[cma-l] Channel 4 abandoing Digital Radio (The Guardian, 13 October)

[Jaqui Devereux]

Source:
http://www.guardian.co.uk/media/2008/oct/13/channel4-radio-digital

Never on 4
Channel 4 promised to bring its 'risk-taking approach' to radio. Last
week, the challenge proved too much and it abandoned the project,
dealing a body blow to the future of DAB. John Plunkett and Maggie Brown
report

    * John Plunkett and Maggie Brown, The Guardian, Monday October 13 2008

Channel 4 was supposed to be the saviour of commercial radio's digital
ambitions. But with the announcement three days ago that it was
abandoning its entire radio project, the broadcaster has blown a gaping
hole in them instead.

The broadcaster's chief executive, Andy Duncan, blamed the economic
downturn for the decision. Two years ago he promised to bring Channel
4's "risk-taking approach to TV to radio", and appeal to the age group
he branded "Generation Lost". But it is Duncan's dreams that have been
lost after the risks and costs involved in launching C4's three planned
new radio services - including a spoken-word competitor to BBC Radio 4 -
were deemed too great.

Three Channel 4 stations were originally due to launch this year on the
second national digital radio multiplex, awarded by Ofcom to the 4
Digital Group, in which C4 was the majority shareholder. The music and
entertainment station E4 Radio was the last remaining station to be
axed, saving the broadcaster an estimated £10m next year, part of its
bid to cut £100m in costs across the group.

The remaining shareholders, who include UBC Media and Carphone
Warehouse, will hold an emergency meeting this week to decide whether to
go it alone or follow Channel 4's lead and call a halt to their digital
investment.


Full-scale retreat

Such a full-scale retreat would deal a body blow to the commercial
sector, which offers the 7.7 million people who have bought a digital
audio broadcasting (DAB) radio set in the UK just one national digital
station that is not already available on analogue - Planet Rock.

Fifteen jobs will go because of C4's withdrawal, including the likely
departure of its director of radio, Bob Shennan, the former BBC Five
Live controller who quit the corporation under a year ago. And what next
for Channel 4's other great digital radio champion, its director of new
business and corporate development, Nathalie Schwarz?

After last week's decision, not only have the three Channel 4 services
been lost, but the other proposed stations run by former partners in the
4 Digital Group - including a spin-off of Bauer women's magazine Closer,
UTV's Talk Radio and Sky News Radio - have also been thrown into doubt.

DAB has been on the back foot since the former GCap Media chief
executive Fru Hazlitt announced she was pulling the plug on the Capital
and Classic FM parent's digital investment in February. The cuts were
not enough to keep Hazlitt in a job. She was not the only commercial
radio boss to be pessimistic about the future of digital radio, but
industry executives have a habit of being rather more cheerful about the
platform in public than they are in private.

While take-up among listeners has been encouraging - in the second
quarter of this year digital platforms accounted for 17.9% of all radio
listening - commercial groups have so far been unable to make their
investment pay. C4 estimates that its aborted plans cost less than £5m,
although the cost in time and credibility is much higher. Of total
digital listening, 11% is via DAB radio sets, with another 3.3% via
digital TV, and 2% on the internet, which has become a much more
attractive proposition with the launch of the BBC's iPlayer almost a
year ago.

Commercial radio bosses had hoped that relatively cheap DAB radios would
prove a success at Christmas and believe they can still maintain
momentum in the all-important run-up to the festive season, despite C4's
withdrawal. About 800,000 sets were sold in November and December last
year, and this Christmas will see the first joint campaign across the
BBC and commercial radio to promote the sets.

But a DAB radio offering based solely on the BBC's digital services -
including the comedy and drama station BBC7 and the Radio 2 spin-off 6
Music - is surely not a long-term option.

Yet Simon Cole, the chief executive of 4 Digital shareholder UBC Media,
says at least C4's withdrawal, after months of dithering, removes the
uncertainty from the market. "It is very regrettable that Channel 4
caused the excitement that they did, only to dash everyone's
expectations in this way, but it doesn't mean the rest of us [have to
follow suit]," says Cole, whose company does not yet offer a digital
station.

"For the last six months the radio industry has been repiecing the
jigsaw of digital radio, and Friday's announcement was part of that. If
anything it helps because it creates certainty and that is always a good
thing. Difficult times force people together."

When Duncan told staff the news on Friday, the reaction was muted. Given
the need for cost-cutting - slashing into the programme budget so deeply
that C4 is even considering dropping horse racing - it was seen as
inevitable. Yet in private, there was amazement and anger that it had
taken so long for Duncan to admit the obvious: the venture had no
future. He seemed to have stubbornly backed a dead horse for much longer
than anyone expected - but then he had bound himself to it.

Beyond Duncan and a handful of supporters, the diversification had
little internal support. An increasingly agitated board, led by the
chairman, Luke Johnson, had debated the matter openly in February, and
asked for a budget rethink. Digital radio was even seen, rightly or
wrongly, as a distraction, perhaps (cruelly) as a displacement activity
for a chief executive who came from a marketing rather than television
background.

Yet as late as June, the board signed off a scaled-back version, giving
permission to launch the Digital 2 multiplex it controls while
mothballing Channel 4 Radio, the expensive public service bit.

At this point, says Duncan, it seemed to have takers for all the spare
slots on the multiplex, which would have provided a rental income. But
then they melted away as the recession loomed, leaving the 4 Digital Group.

The venture has left many insiders bitter. "What a mess. The truth is,
nobody in programming or advertising sales thought it was a good idea,"
says a senior executive.

Another simply says: "I am furious about the waste of time. It isn't
just the waste of millions of pounds at a time like this."

More experienced hands, including Dorothy Byrne, C4's head of news and
current affairs, had long warned Duncan that it would be impossible to
challenge Radio 4 and its well-resourced programming with Channel 4
Radio's original budget of around £12m.

But Duncan stands by his argument that the plan was fundamentally sound
- it was the ever-worsening economic circumstances that were to blame.
"It couldn't have been anticipated. The next 15 months are going to be
very grim," he says.

But where does that leave him? Duncan survived a huge professional
challenge in 2007 over Celebrity Big Brother, which also knocked Luke
Johnson. It is common knowledge that the two men have never really hit
it off, but they manage to work together. Duncan has no intention of
standing down over an abortive radio bid and, anyway, can point to
having the board's backing.

And these are certainly difficult times - not least for the media
regulator, Ofcom, which will have its own questions to answer after
awarding the licence to a consortium that has fallen apart in such
spectacular fashion. Indeed, the owner of the first national digital
radio multiplex, Digital One, told the regulator three years ago that it
should not issue a second licence at all.

"Unfortunately, there was an over-supply of capacity, which was always
the biggest risk to be caused by another national multiplex at a time
when the industry quite clearly was not able to afford it," says the
former Digital One chief executive Quentin Howard, now president of
WorldDMB, a forum to promote the take-up of DAB-based services worldwide.

"There is no pleasure in saying it, but those of us who were close to
the industry and understood these things knew this was a likely
consequence. It is regrettable that we had to go through all this
faffing and instability; it has done short-term damage, no question
about it."

Tony Moretta, chief executive of the Digital Radio Development Board -
the trade body supported by the BBC and commercial radio - says
operators are queuing up to launch a national radio station on DAB. But
who exactly? And why have they not already found a berth on Digital One,
which has had plenty of spare capacity for some time?

High prices might be to blame, as might the uncertainty caused by
Channel 4's dithering. Such was the paucity of interest that a channel
playing nothing but birdsong can be heard on Digital One, filling in
airtime until a serious operator is found. NME Radio, which already
broadcasts online and on digital TV, might be interested, as might Jazz
FM, which relaunched online and on regional digital multiplexes earlier
this month. But when MediaGuardian pressed one industry executive to
name names, they came up with BFBS, owned by the British armed forces. A
worthy service in its own right, no doubt, but unlikely to get them
piling through the doors of Argos in the hunt for radios for Christmas.

The launch of a new music digital station could cost anything between
£5m and £10m in its first year of operation. A speech format, anything
between £10m and £15m. If the history of DAB tells us anything, it is
that new stations done on the cheap - jukebox broadcasters run by
computers out of an empty studio - do not attract advertising.

The BBC's director of audio and music, Tim Davie, who succeeded
digital's great champion, Jenny Abramsky, last month, said Channel 4's
withdrawal was "disappointing news" for UK radio.

But he said the corporation remained "positive" about the future of
digital radio and DAB. "DAB will continue to offer high-quality services
that are proven to have significant appeal to radio listeners, and we
look forward to working in partnership with all the industry to drive
further growth of the platform."

But now the BBC has lost its most high-profile commercial partner.
Freeview, which has long been mooted as a model for the relaunch of DAB
radio, would not have worked if it had only offered BBC stations.
Neither will digital radio.



Tuning Out

July 2007 Channel 4 wins the licence for a second national digital
multiplex, taking a controlling 55% stake in a consortium of investors.
The broadcaster plans three services - E4 Radio, Pure 4 and 4 Radio,
which is to be a speech station to challenge the BBC's Radio 4.

November 2007 The government launches the digital radio working group,
"to look at how to promote digital radio and increase penetration".

February 2008 Channel 4's chief executive, Andy Duncan, is directed to
go over-budget by the board, amid fears caused by GCap Media's decision
to pull out of Digital One.

March 2008 The Guardian reports a split at Channel 4, with most
executive directors and senior managers opposed to the move into radio.

Channel 4's Next on 4 public service plans are announced, with only one
line about E4 Radio launching "later this year".

April 2008 Bob Shennan, the former controller of Five Live, joins
Channel 4 as head of radio. He starts hiring staff.

April-May 2008 The board defers a decision on investing in the
transmitters for the network.

October 10 2008 Channel 4 announces that it is abandoning its entire
radio project, with the loss of up to 15 jobs.


-- 
Jaqui Devereux

Director
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