Annual DAB sales 50% below forecast

The following graphs are copied from the DRDB's (Digital Radio Development Bureau -- UK DAB's marketing and PR arm) sales forecast documents from 2004 and 2007, and they show that the forecast sales for 2008 are a massive 50% below what the DRDB had previously forecast they would be for 2008, and the cumulative sales will be 18% below previously forecast by the end of this year and 30% below what they had previously forecast by the end of next year:

DRDB's cumulative sales forecast - 2007 document

DRDB's cumulative sales forecast - 2004 document

2004 vs 2007 forecast

The following graph and table shows the data from the above two graphs combined for comparison purposest:

blue curve = 2004 forecast

red curve = 2007 forecast

1 - from Ofcom's "Communications Market Report - Radio", 2005

Annual sales & year-on-year sales growth

What went wrong?

Other countries refusing to use DAB

In 2004 it was thoroughly expected that DAB would become the Europe-wide digital radio standard, and that a few European countries, such as Germany, France and the Scandinavian countries, were expected to properly launch (i.e. heavily promote) DAB in the not too distant future. But in the space of just over a year, starting in autumn/winter 2004, a series of events led to the rapid downfall of DAB, which led to the WorldDAB Forum being forced to design DAB+ due to numerous European regulators, broadcasters and governments refusing to use -- and heavily attacking -- the old DAB system on the basis that it was outdated and inefficient. If WorldDAB hadn't designed DAB+ then the UK, Denmark and Norway faced being the only countries in the world using the old DAB standard. The eye-opener for the people that attacked DAB during 2004/5 was that modern and far more efficient mobile broadcasting systems had just emerged, such as the DVB-H mobile TV system, because this highlighted just how incredibly out-of-date DAB was.

There are two main reasons why other countries refusing to adopt DAB have affected sales in the UK. Firstly, the consumer electronics giants will have changed their future plans once they heard that DAB was going to be upgraded, because there's no point in including the non-upgradeable version of DAB in a wide range of products if they're only going to sell in the UK, Denmark and Norway. Therefore, DAB will have been added to significantly fewer audio products than would otherwise have been the case if DAB hadn't been upgraded, and the fewer audio products that include DAB the lower the DAB sales will be.

Secondly, because other countries didn't get on-board with DAB, this meant that the global DAB sales have been far lower than they would otherwise have been, and this has kept receiver prices in the UK high, which in turn has kept UK DAB sales far lower than they would otherwise have been -- a good example of what global sales can achieve is the cost of DVD players, which cost as little as £20 each due to the enormous quantities sold around the world. 

Countries like Denmark and Norway (the only other two countries pushing the old DAB system) only have small populations, so the UK has almost been on its own in trying to drag the price of receivers down by increasing sales volumes, but there's a limit to what a single country can do in this regard.

The DRDB and Digital One couldn't have foreseen DAB falling from grace as rapidly as it did, because before DVB-H emerged there was no threat to DAB becoming the Europe-wide digital radio standard, and looking back on how things transpired the speed at which DAB fell from grace was pretty amazing. I would say, however, that it serves the UK radio broadcasters right for thinking that they could launch the DAB system (which was designed in the late 1980s) and get away with providing the low audio quality that they're providing -- especially when AAC and Reed-Solomon (RS) error correction coding were both available from 1997 onwards (AAC was standardised in 1997, and RS coding was invented in 1960), so they had a five-year window to upgrade the DAB system prior to properly launching it in 2002, but they did nothing. Ultimately it has backfired on them in a way that will hurt them most, because the end result will be that it will probably take them an extra five or more years to switch off FM.

DAB not being factory-fitted into cars

This is related to the issue described above, in that DAB is too expensive to be included as standard compared to the very low cost of including FM in a car stereo. I've been told by someone whose brother-in-law works for Ford on this kind of thing that the cost of a DAB in-car receiver module would have to drop a long way before it would be fitted as standard in cars, and it is likely to be a few years before this does happen on a large-scale basis. 

DAB not being included in mobile phones

Due to the huge number of mobile phones that are replaced every year (global mobile handset sales were estimed to be around 740m in 2005), if DAB had been included into a range of mobile phones then its total sales could have been far higher than they actually are.

I think the DRDB would have expected that DAB would have been able to break into these car and mobile phone markets better than it has done, and this would account for some of the shortfall in 2008 sales relative to the sales forecast they made in their 2004 document.

Going forward

It's interesting that that the sales forecast graph in the 2007 document only covers forecast sales in 2008, whereas the 2004 document looks four years into the future. I think the reason they've done this is because sales are now so far behind previous expectations and year-on-year sales are growing so slowly that providing their true sales forecast for the next few years would both be embarrassing and it would highlight how little chance there is for FM to be switched off even at any point before 2020 -- the issue could be forced if Ofcom and the government set a switch-off date for FM, but at current year-on-year growth levels it would seem to be massively premature even to set a switch-off date (no matter how far into the future it was set), because sales could stubbornly refuse to grow at the levels needed for FM to be switched off, which could lead to a consumer revolt if there's a large percentage of the population that are forced to buy DAB because when they actually don't want it. This will be why Ofcom isn't planning to even review switching off FM until 2012.

However, although the DRDB forecast document doesn't provide a forecast of sales for the next few years, they do provide their forecast of DAB household penetration levels, so their forecast for actual receiver sales can be extrapolated from these figures, although there will be a margin of error compared with what their true forecast sales will be.

According to the DRDB 2007 forecast document there will be 25.5 million households in the UK by the end of next year, and there will be 1.2 sets per household in those households that have DAB. Therefore, you can calculate the cumulative DAB sales if you assume that the number of receivers per household and the number of households in the UK stay constant -- they won't stay constant, though, but the values won't change quickly, so the the following figures are estimates and they will have a margin of error attached. The number of receivers can be calculated from the following formula:

Number of receivers = number of receivers per household  x  (total number of households in the UK  x  (DAB percentage household penetration / 100))

Using the above formula, the following table shows the estimated cumulative DAB receiver sales assuming that the total number of households and the number of receivers per household doesn't change:

The figures in the above table will probably underestimate the DRDB's true forecast cumulative sales, because the number of receivers per household is likely to increase over time due to people who've already got a DAB portable radio going on to buy another piece of audio equipment that also has DAB. But the number of receivers per household figure is unlikely to increase quickly, so I would suggest that the DRDB's true cumulative sales forecast won't be all that much higher than the figures in the above table. And if the figures in the above table are anything like close to reality then FM looks to be safe for many years to come, because Ofcom estimates there are around 120m - 150m devices that include FM that are in use in the UK, so over the space of a full decade from when the BBC began advertising DAB on TV in 2002 to the end of 2011, DAB would still only account for around 12% - 15% of all the devices that contain a radio.