CLOSE-UP: LIVE ISSUE/DIGITAL RADIO - Ford's MXR deal marks the big time for digital radio. The car giant's new venture is exactly what digital radio needs, Jenny Watts writes

Ford is going into the radio business, promising to soothe the pain of traffic jams by providing drivers with crystal-clear digital car radios.

Ford is going into the radio business, promising to soothe the pain of traffic jams by providing drivers with crystal-clear digital car radios.

In taking a stake in the MXR digital radio consortium, Ford has declared that it plans to fit digital radios into all the new cars it sells in Britain by 2004.

That's not all, however. The car manufacturer will also be joining with MXR in pitching for digital radio licences. This adds up to another blurring of the line between advertisers and media owners. But the move is also a sign that digital radio is coming of age and Ford's involvement looks set to be a driving force in expanding the medium into the marketplace.

Sally Oldham, the strategy and development director at Capital Radio, believes that the move is a crucial trigger in the development of a new medium. She says: 'The commitment by Ford probably represents one of the key milestones in the development of digital radio. We have always believed that some sort of vertical integration with either manufacturers or retailers is required to drive the take-up forward.

'Given that the consumer benefits of digital radio are greater when the listener is on the move - that is, no fading, hissing or re-tuning - then the in-car market is an important one.'

She is not alone in her beliefs. Jim Marshall, the chief executive of MediaVest, believes that the growth and health of digital radio will revolve around the car market. Duncan Sillence, the group head of radio and press at Starcom Motive, also agrees that Ford's move could, in itself, be enough to transform digital radio usage.

He says: 'There can be a rapid growth in digital radio penetration through just one car manufacturer. If this wasn't happening, we would probably be waiting until the Government turns off the analogue system and then there would be a mad rush. Anything that speeds up the critical mass is good for the radio industry.'

Mind you, Ford is not the only manufacturer to spot a canny opportunity in the digital radio market. The retailer Carphone Warehouse joined with Virgin Radio in the Switchdigital multiplex bid for London's second digital radio licence, which the group successfully picked up in April.

Steve Taylor, the enterprises director at Virgin Radio, says: 'Virgin Radio is committed to the development of digital radio. We support the involvement of both the manufacturers and retailers.'

Carphone Warehouse's involvement ensures national retailer support for digital radio in the same way that Ford's involvement will lend manufacturing support to the medium. Both companies are 5 per cent shareholders in the respective applications.

However, the spotlight on Ford still throws up the old questions surrounding an advertiser taking a stake in a media owner. Sillence, for one, believes that this is something that media agencies should be getting used to by now. 'Gap, for example, has built its own 96-sheets. There is an increasing amount of supplier-funded programming, and mobile phone suppliers will be media owners in the next couple of years,' he says.

The main issue is whether an advertiser could use such a position to lever preferential treatment. However, the relationship that Ford has established with MXR is that of an investor in the multiplex, rather than as the owner of any of the radio services or service providers.

'This puts it at arm's length to any advertising policies or the running of the radio stations,' Oldham says. 'As part of the partnership, the MXR service providers have agreed to promote the availability of digital radios. Ford fitting the radios is a ring-fenced activity and will not prohibit any other car manufacturer from using radio.'

Not unsurprisingly, and based on Virgin's experience since April, Taylor agrees that Ford's involvement is unlikely to lead to preferential treatment for the car manufacturer. He says: 'I don't think that will happen. At the end of the day, anything we can do to push the availability and distribution of the radio sets can only benefit the industry.'

But a conflict of interest, no matter how tightly contained, can still cause problems. 'The danger is that it possibly sours your opportunity to do things with other manufacturers,' Marshall admits.

However, media buyers are unlikely to find that the alliance has ramifications on other advertisers. Anything that jeopardises advertising revenue from other motor manufacturers would, obviously, be counterproductive.

As with other cases of advertisers moving towards media owner territory, this basic principle is perhaps the strongest guard against abuse. 'It's not really a conflict of interest - unless Ford becomes too monopolistic and brings in exclusivity deals to keep competitors from a commercial audience,' Sillence says. 'If you look at Ford on TV, it has had a policy of break exclusivity before, but it's not unique for a media owner to have those kind of deals.'

Oldham says that viewing Ford as an advertiser mis-states the manufacturer's motive for signing up with MXR. 'Ford is investing in MXR as a manufacturer, not as an advertiser. It has recognised the benefits that digital can bring its customers and has aligned itself to the programme services offered by MXR,' she says.

It's undeniable that the MXR consortium needed the involvement of a car advertiser. It also seems likely that similar alliances will signify the way forward for other digital radio consortia.

These deals give digital its best chance of penetrating the mass market in the UK. It will, however, be largely down to individual radio companies to ensure that they retain their independence.



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