Interview: The future of digital radio
12th Apr 2009 | 11:37
DRDB boss Tony Moretta on DAB, DAB+ and internet radio
Listeners talk back to their radios
TechRadar recently sat down for a long, revealing interview with the Chief Executive of the UK's Digital Radio Development Bureau, to find out more about what the organisation does and what its vision for the future of radio in Britain is.
TechRadar: What is the DRDB? And who are your stakeholders?
Tony Moretta: We are the radio industry's trade body for digital radio. Uniquely we have both the BBC and commercial radio sitting around our board, so you have the rival commercial and BBC sector and rival commercial radio groups all pulling together to drive digital radio. So we've got the BBC, Global, UTV, Bauer, GMG, Archiva, Digital One… so all of the major players are represented, with their chief execs sitting around our board.
The idea is to 'drive' digital radio. In the early days this was done by driving set sales – telling people what it was, working with manufacturers and retailers to get the right products into stores. Getting the right price points, form factors, styles and so on. Then telling consumers – mainly via radio talk-up, radio advertising, radio promotions and a little bit of print and editorial coverage.
That focus is now moving away from set sales (though that remains a very important part of what we do) towards listening – so driving up the percentage of people listening to digital radio. And we've been shifting our focus towards this, even before the recent Digital Britain report came out.
So that is basically what we do. It's the radio industry pulling together to drive digital radio across the whole 'chain', which includes not only manufacturers, retailers and broadcasters but it also includes government, OFCOM, chip makers and – of course – the consumer.
The analogy I use quite often is that the DRDB is very similar to Freeview, in the sense that Freeview as a body is responsible for developing and marketing the platform of digital terrestrial TV. It has shareholders at Sky, BBC, ITV and Channel 4 – who compete like hell on the content – but they co-operate and have one body responsible for promoting the platform. So our role is to promote the DAB platform (and other digital radio technologies) on behalf of the broadcasters in particular, but also working across the supply chain. So this is why we have one consumer website, one set of consumer materials in terms of point-of-sale and one contact point for the manufacturers and retailers. We offer a lot of support for consumers in terms of telling them where to get the radios, post-code checking the coverage – the stuff that it makes sense to have centralised in order to promote the platform.
Over the last seven years we have also become the key source for market data on digital radio – so we talk to analysts, GfK, Rajar, overseas broadcasters and people who are interested in going onto a digital platform. So we have all the market data on set sales, listening, on consumer likes and dislikes – all going back over time to when DAB started – which nobody else has.
TechRadar: So what are the advantages of DAB over FM?
Tony Moretta: Well, one of the things to remember about FM, is that there just isn't the space to run any more services. Particularly with commercial radio – when you think that there are five national FM services and the BBC has four of them. Commercial radio only has one (Classic FM) and for the other two national commercial stations, they are having to use AM – which of course has its own problems in terms of where you can get it, what the signal is like, its mono… and so on.
So with DAB you have an immediate advantage in that you can offer a lot more services, particularly nationally. The reason commercial radio has mostly been local to date is because that is where the spectrum was. There wasn't the spectrum to have more national services. So you can get more services with digital over FM, which is the first advantage.
We get a lot of people who say that their FM coverage is not that robust but they get DAB. The funny thing is that only recently I was talking to the director of Classic FM – who only lives in Canterbury – and he can't actually get Classic FM very well on FM, but he can get it on DAB!
There are a lot of benefits in the functionality of the radio – the fact that you can just scroll through the list of services that you can get very easily and very quickly. Stuff like accessing text and information services – so obvious stuff like being able to see the names of tracks, artists, travel info, weather, DJs, stations and shows, offers a clear advantage over analogue radio.
One thing that is not very well publicised and not that well known is that a lot of digital radios – especially those made by Pure – have a storage functionality with regards to the text. So it stores the text and you can call it up whenever you like – so some of it is segmented in terms of news, weather, traffic and so on. So you can always instantly bring up what you want.
There is still a lot more that can be done. Things like recording and listen-again functions – Sky+ type functionality for radio - which need the metadata, that cannot be done with analogue. There are other things that will be developed, such as much better traffic data – a service called TPEG, for example, is a way of offering much better traffic data on DAB than you can currently offer on analogue. That's being pushed a lot in Germany right now. Trafficmaster are just about to launch a much-improved TPG service, as they have the capacity on Digital One.
We have only just started, in terms of these types of additionally functionality that you can do on digital radio compared to what you get on FM. But even if you look at the core proposition, even without all of the many additional stations – if you look at somebody that listens to national stations on FM – then you are getting twice as many national services. So you are getting stations like 1Xtra, BBC 6 Music, Radio 7, World Service, Asian Network and so on. All stuff you cannot get on FM. And if you listen to commercial radio, then you are getting stations such as Absolute, TalkSport, Classic FM and so on crystal clear and in stereo.
TechRadar: What about those who say that internet radio and services such as the BBC iPlayer are the future of radio?
Tony Moretta: How are you going to use the iPlayer in a car? How are most people going to use, easily and cheaply, the iPlayer when they are walking around? How are you going to use it in your kitchen?
There is a big future for broadcast radio. Internet radio listening has grown over the last twelve months from 1.9 per cent to 2 per cent of total listening. What is PC and broadband penetration? Around sixty per cent of UK homes? Compare that with current DAB penetration rates of around thirty per cent of UK homes, yet DAB makes up 12 per cent of total listening. Six times more than internet radio. People like listening to broadcast radio.
TechRadar: What about the ways in which listeners can give their own feedback with DAB and digital radio technologies?
Tony Moretta: Yes, what's interesting and what is starting to happen is that you are starting to see radios with both DAB and Wi-F i– what Pure call 'Connected' radios. It is very niche at the moment (to put it in perspective 2.1 million DAB radios were sold last year, compared with around 40,000 internet radios, of which 15,000 have DAB – radios such as Pure's Evoke Flow, Avanti Flow and so on).
The great thing about DAB combined with Wi-Fi is the fact that it offers that 'return path' for listeners. Some things are just always going to make sense to be transmitted as a broadcast platform, because it is a lot more economic for everybody – for the ISPs, for the broadcasters and so on – in a one-to-many way. But in terms of interactivity, with having that Wi-Fi return path and the feedback – considering that radio is quite often a medium that you consume while you are doing something else, whether you are driving or in the kitchen or so on – now, wouldn't it be great if you hear something such as an ad or a music track that you want more info on and you can just touch a 'thumbs-up' button or whatnot on the screen. This 'radio tagging' technology is already available now, so your radio will know what you are listening to at that time and it will tag it.
So that tag will know whether or not you were listening to an ad or a programme or a music track and so on. So wouldn't it be great if you were sitting at your email at your leisure at a later date and you have an email that has been sent to you from the radio station or from the advertiser or whoever saying "you expressed an interest in this track/ad and here is where you can buy it, or here is a voucher for a particular product from an advertiser"?
So that is what the Wi-Fi bit gets you, that return path functionality to complement programming commercially – in terms of getting advertising and stuff. Plus, it is all about developing that right level of functionality that is complementary to the radio experience. You're not going to sit there and browse the web on it! You'll do that on a PC or whatever... But it is that 'glance-ability' – you want to be able to glance at something, press a button and then consume it or listen to it again later at your leisure.
TechRadar: Radio listeners seem to be far more passionate about the shows they regularly tune into – compared with TV, say.
Tony Moretta: Yes, we have data that shows that people are far less promiscuous on radio compared with TV. The average person listens to 2.5 radio stations on analogue. When you give them a digital radio and you double their choice they still only listen to 3 radio stations – so it only goes up by a little bit. They don't go mad! They are still very discerning and very loyal in terms of the stations that they listen to. The other interesting thing which our data shows is that when a listener moves from analogue to digital they listen to those stations for longer – which is of course great for the radio industry.
But radio is also very different, in terms of some stations such as BBC Radio 4 being very programme-centric, while other stations, such as your local breakfast show, for example, are very much more topical and stream-of-consciousness in style.
An example I regularly give is the way in which you listen to the radio in the car. I regularly hear trails on Radio 4 while driving to or from work for an interesting programme that is on that evening. But I might forget to listen to it at home, or to go on the iPlayer to download it. So wouldn't it be great if you could just tap a button in the car and it records it for you automatically? So you can listen to it when you get in the car the following morning, instead of listening to Wogan or the Today Programme or whatever, should you wish. So it is the time-shifting and the listen-again features and that sort of stuff that people will want to use.
TechRadar: A number of digital stations disappeared last year, with broadcasters citing costs as a reason for pulling the plug. Why did that happen?
Tony Moretta: Well, the main stations that went away – aside from all the Channel 4 stuff, which never launched and was nothing to do with DAB – where the GCap stations, such as The Core and thejazz also had nothing to do with digital. You had a company that was trying to resist a hostile takeover that had to show they were making savings on costs and they were basically throwing sandbags out of the hot-air balloon to gain height. It was a very short-termist attempt to try to cut the costs and that is why those stations were closed.
When you are talking about DAB costs, it should also be stressed that it is only more expensive when you are doing BOTH analogue and digital. It is the same in TV and when that industry gets to the switchover point broadcasters can stop paying for their analogue transmission. It is always going to be a lot more expensive when you are effectively paying twice to cover the country. So that is why the goal of the Digital Radio Working Group is for us to get to a point where we can switch analogue off.
TechRadar: So what is the digital radio industry doing to attract new broadcasters?
Tony Moretta: The majority of local multiplexes are more or less full. Following Channel 4 pulling out late last year, there is free capacity on Digital One and the Digital Radio Working Group has made moves to bring down the costs of entry recently. But, to be very honest, we are in an environment where banks are losing 95 per cent of their value! You cannot blame commercial radio groups for NOT wanting to launch new stations in the current climate, taking into account the advertising downturn and so on.
However, there are people that do want to launch out there and are talking to Digital One about it. So the industry is looking at those ways of reducing the costs of access to capacity to commercial stations wanting to launch on a national level. It has been reported that Global is looking to launch LBC (or something similar) as a national news station. NME Radio wants to go digital. Minority and special interest stations such as the Asian Sunrise Radio are looking to launch nationally, and so on. So there is interest out there. It is obviously subdued right now, because there aren't many people launching new businesses right now.
TechRadar: Talking a little more about Lord Carter's recent Digital Britain report – can you tell us a little more about that and about how it relates to the Digital Radio Working Group (DRWG) and the analogue to digital radio switchover plan.
Tony Moretta: Well I think the report is very sensible, because basically what Lord Carter is saying is that they agree with the migration timetable and the targets and the general conclusions of the Digital Radio Working Group (DRWG) – and they want to see a little more information on the industry's plan before fully committing to a switchover plan. Obviously Digital Britain is an interim paper right now, with the final paper due later in the year.
The DRWG is about getting the industry together to talk about how switchover is going to work in radio. What they are effectively saying is – and this is very sensible and government is involved in this as well – is that if the industry gets digital radio listening up to the 50 per cent figure, then the government will do its bit and introduce a migration timetable, because when you get beyond 50 per cent you get to a point where less people are listening on analogue than on digital, so it is clearly a mass market proposition and you know it is going up the curve.
So at that point the government puts in the switchover timetable. Digital listening is across the board by the way – including internet listening and listening via digital TV (on Sky, Virgin Media and Freeview). It also says that before you actually do switch off analogue that people can get all the services on DAB that they get on FM now, so they are not going to loose anything.
In addition to those coverage targets the DRWG also talks a lot about increasing coverage on the roads. Currently, DAB isn't doing badly in-car. A lot of manufacturers are now reporting that a lot of their models, around 50 per cent or so, have DAB radios in them. Another major manufacturer – we can't reveal who it is yet - has just told us that they are standardising DAB across the mass market model ranges, standardising DAB on the top two tiers and offering it as an option on the rest of their range. So again, the target is to offer at least as much in terms of services to in-car DAB owners on the national and local road network than is currently available on FM. So they are the targets of the DRWG and Digital Britain supports them.
The future of internet radio
TechRadar: What of the future for internet radio?
Tony Moretta: Radio needs a dedicated digital broadcast platform. Despite what some people say, DAB is the only option, the only way of doing that. The internet, IP, cannot be the future of radio. It is not free at the point of access, because you need to be paying your ISP for your broadband, or your mobile provider for mobile coverage. I mean, you read some stories about 'internet car radios' - but how is that going to work? You are either going to drive very slowly down a road of terraced houses and hope that there are enough unsecured Wi-Fi networks or you are going to have to connect via your 3G phone!!
TechRadar: What about WiMAX?
Tony Moretta: I know a fair bit about WiMAX, because we were looking at it at my last company. WiMAX is a long way off. The problem with WiMAX is that you need to build a completely new national network. It is a cellular network, so the sort of numbers of sites needed are not TV and radio site numbers, they are mobile phone sites. So it requires a massive, multi-billion pound investment. Who is going to make that investment now? Typically, you would imagine it would be the telcos that would make it, but they are concentrated on making more and more use of their 3G networks aren't they?
So I think it is going to be a long time before WiMAX happens and even then you are going to have the same issues. Why would you use an IP network like that for broadcasting something, say for example such as Wogan, to millions of people live, while it is on? Digital Radio is going to be a mixed economy. Just as with Digital TV, where most people use digital terrestrial television (DTT), but a lot of people have digital satellite, a lot of people have cable, some use the iPlayer, and so on. And radio will be the same. But you need a broadcast platform for the majority of listening and DAB is the only option there. It really is the only option.
TechRadar: What is the significance of the year 2015 in the switchover time-plan?
Tony Moretta: That year has been mentioned because the DRWG has said that on current forecasts, based on organic growth, you will probably reach that 50 per cent of listening figure by 2015. Now that is without the bold plan that Digital Britain is talking about that it would like to see happen. What the government says is that they might switch off some analogue services two years after that, so that is why some have said that switchover could happen by 2017. So the earliest that [analogue to digital radio switchover] could happen is 2017.
So basically once we reach that 50 per cent tipping point the government will put in place a timetable. That will also relate to existing analogue licenses for commercial radio stations, so I think the plan would be at that point relating mainly to national services and also local services that had achieved a listenership of 90 per cent or more on DAB within their area – these services would then have two years to make the migration from an analogue/digital mix to digital-only. So in essence the government will adjust the licenses of existing commercial radio stations.
Don't forget that it is a commercial decision for the commercial radio sector. If you think, "Okay, only 20 or 30 per cent of my listeners are listening to me on analogue – and that is worth a certain amount – and I know if I go digital only they will migrate anyway, and we will help them do it and the switchover is in a few years. But actually if I stop transmitting analogue then I'll save all this money on what I'm paying for my transmission and my analogue license." So they will make a commercial decision. They will say, "actually it is worth our while to switch off our analogue service in two years time."
It is also about making sure people have an easy route to digital. So if you have £15 DAB radios (like you can get £20 freeview boxes). You have technologies such as Pure's Highway to adapt cars that don't have DAB as standard – and that technology is only going to develop and get better and easier and cheaper. Plus don't forget that people can listen in on their TVs, their PCs, mobile devices or whatever.
TechRadar: The government's Digital Britain report mentions tackling certain 'structural problems' before switchover.
Tony Moretta: Again, that is about the cost issue – things like reducing the barriers to entry, cost of access, things like making sure that a commercial station might want regional opt-ins, to do regionally-targeted advertising and so on. That's also one of the things mentioned in the DRWG.
TechRadar: Moving on to talk about the criticisms that the DRDB is focusing too heavily on DAB at the expense of DAB+ technology.
Tony Moretta: DAB+ is a complete red herring at the moment. It is not particularly a different technology. It is like with anything, if you bought a PC eight years ago and you buy a PC now, you are not going to buy the same technology as you had back then. If you are launching a new digital TV network, you wouldn't use the technology that is there straight away now. If you look at the technology that is involved in high definition on Freeview, for example, they are having to go to DVB-T2 instead of DVB-T, but it is not backwards compatible. So they are going to have an issue – anyone who has a HD-ready TV is going to have to buy a new box to get HD on it.
So the reason why the Australians, for example, are using DAB+ is because they are launching digital radio now. They have no history, no legacy of DAB out there. DAB+, like anything else, if you are using the latest codec, it gives you some technical advantages. So the issue then is – what does DAB+ give you? It does allow a more efficient exploitation of radio spectrum, so you can get more on it. Not an issue right now, because there isn't too little capacity out there, right now. DAB+ enables better audio quality if you use the same capacity, but the reality is that the vast majority of people are not that bothered about the audio quality.
You will get some audiophiles that take issue with that – and you have spoken to some of them recently – but our recent research (and OFCOM's research) shows that 88 per cent of users voted DAB audio quality as 'good or higher'. Some of these audiophiles will be dismissive of the general public and say, for example: "Well, what do people know? They pay the same price for an album on iTunes as they would on CD, when on iTunes it is compressed far more than on CD?"
Well, in fact, that is a good analogy, because it shows that the vast majority of people are more bothered about convenience and fitting in with their lifestyles, than they are about audio quality.
To do DAB+ it would cost a lot more for the broadcasters right now – they would have to change certain standards, they would have to use up more capacity than they need to do it, they would have to effectively bypass or switch off the nine million or so DAB radios already out there. How is there any case for doing that right now for the sake of a small number of audiophiles?
0.5 per cent of all audio products sold are Hi-Fi products. Still, an audiophile might turn around to me putting this argument forward and say: "Still, that's tough. The broadcasters have a duty to provide the best audio sound quality that they possibly can."
Well, 'A' they don't. And 'B' 88 per cent of those with DAB radios are perfectly happy with the sound quality that they are receiving. It is not as if you sit in a chair – unless you are an audiophile - with a pair of high-end headphones on and a £4000 Hi-Fi system listening to music on the radio. Digital radio is a secondary listening medium. My view is, if you are an audiophile, then fine, I wouldn't criticise you for that! If you are a real audiophile, perhaps DAB might not even be for you. If you want to hear classical music in the best available quality, then you will buy the CD. Or you might want an internet radio to get a better quality stream.
Just as if somebody is really into HD, then they will get Sky HD, if they are really into picture quality. You will pay the extra and get that because Freeview won't be good enough for you, or whatever. It is the same with radio. The problem is that there a few very vociferous audiophiles that are commercially naive. And they actually do have a vendetta against the BBC and a conspiracy theory that the BBC is somehow intentionally damaging audio quality or something in supporting DAB.
It is just commercial reality. It is always a balancing act with new technology. Right now there is no real benefit of introducing DAB+ in the UK either for users or for broadcasters. But there is a massive disadvantage in doing it, in that you would effectively switch off those nine million or so digital radios already out there. Now why on earth would you do that?
Now over time that might change and we are in favour of new radios coming out that are DAB+ compatible.
DAB versus DAB+
TechRadar: So when will we reach a point where DAB+ is a viable option for the UK?
Tony Moretta: Well if you get to a point where there are ten million DAB+ compatible radios out there, then a multiplex might say, "actually, somebody might want to launch a DAB+ service." You just have to make sure that you tell your listeners that if they have an old radio then they have to replace it, or whatever. It would also, incidentally, require a change in regulations from OFCOM to allow a broadcaster to broadcast in DAB+, as that is not allowed at the moment.
TechRadar: So you are broadly in agreement with Pure's strategy – of 'Connected Radio' devices that bring together Wi-Fi/internet radio with DAB (and DAB+ compatible) radio.
Tony Moretta: Well, we can't comment on Pure's strategy, but what we can say is that you are going to have different devices. If you look at TV set-top boxes, you can buy a cheap set-top box that will receive all the stations. Or you can get a more expensive set-top box with a hard drive that can record and offer listen-again type options and it might have an ethernet port for the BBC iPlayer (as Freesat has said they are going to do). And I think you will get the same with radio. You will be able to go and buy a cheap radio if you like (Netto, this month, for example, is offering a £15 DAB clock radio). Or you might want to go out and buy something like a Pure Evoke Flow, because you want to get stations that you are outside of coverage for.
The ideal situation would be, if you went to your radio and said "I want to listen to this station" and the radio looked for a DAB signal and if it couldn't find a DAB signal for the service you want then it looks for an available Wi-Fi connection. So, yes, we support Pure offering these 'connected radios' as part of its premium product range. But it is not the answer for everybody, because it is more of a premium product. But if you just want a radio to listen to in the kitchen while you are doing the ironing or whatever, then you are not necessarily going to want to buy an expensive 'connected radio'.
TechRadar: Why do you think broadcasters would struggle to monetise internet radio?
Tony Moretta: It is very basic. At the end of the day, advertisers are interested in who is listening to a station, what types of people are listening and how many are listening. Now, that is why, at the moment, analogue is still getting more revenue than digital, because more people are listening on analogue. That's fine. But with internet radio, it is a difficulty, because you are getting smaller and smaller groups of people listening, which might be less interesting to advertisers (some of them might be, of course, depending on what the niche is). I think
DAB is a good balance for the advertiser. You can have more stations. You can break the segment down more. Planet Rock, for example, who couldn't launch in analogue – because there is no capacity, there is no spectrum – I imagine they have very good information on their demographic and on the type of listeners they have with which they can go to advertisers with. So they can say to advertisers, "if you are looking to target ABC1 males between the ages of 30 and 45, then we have X hundred thousand listeners that fit that bill listening in every week."
So there is that problem with internet radio – that it is going more and more niche. And people talk about having the ability to listen in to foreign stations on internet radio and stuff like that. American advertisers advertising on a US country music station are not so interested in the fact that you are listening to the station in the UK, because you are unlikely to even be able to buy the products they are advertising. And likewise, British advertisers are not going to want to advertise on a US country music station, when the vast majority of British listeners are not listening to it!
Internet radio is useful for out-of-coverage stations – so listeners can tune into something such as Q Radio, for example, which currently only broadcasts in the London area - but it doesn't really matter what technology people are listening on. It is just that having the broadcast platform is the most practical.
The other thing is that this message of "10,000 radio stations at your fingertips" is also a total red herring, because as our research has shown, radio listeners are not promiscuous with their listening. They do not want to be listening to twenty or more different radio stations. It is a gimmick. Unless you are an ex-pat and want to listen in to your favourite stations from home, or whatever.
But the Wi-Fi bit – in terms of its functionality – for offering listen-again features, to make it easier to pull information from a programme, all of that makes total sense. Which is why I think of it as 'DAB plus Wi-Fi' rather than 'internet radio'. I mean, internet radio works on anybody's PC, but people have shown that they don't particularly listen to radio (in large numbers) on their PCs. In fact, in the latest RAJAR figures, the percentage of listeners tuning in to internet radio via their PCs went down! There is more digital TV listening than there is internet listening.
TechRadar: Finally, what about the DAB sales drop in late 2008?
Tony Moretta: In 2008 overall DAB sales were up around 3 per cent. Towards the end of last year we saw a dampening of growth and we did sell less DAB radios in December 2008 than in December 2007. Gfk, which track retail sales data for consumer electronics, highlighted DAB as one of the success stories of 2008. The downturn in DAB sales in 2008 occurred in the middle of the year, almost immediately following the economy taking a dive. Retailers were managing stock levels down, which damaged us a bit, with some manufacturers having to ship stock to retail all the way up to Christmas Eve last year.
But at the end of the day, for a year which started with all the stories of DAB channels disappearing, followed by all the business with Channel 4, to sell half a million DAB radios in December alone was quite an achievement, even though we failed to hit the original target which was set eighteen months ago. And nobody saw what has happened with the economy coming eighteen months ago! So we are still very pleased with DAB sales in 2008.
The major manufacturers – Pure, Roberts, Sony and so on – are all reporting that they had great Christmases, which means that they will keep investing in research and development. The retailers also see that DAB was a success story this last Christmas, which means that they will keep promoting it and giving it shelf-space and so on going forward. So we are happy with the growth.