2010 represented a year that delivered record commercial audiences, exciting shifts in technological development and increased year-on-year advertising revenue. Yet, despite these facts, radio-related news coverage continues to focus on areas of scepticism. Can the industry cope with restricted COI investment? Will the digital switchover ever happen?
There is no doubt that UK commercial radio will continue to face tough challenges in 2011 (and beyond), but the industry is now in better shape to tackle any forthcoming barriers head-on. 2008 was the year of private consolidation, with Global Radio and Bauer buying out GCap and Emap respectively, and the market has progressed considerably during these past two years. Gone are the days of short-term reaction planning to appease those shareholders and advertisers are now benefiting from the fruits of longer-term planning via the strengthening of established radio brands and increased technological investment.
More than 33.3 million listeners are now tuning into commercial radio each week and the commercial sector has increased share of listening versus BBC over the past three 2010 Rajar surveys. Most importantly, advertisers are acknowledging this audience growth and development as overall commercial revenue is also increasing.
So, don't be too influenced by the withdrawal of COI investment and the apparent disaster this represents for commercial radio, because other advertisers have already stepped in and closed the gap. Although revenue for the first quarter in 2011 is looking challenging in terms of year-on-year comparison (due to significant pre-election COI spend), overall 2010 revenue rose by around 3 per cent.
High-spending FMCG brands returning have helped with damage limitation but much of this success should also be attributed to positive brand developments, growing commercial opportunities and assurances for advertisers from Radio Advertising Bureau award-winning research initiatives, including the online multiplier research report and ongoing Radiogauge projects. Both have offered advertisers crucial effectiveness data support, providing further reassurance to marketers who may have previously backed out prior to signing off their respective radio budgets.
One issue that will inevitably continue to dictate headlines in 2011 will be the ongoing analogue switchover debate and whether or not commercial stations should be doing more now to support digital growth. It was widely reported that numerous leading UK commercial stations refused to broadcast the Christmas 2010 campaign to promote digital radio and specifically sales of DAB sets. It is important to clarify that most commercial salespoints are desperately keen for the switchover to happen as soon as possible, because digital multiplexes will provide greater bandwidth, resulting in more services/choice for UK listeners and, in turn, greater targeting opportunities for advertisers. But, most crucially to these salespoints, the cost of effectively paying twice to broadcast on both analogue and digital frequencies is causing huge and growing financial pressures. It is consequently affecting their ability to invest in superior quality content and higher-profile presenters. But the main issue is poor quality of local coverage and, while I'm sure we all embrace the exciting possibilities that digital radio can potentially deliver (from both a listener and advertiser perspective), I believe that there is no point in even having this debate until the basic infrastructure for digital is fully operational.
That said, digital is more than just DAB and we should still expect to see continued growth in digital listening in 2011 as DAB and smartphone penetration (in particular) increases. With the percentage of all listening via digital output rising from 21.1 per cent (quarter three 2009) to 24.8 per cent (quarter three 2010), it would be fair to assume at least that level of increase once again in 2011. The digital debate will continue but there are some imminent and exciting developments that will have a more immediate impact over the next 12 months.
Global's decision to roll out the Capital network from January 2011 was not wholly unexpected, given a similar move at Heart, which has already attracted 500,000 extra listeners. Radio purists will be concerned by this relatively new trend of networked roll-outs and the long-term effect that these may have on local radio broadcasting. But there is growing evidence that our clients (the advertisers) prefer to buy into brands and they want the power of those brands to endorse their products accordingly. Not just on air, but online, via newsletters and station events.
Loosening of Ofcom regulations could also be significant. The industry expects significant relaxing of the current regulation and a move towards far greater brand prominence. Stations will expect to be in the position to communicate advertiser benefits more openly within programming and, while this is not quite product placement, there are similarities. This relaxing of regulations will enable more powerful brand-, stationand presenter-endorsed content that could and should attract more advertisers to air.
2011 will also see a growing plethora of cross-platform opportunities for advertisers, which are rapidly evolving into invaluable revenue streams for commercial operators. Consider the growth of smartphone listening that has now resulted in more than five million downloads along with the staggering growth of podcasts. We have all been quick to question the quality of station websites and their respective interactive capability, but listeners clearly disagree - who would have thought Capital capable of selling 70,000 tickets to its Summertime Ball in just 40 minutes on its website alone?
On the theme of technology, perhaps the most significant development for 2011 will be the launch of Radioplayer, a common interface linking streamed radio content online that is funded by both the BBC and commercial radio. The simplicity of navigating from one station to another will most certainly drive incremental audience to commercial station websites, which will increase the value of those properties.
With record audiences, greater technological opportunities and the expected relaxation of Ofcom rules, the year ahead is looking highly encouraging and exciting for radio. Expect another year of growth with industry forecasts predicting radio ad revenues to increase by 4 per cent year on year.
Simon Blackburn is the head of radio at MPG Media Contacts.