Media: All about ... Digital commercial radio

Despite listener growth, radio remains wedded to analogue.

Last week's Rajar listening figures created all the usual headlines surrounding the "breakfast wars". This quarter's reports were especially juicy since Magic's Neil Fox, a former employee of Capital Radio, overtook Capital's Johnny Vaughan for the first time (albeit by only 5,000 listeners during the time the shows coincide).

Needless to say, "Foxy" was pleased to get one over on Capital (which never saw fit to hand him the breakfast show reins permanently) and couldn't resist a dig at Vaughan and his ilk. Explaining his success, he said: "People don't want to have people pretending they are the funniest people in the world, or pretending to laugh all the time about stuff that's not funny."

Fox wasn't the only one experiencing a growth in listening. For the third quarter running, commercial digital listening received a boost. And much of this growth is being driven by niche content.

The latest Rajar results shows digital radio continuing to grow its reach, hours and share. Some 28.4 per cent of adults listen to digital radio, up from 26.2 per cent in June. And digital radio now takes a 15 per cent share of all radio listening.

However, critics of the industry argue this growth is papering over the cracks. That since the launch of commercial digital radio (in 1999), it has grown at a snail's pace. According to figures from the Radio Advertising Bureau, commercial listening via digital platforms is still in the minority (with 8 per cent of listening via DAB, with a further 4.3 per cent via digital TV and 1.5 per cent via the internet).

However, Ian Dickens, the chief executive of the Digital Radio Development Bureau, argues things are moving in the right direction: "With sustained growth and commitment from broadcasters, DAB is on track to reach 50 per cent household penetration."

Critics argue that lack of strong marketing and of sufficiently strong digital radio products on the market, commercial digital radio has underperformed. However, there are signs this is turning around. Matt Landeman, the head of radio at Carat, says: "Commercial digital radio is in a really good place, commercial radio has a bigger slice of audience share in digital than analogue and this can only increase. The prognosis for commercial digital is very good and we'll see natural, continued growth."

1. Commercial radio groups are pinning their hopes on digital because commercial radio outperforms the BBC when analogue is out of the equation. In terms of numbers, more than 80 per cent of digital stations are commercial, and 63 per cent of digital listening is via commercial stations.

2. In addition to national and local stations, leading specialist commercial digital stations include Emap's Smash Hits, which increased its listeners by 84,000 to 990,000 (helped by high listening through digital TV). GCap is also a significant player with Planet Rock (its listening climbed from 530,000 to 548,000 during the third quarter) and the recent launch theJazz, which has built an audience of 388,000 listeners. Emap's Heat Radio, which launched in September, is also expected to build a significant audience.

3. Sales of commercial radios are seasonal. Radio companies are hoping for a a big spike ahead of Christmas. More than 5.5 million sets have been sold and DRDB is expecting total sales of digital radio to have reached 6.5 million by the end of the year. Radio companies are pleased that, at last, some marketable and good-looking products are coming on to the market. Another vital area for digital radio is getting the platform into cars, which the industry has found difficult to do so far. However, a recent deal with Ford that will see digital radios in some models of the Ford Focus is a move in the right direction. "Growth is all about product innovation," Simon Daglish, the sales director at GCap Media, says. "We have to produce exciting radios and a big driver could be DAB chips in mobile phones. Some 45 per cent of mobiles now have an FM receiver and there are talks ongoing about DAB chips - a stumbling block has been cost, but prices are coming down."

4. Digital radio looks set to be handed a further boost when the second national digital multiplex, which will be run by a consortium headed by Channel 4, goes live next year. Ofcom is also advertising a series of local digital licences. Landeman says: "The Channel 4 consortium promises to offer content that is unique and interesting. It's speech-based and could attract a younger audience."

WHAT IT MEANS FOR ...

RADIO COMPANIES

- Despite heavy investment in digital radio, the leading radio groups are still waiting for the big returns. Revenues are building, but are relatively small scale compared with the major analogue stations. Daglish says: "Revenues are not currently at the level of listening, but we've invested in a dedicated DAB team that is driving revenue and we're delighted where we have have got to with Planet Rock. It's not large beer compared with the big stations, but it's growing."

- Digital-only stations can be launched on a relatively small budget and, if targeted at a specialist audience, are capable of delivering.

ADVERTISERS

- Digital stations offer niche, specialist audiences. Buyers have applauded, for instance, the recent launch of Heat Radio, which has a clear demographic.

- Digital radio can be traded in a different way to analogue. Taking the Heat Radio example, Emap can offer content and sponsorship packages to a few advertisers rather than selling airtime in a traditional way. Landeman says: "And the fact that digital generally is less regulated than analogue, provides us with more commercial opportunity."

- In addition, audience involvement can be more in-depth and its audience's patterns tend to be flatter across the day rather than peaking in different day-parts such as breakfast and drivetime.