developments in other media, which supposedly would diminish the role that radio plays in people's lives.
The Broadcasting Act of 1996 sets in place the process by which UK broadcast media will enter the Digital Age. This Act has entered legislation as the InterNet booms and the multi-media future increasingly becomes a reality.
Radio is a resilient medium, as its survival over the second half of the twentieth century has shown, and there are strong arguments that radio's strengths will ensure that it survives the advent of the Digital Age as the most effective communications medium.
Paul Donovan, the respected Sunday Times radio columnist, recently concluded that the listener's relationship with their radio station bodes well for the future.

" ( The possibilities afforded by DAB ), allied to radio's traditional strengths, suggest that the medium has a safe future, even in a multimedia age. And although for most of the day it no longer unites the nation as it did until the mid-1950s, it remains dominant at breakfast time. People still feel they own radio in a way that they do not, and never have done, with television. Its delivery systems will alter over time, but radio will always be deep inside the skull."
The radio industry was also pleased to hear, in this hi-tech age, that a radio based on technologies developed in the 16th and 18th centuries won the top award in the 1996 BBC Design of the Year Awards. Designed by an English inventor to cater for the African marketplace, the Baygen Radio operates on clockwork technology, so negating the need for battery or electric power. It was voted as the best new design by the public and experts alike - another sign of the enduring passion people hold for radio.
This document has been written to encapsulate the recent history of Commercial Radio and to look forward to the role it is likely to play in the future media marketplace.
The RAB would like to thank the Commercial Radio Companies Association ( CRCA ) for their assistance in writing this publication.

The growth of Commercial Radio
Commercial Radio has come of age in the last ten years, with audiences growing more rapidly than at any time since the introduction of competition for BBC Radio in 1973.
Since 1986, Commercial Radio stations have increased their share of the listening public's affection to now account for just under one half of all radio listening. Commercial Radio's coming of age was most clearly defined when the audience tuning in outnumbered BBC Radio's for the first time ever in 1994. This enabled Commercial Radio to credibly claim a critical mass for the first time.
The increased number of stations that listeners can choose from has been a key factor in these growing audiences. In the most developed regional marketplaces, Commercial Radio has increased its share of listening to account for well over half of all radio listening.
Across the same period, although most notably in the 1990s, Commercial Radio has changed the attitudes of the advertising industry, with expenditure on the medium increasing more than twofold since 1992. The primary driver in the increased investment has been the national advertising marketplace, from which there has been a 150% rise in revenue across the same period.
Future Developments
There will be further expansion in the number of radio stations that listeners will be able to tune to in the future. This will largely be as a result of Radio Authority plans for licensing stations in the 105-108 FM spectrum, which has recently been made available to Commercial Radio. In addition the longer-term development of Digital Audio Broadcasting (DAB) will bring more stations for listeners to choose from.
The characteristics of radio audiences have changed over time, however the predominant characteristic remains that of loyalty. Despite increased choice and better technology, the hypothesis that listeners will tune around more has to date been largely unproved. The average number of stations tuned to is still just over 2 each week and around two-thirds of radio listeners listen to a maximum of two stations.
Recent research has revealed that the vast majority of listeners expect to be listening to either more or the same amount of radio in ten years time. At the same time most listeners predict that they will be listening to the same number of stations each week.
Commercial Radio expects to benefit from the increased expansion in choice for listeners. Historical precedent suggests that Commercial Radio audiences will, in the long-term, grow by as much as 20%. This will continue to validate advertisers' perceptions that the medium reaches a critical mass of the population.
Advertising industry experts predict that Commercial Radio will continue to increase its revenue base at a faster rate than that of advertising as a whole across the rest of the decade. It is predicted that by the year 2000, Commercial Radio will increase its share of the display advertising marketplace to in excess of 5%.

The growth in marketplace supply
The last ten years has seen the number of Commercial Radio stations increase from 46 to 170. This growth in the number of services has come about as a result of three principal factors.
Split-frequencies
until 1986 Local Commercial Radio stations broadcast the same output on both the AM and FM waveband. Since that time, these stations have stopped simulcasting and now broadcast different output on the two frequencies. Broadly speaking the FM waveband has been used by stations for the broadcasting of Contemporary Hit Radio, targeting younger listeners, while the AM waveband became the focus for the development of the Gold format, targeting older listeners, in the UK.
Additional local/regional licences
until 1989, Local Commercial Radio stations generally had no commercial competition for listeners in their area - the one exception was London, where LBC and Capital broadcast. From 1989, the Radio Authority started to licence additional local services in areas already covered by Local Commercial Radio. The remit followed by the Radio Authority in the awarding of these licences is that new services should diversify listener choice. The first round of additional licences in London saw the arrival of Jazz FM, Kiss FM ( dance music ) and Melody Radio ( easy-listening ). Subsequently there have been new station launches catering, amongst others, for country music, soul music and ethnic minorities, while regional licences have been awarded in Scotland, the North East, North West, West Midlands and Severnside.
National stations
the Broadcasting Act of 1990 allowed for the launch of 3 National Commercial Radio stations, one on the FM waveband and two on the AM waveband. The FM licence was awarded to Classic FM, which launched at the end of 1992. Virgin Radio and Talk Radio were awarded the two AM licences and started broadcasting in 1993 and 1995 respectively.

The growth in Commercial Radio
The effect of listeners having more stations to choose from has been positive for advertisers, with this being a primary reason behind the amount of time spent listening to Commercial Radio almost doubling since 1986.
In 1986 approximately 40% of the UK tuned to a Commercial Radio station each week and the share of listening accounted for by commercial services stood at 28%. The latest RAJAR data reveals that 60% of the UK now tune in each week and that Commercial Radio accounts for just under one half of all radio listening.
The London Marketplace, which is the most developed, has seen an even greater increase in audiences available to advertisers. In 1986, when LBC and Capital were the only two commercial broadcasters, 27% of all radio listening was to these two stations. The share has more than doubled over the last ten years with over 60% of radio listening now being accounted for by the Commercial Radio services.
The characteristics of radio audiences have changed
The role of radio has changed significantly since the days when it acted as a focal point for family evening entertainment. The advent of television in the fifties was a catalyst for predictions of the demise of radio. Subsequently the introduction of breakfast television and teletext services tackled two of radio's accepted strengths, the medium for mornings and immediate information. The development of satellite communication technology, which has enabled instantaneous global access to visual depiction of news events, also challenged the pre-eminence of radio as the primary medium for fast access to news and information.
Despite these developments radio listening continues to be a mass-consumption market. The latest audience research shows that 86% of adults tune to the radio each week and that the length of time tuned averages just under 3 hours each day. In addition the average UK household has 4 radio sets, another indicator of the mass appeal of the medium.
The reasons for the continuing appeal of radio are that the medium has become more personal and more ubiquitous. Research shows that only 30% of radio listening occasions happen as group activity - the comparative figure for television is 75% - making the majority of radio listening a personal activity. The portability of the medium has been an important factor. A fifth of all radio listening takes place in the car, while a further 15% takes place at work.
Several research studies have demonstrated the strength of the relationship between listeners and their radio stations. Although radio listening is primarily a secondary activity, there are strong emotional ties that listeners have with their radio station. Much of this can be attributed to the fact that people use radio as a mood affector - whether it is waking up in the morning or relaxing in the evening, radio has a unique ability to positively affect people's environment.

Advertising industry attitudes have changed
The 1990s has seen a significant step change in the attitude of the advertising industry towards Commercial Radio. Between 1992 and 1996 the amount of money spent advertising on the medium has almost doubled, with the majority of growth being driven by the national advertising marketplace. While the national advertising marketplace has been the primary driver of growth, local advertising marketplace on its own would have qualified as the fastest growing advertising medium across much of the early 1990s.

There are five principal reasons behind the growth of the medium.
National buying opportunities
the launch of National Commercial Radio stations bought increased gravitas to the medium, while the advent of more ease of purchase packages, such as Newslink and National Network Radio, countered one of the previously held obstacles to purchase, which was that it was too time-consuming to buy radio campaigns.
Better audience research
the launch of National the launch of RAJAR in 1992 was an important factor in increasing the credibility of the medium. By moving to a single research methodology for radio audience research, funded by both Commercial Radio and BBC Radio, the belief in the research was considerably enhanced and RAJAR has been held up as a Gold Standard in media research.
Increased audiences
the increase in Commercial Radio audiences over the last three years has also been a factor in changing attitudes. Audience share stood at 37% in 1992 and increased rapidly until Commercial Radio broke the 50% barrier for the first time in 1995. When audiences exceeded those of BBC Radio for the first time in 1994, the Commercial Radio audience reached a critical mass in the eyes of the advertising industry.
Generic marketing
the Commercial Radio industry has invested significantly since 1992 in marketing the strengths of the medium to the national advertising marketplace. Attitudinal research conducted by the RAB shows that back in 1992 the strengths of the medium were largely perceived to be tactical. The same research was conducted in 1995 and revealed that there is now a greater understanding of the audience delivery of the medium and the benefits that the relationship the medium has with its listeners can offer to advertising objectives. The same research has also shown that advertisers have got over the fundamental question of whether radio advertising works and are now asking themselves how it can work best for them.
The net effect of the increased confidence that advertisers have in the medium has been an increasing share of the advertising cake being diverted to Commercial Radio.

FUTURE DEVELOPMENTS
Radio Authority licensing plans
Digital Audio Broadcasting
Audiences of the future
Will Commercial Radio audiences continue to grow?
Future revenue growth

Source: Sandra Dickinson, 1996

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