GCap says DAB is "not economically viable"

I wrote the following article around the time of GCap dropping their DAB bombshell, but I didn't publish it at the time due to it being unclear as to whether Global Radio would take GCap over, and it was unclear what Global Radio's view was of DAB.

As I'm sure most of you will already know, Fru Hazlitt, the saviour of digital radio and chief executive of GCap Media, the UK's biggest commercial radio group and the biggest supporter of DAB in commercial radio for the last decade, has labelled DAB as being  “not an economically viable platform”, and she announced that the company's national digital stations Planet Rock and theJazz will close and GCap's 63% stake in the Digital One national DAB multiplex will be sold for £1 to transmission provider Arqiva. This news follows the closure of two other national DAB stations in January, another national station is also set to close, plans for two new national DAB stations have been axed, and BT's mobile TV service on DAB closed down at the end of January.

Fru Hazlitt also said that she would like to pull out of DAB completely, but the thing stopping her doing that is that if she removed GCap's analogue stations from DAB, Ofcom would automatically re-advertise the stations' analogue licences. This is a consequence of the Radio Authority, which regulated radio prior to Ofcom taking over, offering the incentive of automatic 12-year licence extensions to analogue stations that were also broadcast on DAB, but with this punitive clause included in case the stations were subsequently removed.

Since the groundbreaking announcement, other commercial radio groups have called on Ofcom to remove this draconian piece of legislation, which suggests that Fru Hazlitt could have started a stampede amongst commercial operators away from the failing DAB platform, and one industry boss said that if they had the chance to hand DAB licences back without this threat to their FM stations, "there would be an avalanche of licences handed back". Ofcom is basically holding commercial radio groups to ransom and forcing them to pay for loss-making transmissions on DAB, which is hardly in keeping with its "light-touch" regulation ethos and its claim that it is "biased towards non-intervention wherever possible".

When Ofcom advertised the second national commercial DAB multiplex last year it simply ignored the fact that the Radio Authority had originally advertised the Digital One licence as being "the only national commercial DAB multiplex" there would ever be in the UK, so it would be completely hypocritical if it doesn't decide to lift this ill-thought-out clause when it's already torn up promises made by its predecessor when it has suited Ofcom to do so.

Ofcom claims to be in favour of "letting the market decide", but Fru Hazlitt believes the market has already spoken, as she said that the reasons for wanting to pull out of DAB completely were that "DAB take-up is incredibly slow - consumers are voting with their feet", that the sound quality offered by FM "compares favourably to any digital radio platform available to the consumer", and even after years of advertising for DAB, digital-only stations only account for 4% of all radio listening (a figure that will be significantly reduced by the withdrawal of five national digital-only stations), and that figure includes listening via DAB, digital TV and the Internet.

GCap lost £8m on DAB in the financial year of 2006/7 due to the combination of insufficient advertising revenue and DAB's extraordinarily high transmission costs, and the final straw came with BT's decision to withdraw its DAB-IP mobile TV service from the Digital One multiplex, which threatened to reduce the national multiplex's income by £5.5m per annum unless the freed-up capacity could be filled -- but stations are queueing to get off Digital One rather than get on, hence the disposal of GCap's 63% stake in Digital One for a nominal sum.

There was a crumb of comfort for the ailing "DAB" platform, though, as Fru Hazlitt said that it was DAB's "current cost structure and infrastructure" that's to blame for it not being economically viable, and that GCap would work with the industry to "re-plan digital networks for more efficient spectrum use". These were clearly references to using DAB+, because DAB+ is far cheaper to transmit and it is far more spectrum-efficient than DAB is. However, in a reversal of the wishes of her predecessor, she said that GCap would no longer be lobbying the goverment to switch off FM.

Instead of throwing good money after bad on DAB, Fru Hazlitt wants "the new GCap" to re-focus on FM and broadband, which she described as being the “platforms that listeners want”, and that broadband is “the obvious complementary platform to analogue radio”. Jenny Abramsky, the BBC's Director of Radio, and Director-General of the highly secretive Digital Radio Luddites Society, disagrees here, and following GCap's announcement she said in interviews that the failing DAB system with massively behind-target sales figures and whose sales-to-date have only been made possible by the BBC broadcasting 20 high-impact TV advertising campaigns for DAB, which I calculated would have cost £163m if the BBC had to pay for them to be shown on ITV (which works out as being £25.07 per DAB radio sold-to-date), has been "a success story", and that DAB's advantage was that it can be received anywhere, which was clearly a dig at Fru Hazlitt's preference for Internet radio, which is perceived to be difficult to receive on portable and mobile devices -- I will address this below. But Jenny Abramsky was the person responsible for the BBC throwing its weight behind the outdated and inefficient DAB system, so she would say that, wouldn't she.

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