Much has been made of the opportunities digital radio offers both listeners and advertisers. Aside from the benefits of easier tuning and better reception, both of which encourage consumers to spend more time listening to the radio, digital's main advantage is a wider choice of listening.
Since most of the new digital channels have national reception, this growth in choice creates opportunities for advertisers to target nationally and reach narrower interest groups.
Of the 281 commercial analogue stations in the UK, only three - Classic FM, Virgin and talkSPORT - are national. In comparison, there are now 30 commercial stations that can only be received through digital platforms.
All are national, and they serve a disparate range of interests and age groups, with stations ranging from Capital Disney and Smash Hits to Planet Rock, Saga and Oneword.
The choice may be wide, but, as yet, the audiences for the digital layers are comparatively tiny. Only 13 of the 30 digital-only stations are currently measured by Rajar. In its figures for the third quarter, released last week, Rajar revealed that these 13 achieved 10,854 listening hours between them, less than a quarter of the total for Classic FM.
Slow growth
Surprisingly, growth in the digital stations' listening hours compared with the same period last year was just 2.7%. This despite the inclusion by Rajar of six new digital stations and the sale, in the first half of this year, of 250,000 digital radio sets, adding to the 350,000 already in UK homes.
The statistics suggest that, despite having a wider choice of stations to tune in to, most digital radio owners still listen to established analogue brands. To win over listeners, the fledgling digital stations will need to make much greater investments in content and marketing.
This point is not lost on Mark Storey, managing director of radio programming at Emap, which, among radio owners, is by far the biggest convert to digital.
He describes the digital era to date as a land grab, in which radio companies rushed in with station launches to acquire digital licences. The goal now, he says, is to develop the content and market it to listeners.
Digital stations' individual marketing efforts are being supported by an £11m investment by the Digital Radio Development Bureau, which predicts that by 2008 there will be 13m digital sets in UK homes and digital penetration will reach 29% of the population. It also predicts that by the same date the number of cars fitted with digital radios will increase from the current 3000 to 645,000, further boosting the audiences for digital stations.
Such audience growth will inevitably mean greater fragmentation of the radio market, and some advertisers see digital radio as a double-edged sword. Radio makes up 7% of UK display advertising, but its oft-stated aim is to be a 10% medium. Perhaps the biggest impediment to that goal is a perception that radio is a complex medium, involving labour-intensive planning and buying. Fragmentation can only add to this.
For advertisers seeking to target niche audiences, the advantages of digital radio are obvious. But for FMCG advertisers, achieving the scale they need will become ever more complicated.
On balance, Howard Bareham, head of radio at MindShare, believes that digital radio offers more positives than negatives. 'Niche digital stations offer a low-cost way of targeting difficult-to-reach audiences,' he says. 'And they are more flexible about offering in-programme associations. Their narrowness allows perfect brand marriages.'
That said, the development of digital radio is already raising some complex issues for advertisers and agencies to address. Next-generation digital sets, already on sale, include 'rewind' technology, allowing listeners to pause the broadcast and skip commercial breaks.
According to Steve Parker, UK buying director at Starcom Motive, this presents radio advertisers with a challenge. 'Traditional radio promotions won't work in the future, as listeners will edit them out,' he says. 'Communications will have to be much more powerful.'
Measurement issue
What's more, as Parker points out, the growth in stations puts more pressure on the diary system of radio audience measurement. A Rajar diary, in which respondents record their listening habits, presents a choice of about 50 stations in a local broadcast area. The potential for misattribution is obvious, but Rajar recently admitted that electronic audience measurement could not be introduced before 2007.
Where technology presents challenges, it also presents opportunities. Among these are the broadcasting of text, such as contact details, on the displays of digital radio sets, interactive content and the integration of radio communications with the internet and mobile phones.
In the short term, digital radio might be a mixed blessing. But its long-term prospects mean the industry's 10% goal might be realised.
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