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'Options For Radio Broadcasting In The UK' by Grant Goddard

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Report outlining potential options available to acquire a broadcast radio station to target the Chinese community in the United Kingdom, written by Grant Goddard in January 2014 for Propeller TV.

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'Options For Radio Broadcasting In The UK' by Grant Goddard

  1. 1. OPTIONS FOR RADIO BROADCASTING IN THE UK for PROPELLER TV GRANT GODDARD 8 January 2014 www.grantgoddard.co.uk
  2. 2. Remit of report This report was commissioned on 23 December 2013 by Propeller TV to assist with its plans to create a radio station in the UK: This report sets out: Potential UK local commercial FM/AM analogue broadcast radio station acquisition targets holding ethnic content licences, including:  Coverage area and licensed format data (from Ofcom)  Audience data (where available from RAJAR)  Financial data (where available from Companies House)  Suggested offer price  Ownership data  Chinese population data (from 2011 Census) Potential routes and costs to establish a digital radio station via:  UK broadcast platforms  Online Commencement of consultations with Ofcom to determine if/how content can be broadcast in partnership with an Ofcom-licensed commercial radio station Suggested strategy to pursue the next steps to secure a UK radio outlet for Propeller content. Data quoted within the report was derived from primary sources: Ofcom, RAJAR, Companies House, 2011 Census and legal filings. page 2 of 30
  3. 3. Introduction The options to build a radio station in the UK are:  Broadcast radio o Analogue terrestrial platform  FM / VHF  AM / Medium Wave  Long Wave (no licences available) o DAB digital terrestrial radio platform  National coverage  Local coverage o Satellite TV platform  Sky (national)  Freesat (national) o Digital terrestrial TV platform  Freeview (national)  Online/internet radio. The decision to use a particular platform (or platforms) will be determined by:  The long-term objectives of the radio station owner  A cost/benefit analysis of the fulfilment of these objectives  Take-up amongst the target audience of the platform  Usage amongst the target audience of the platform  Technology trends. Among the total UK adult 15+ population, consumption of broadcast radio is consistently high:1  90% of the population (47.7m) listen to broadcast radio each week  The average listener consumes 21.5 hours per week of broadcast radio  More than 1bn hours per week of broadcast radio are consumed. Analogue continues to be the most listened to platform for broadcast radio:2  60% of broadcast radio listening on AM & FM platforms  23% of broadcast radio listening on DAB platform  5% of broadcast radio listening via digital TV platform  6% of broadcast radio listening via internet. Consumer take-up of analogue radio receivers is almost universal (i.e. 95 to 100%):3  Between 101m and 117m radios in use in the UK  15% to 19% of these radios receive DAB digital radio  4m analogue radios purchased per annum  2m DAB radios purchased per annum. Consumer take-up of equipment receiving digital radio varies greatly: page 3 of 30
  4. 4. 4 It should be noted that:  DAB radio is not present in any phone/smartphone  DAB radio is not present in any digital TV  Internet is present in many smartphones  Internet is increasingly present in digital TV receivers. page 4 of 30
  5. 5. Analogue Terrestrial Platform: AM/FM Radio Commercial radio licences:  No new AM/FM commercial radio licences are being offered by the regulator, Ofcom  300 local commercial radio licences are currently regulated by Ofcom  Commercial radio licences can be acquired, although there is no active marketplace for these licences (i.e. no stations are 'for sale' on the open market)  The acquisition price of an individual commercial radio licence is determined more by the willingness of the vendor to sell and the acquirer to buy, rather than by the intrinsic value of the radio station as a business. Regulation of commercial radio:  Commercial radio is an industry highly regulated by Ofcom  The licence of each commercial radio station specifies: o The geographical coverage area o The expiry date of the licence o The owner of the licence o The 'format' of the station o The geographical location where content is produced o The minimum number of hours to be broadcast of locally-made content o The minimum number of local news bulletins to be broadcast.  The coverage area of the licence and expiry date cannot be amended  The other characteristics can only be amended by application to Ofcom  Each application to make a change is considered individually on its merits  Such applications are considered at monthly Ofcom radio licensing meetings  If the proposed change is considered significant, Ofcom may decide to issue a public consultation, which could last 3 to 6 months  Ofcom's decision on each application is final and there is no appeal system  While an application to Ofcom for change is pending, the station is required to continue broadcasting content according to its existing licence. Radio station 'format':  The 'format' describes the programme content required to be broadcast and/or the station's target audience  The majority of 'formats' specify the music genre(s) to be broadcast  Only a small number of licences specify a 'format' for speech/talk programmes to be broadcast  Only a small number of licences specify a 'format' directed at 'ethnic' audiences  No commercial radio licence presently specifies a format exclusively for Chinese content. page 5 of 30
  6. 6. Suggested strategy:  Acquire a local commercial radio station whose licence already requires an 'ethnic' format because: o A station with an ethnic licence will be cheaper to acquire than a mainstream music radio station o Ofcom is likely to consider more favourably an application to amend a licence from one ethnic format to another  Make the acquisition conditional on successfully securing Ofcom approval o To change the licence ownership o To change the format to Chinese content o To change the studio location (if necessary) o To change the minimum locally-produced hours (if necessary) o To change the local news requirements (if necessary)  Contract the existing licensee to continue broadcasting its existing service until Ofcom approval of changes is secured  Prepare and submit documentary evidence to argue the reasons to Ofcom to: o Change the licence ownership o Change the format to Chinese content o Change the studio location (if necessary) o Change the minimum locally-produced hours (if necessary) o Change the local news requirements (if necessary). Acquisition assets:  The radio broadcasting licence is assigned by Ofcom to a specific company, so it is that company that has to be acquired  It is imperative to determine the assets and liabilities of the company holding the broadcasting licence  The vendor of the licence may wish to include in the sale: o Premises and/or radio studios o Debtors and creditors o Existing contracts (employment and leases) o Transmission and distribution contracts  The buyer has to decide which of the above assets and liabilities it wishes to acquire from the vendor  Negotiations between vendor and buyer can then proceed. Acquisition price:  The acquisition price is determined by the willingness of the vendor to sell and the willingness of the buyer to pay  The majority of local commercial radio stations record operating losses, so that acquisition prices are difficult to calculate as a ratio of a business' operating profits  Recent large-scale commercial radio transactions (see table below) have taken place at prices representing a multiple of between 1.5 and 3 times reported annual operating revenues  The smaller the commercial radio station, the less likely the transaction price is to conform to a predictable multiple of revenues or profits. page 6 of 30
  7. 7. Recent commercial radio group acquisitions:5 date target buyer revenue s (£m) operati ng profit (£m) operati ng margin (%) acquisit ion price (£m) muiltipl e of revenue s multiple of operati ng profit June 2012 Guardian Media Group Radio Global Radio 47.1 (4.1) -8.7 69.0 1.5 June 2008 Virgin Radio Times of India 24.0 4.3 17.9 53.2 2.2 12.4 March 2008 GCap Media Global Radio 193.0 13.3 6.9 374.6 1.9 28.2 Decemb er 2007 EMAP Radio H Bauer 143.0 18.0 12.6 422.0 3.0 23.4 June 2007 Chrysalis Radio Global Radio 65.6 8.7 13.3 170.0 2.6 19.5 Suggested broadcast radio acquisition targets: Ethnic local commercial radio stations:6 Lice nce no. Radio station Service area F M / A M Frequ ency 1 Frequ ency 2 Measur ed Covera ge Area (15+ populati on @ 2001) DAB multiplex Licence expiry date AL0 41 Capital Xtra Brixton F M 96.9 1,577, 032 National (112 stereo) 31/12/ 2019 AL2 55 Capital Xtra North London F M 107.1 1,929, 148 National (112 stereo) 02/05/ 2023 AL1 56 Sunrise Radio 1 Greater London A M 1458 8,038, 386 London 1 (128 stereo) 31/12/ 2018 AL1 75 Sunrise Radio 2 Greater London A M 963 972 7,163, 171 02/07/ 2015 AL1 60 Sunrise Radio 3 Greater London A M 1035 6,675, 971 London 3 (80 mono) 31/08/ 2019 AL1 83 Asian Sound Radio East Lancashir e A M 1377 963 1,923, 963 Manchester (64 mono) 02/06/ 2015 AL0 36 London Greek Radio North London F M 103.3 1,012, 200 31/12/ 2014 AL1 72 London Turkish Radio North London A M 1584 1,915, 684 16/08/ 2015 AL1 71 Radio XL West Midlands A M 1296 3,104, 253 Wolverhampton (64 mono) 29/05/ 2020 AL0 58 Sabras Radio Leicester A M 1260 740,66 7 Leicester (64 mono) 06/09/ 2020 AL0 50 Spectrum Radio Greater London A M 558 10,433 ,014 London 2 (64 mono) 21/12/ 2019 AL0 37 Sunrise FM Bradford F M 103.2 368,97 7 Bradford (64 mono) 31/12/ 2019 Detailed data for each of these radio stations follows. page 7 of 30
  8. 8. CAPITAL XTRA (1 of 2) Licence no. AL041 Radio station Capital Xtra Service area Brixton FM/AM FM Frequency 96.9 Measured Coverage Area 1,577,032 DAB multiplex National (112 stereo) Licence expiry 31/12/2019 Licensee Capital Xtra Limited (02421343) Group owner Global Radio Address 30 Leicester Square, London WC2H 7LA Web site choicefm.com Character of Service A targeted music, news and information service primarily for listeners of African and Afro- Caribbean origin in the Brixton area but with crossover appeal to other listeners who appreciate urban contemporary black music. The service includes 21 hours per week of complementary specialist music. Studio location Locally-made programming must be produced within the licensed area. Locally-made hours At least 10 hours per day during daytime weekdays (must include breakfast). At least 4 hours daytime Saturdays and Sundays. Programme sharing All programmes may be shared between the Brixton licence (AL041) and the North London licence (AL255), subject to satisfying the character of service requirements above. Local news At least hourly during peaktime weekdays and weekends. At other times UK-wide, nations and international news should feature. Weekly reach (% adults) [see next page for combined data of 2 licences] Weekly reach (no. adults) Hours listened per week Estimated revenues Revenues yr. ended 2013 Revenues yr. ended 2012 Operating profit y/e 2013 Operating profit y/e 2012 Chinese population (%) Chinese population (no.) page 8 of 30
  9. 9. CAPITAL XTRA (2 of 2) Licence no. AL255 Radio station Capital Xtra Service area North London FM/AM FM Frequency 107.1 Measured Coverage Area 1,929,248 DAB multiplex National (112 stereo) Licence expiry 02/05/2023 Licensee Capital Xtra Limited (02421343) Group owner Global Radio Address 30 Leicester Square, London WC2H 7LA Web site choicefm.com Character of Service A music, news, community news and information service primarily for listeners of African and Afro- Caribbean origin in the north London area but with crossover appeal to other listeners who appreciate urban contemporary black music. The service includes 21 hours per week of complementary specialist music. Studio location Locally-made programming must be produced within the licensed area. Locally-made hours At least 10 hours per day during daytime weekdays (must include breakfast). At least 4 hours daytime Saturdays and Sundays. Programme sharing All programmes may be shared between the North London licence (AL255) and the Brixton licence (AL041), subject to satisfying the character of service requirements above. Local news At least hourly during peaktime weekdays and weekends. At other times UK-wide, nations and international news should feature. Weekly reach (% adults) 5% Weekly reach (no. adults) 553,000 Hours listened per week 3,264,000 Estimated revenues £4,055,686 Revenues yr. ended 2013 £1,750,000 Revenues yr. ended 2012 £1,282,000 Operating profit y/e 2013 -£529,000 Operating profit y/e 2012 -£693,000 Chinese population (%) 1.5 Chinese population (no.) 53,297 NOTES:  Revenues and profits may be understated by group owner  Acquired for £14.4m in 2001/2003 from founders by Capital Radio plc page 9 of 30
  10. 10.  Owner re-branded and re-marketed station in 2013 as a national service, so is likely to be reluctant to sell  Ofcom may be reluctant to allow a change of 'format' to Chinese content  Still the most recent standalone London FM station to have changed hands  Suggested offer price: £6m to £12m page 10 of 30
  11. 11. SUNRISE RADIO 1 Licence no. AL156 Radio station Sunrise Radio 1 Service area Greater London FM/AM AM Frequency 1458 Measured Coverage Area 8,038,386 DAB multiplex London 1 (128 stereo) Licence expiry 31/12/2018 Licensee Sunrise Radio Limited (02337575) Group owner Litt Corporation Address Radio House, Bridge Road, Southall UB2 4AT Web site sunriseradio.com Character of Service A full service music and information mix for Asians in London, featuring an appropriate variety of cultures and styles, with news bulletins in English and/or Hindustani. Studio location Locally-made programming must be produced within the licensed area. Locally-made hours At least 4 hours per day during daytime weekday and weekends. (In all, at least 10 hours of weekday daytime programming should be broadcast from within the station's nation). Programme sharing No arrangements. Local news At least hourly at peak-times. Outside peak-time and at weekends, UK-wide, nations and international news should feature. Weekly reach (% adults) 4% Weekly reach (no. adults) 415,000 Hours listened per week 2,799,000 Estimated revenues £3,477,900 Revenues yr. ended 2010 £2,916,732 Revenues yr. ended 2009 £3,117,407 Operating profit y/e 2012 -£196,180 [estimated] Operating profit y/e 2011 -£6,195,729 Operating profit y/e 2010 -£10,027,185 Operating profit y/e 2009 -£3,367,499 Chinese population (%) 1.5% Chinese population (no.) 122,189 NOTES:  Station still owned by founder, launched in 1989  Station is key property in group portfolio  In Sep 2013, HMRC served Sunrise Radio with a winding-up order  In Oct 2013, HMRC dropped its winding-up order (£390,000 paid) page 11 of 30
  12. 12.  In Oct 2013, Digital Radio Group (London) Limited was substituted as the petitioning creditor  On 16 Dec 2013, Sunrise Radio remained on the Companies Court winding-up list  Suggested offer price: £1  Forensic examination of company accounts, assets and liabilities imperative  Possibility of paying off debt to Digital Radio Group (and others?) in return for acquiring the company  Conversation with Ofcom essential to ensure change of format will be permitted page 12 of 30
  13. 13. SUNRISE RADIO 2 Licence no. AL175 Radio station Sunrise Radio 2 Service area Greater London FM/AM AM Frequency 963 + 972 Measured Coverage Area 7,163,171 DAB multiplex Licence expiry 2/7/2015 Licensee Buzz Asia Limited (07009138) Group owner Litt Corporation Address Radio House, Bridge Road, Southall UB2 4AT Web site sunriseradio.com Character of Service A music-led service for London Asians primarily targeting those aged 15 to 34 with a mix of Asian music and other more mainstream music where appropriate. Studio location Locally-made programming must be produced within the licensed area. Locally-made hours At least 4 hours per day during daytime weekday and weekends. (In all, at least 10 hours of weekday daytime programming should be broadcast from within the station's nation). Programme sharing No arrangements. Local news No requirement for local news, but UK-wide, nations and international news should feature. Weekly reach (% adults) 1% Weekly reach (no. adults) 77,000 Hours listened per week 606,000 Estimated revenues £752,986 Revenues yr. ended 2011 £631,720 Revenues yr. ended 2010 £630,817 Operating profit y/e 2012 -£43,535 [estimated] Operating profit y/e 2011 £10,509 Operating profit y/e 2010 £75,515 Chinese population (%) 1.5% Chinese population (no.) 108,886 NOTES:  Station acquired from founders in 'fire sale' (company in administration) in 2009 for undisclosed amount  Licence expiry in 2015  In Sep 2013, HMRC served Sunrise Radio with a winding-up order  In Oct 2013, HMRC dropped its winding-up order  In Oct 2013, Digital Radio Group (London) Limited was substituted as the petitioning creditor page 13 of 30
  14. 14.  On 16 Dec 2013, Sunrise Radio remained on the Companies Court winding-up list  Suggested offer price: £1  Forensic examination of company accounts, assets and liabilities imperative  Possibility of paying off debt to Digital Radio Group (and others?) in return for acquiring the company  Conversation with Ofcom essential to ensure change of format will be permitted page 14 of 30
  15. 15. SUNRISE RADIO 3 Licence no. AL160 Radio station Sunrise Radio 3 Service area Greater London FM/AM AM Frequency 1035 Measured Coverage Area 6,675,971 DAB multiplex London 3 (80 mono) Licence expiry 31/8/2019 Licensee Kismat Radio Limited (05318991) Group owner Litt Corporation Address Radio House, Bridge Road, Southall UB2 4AT Web site sunriseradio.com Character of Service An interactive speech-based station targeted at over-35s in the various Asian communities around London, accompanied by a mix of popular formas of music appealing to the target audience. Speech (expected to comprise at least half of daytime, and maybe less out of daytime) may be in English but should encourage a multi-lingual environment. Studio location Locally-made programming must be produced within the licensed area. Locally-made hours At least 4 hours per day during daytime weekday and weekends. (In all, at least 10 hours of weekday daytime programming should be broadcast from within the station's nation). Programme sharing No arrangements. Local news No requirement for local news, but UK-wide, nations and international news should feature. Weekly reach (% adults) 1% Weekly reach (no. adults) 84,000 Hours listened per week 384,000 Estimated revenues £477,140 Revenues yr. ended 2011 £508,678 Revenues yr. ended 2010 £454,165 Operating profit y/e 2012 -£185,017 [estimated] Operating profit y/e 2011 £47,423 Operating profit y/e 2010 -£133,886 Chinese population (%) 1.5% Chinese population (no.) 101,480 NOTES:  Station acquired from Mean Fiddler Music Group in 2003 for undisclosed amount  In Sep 2013, HMRC served Sunrise Radio with a winding-up order  In Oct 2013, HMRC dropped its winding-up order page 15 of 30
  16. 16.  In Oct 2013, Digital Radio Group (London) Limited was substituted as the petitioning creditor  On 16 Dec 2013, Sunrise Radio remained on the Companies Court winding-up list  Suggested offer price: £1  Forensic examination of company accounts, assets and liabilities imperative  Possibility of paying off debt to Digital Radio Group (and others?) in return for acquiring the company  Conversation with Ofcom essential to ensure change of format will be permitted page 16 of 30
  17. 17. ASIAN SOUND RADIO Licence no. AL183 Radio station Asian Sound Radio Service area East Lancashire FM/AM AM Frequency 1377 + 963 Measured Coverage Area 1,923,963 DAB multiplex Manchester (64 mono) Licence expiry 2/6/2015 Licensee Asian Sound Radio Limited (03107568) Group owner Address 42 Southall Street, Manchester M3 1LG Web site asiansoundradio.co.uk Character of Service A locally-oriented music and information service for Asian listeners in East Lancashire, with a mix of music. At least a third of the output will be in Urdu and Hindi, and the Gujerati and Bengali speaking communities will be catered for. On the 1377 kHz transmitter only, a music-based service targeting the Asian and Arabic Muslim community may be broadcast. Studio location Locally-made programming must be produced within the licensed area. Locally-made hours At least 4 hours per day during daytime weekday and weekends. Programme sharing No arrangements. Local news At least hourly during daytime weekdays and peak- time weekends. At other times, UK-wide, nations and international news should feature. Weekly reach (% adults) [no RAJAR data] Weekly reach (no. adults) Hours listened per week Estimated revenues Operating profit y/e 2012 -£30,436 [estimated] Chinese population (%) 1.0% Chinese population (no.) 18,704 NOTES:  Ofcom might be reluctant to approve a format change as this is the only local commercial analogue radio station serving the Asian community  Licence expires in 2015  28 hours per week of programmes have to be produced in Manchester  Local news bulletins have to be broadcast hourly  The potential Chinese audience is relatively small  Suggested offer price: [insufficient financial data] page 17 of 30
  18. 18. LONDON GREEK RADIO Licence no. AL036 Radio station London Greek Radio Service area North London FM/AM FM Frequency 103.3 Measured Coverage Area 1,012,200 DAB multiplex Licence expiry 31/12/2014 Licensee London Greek Radio Limited (02147539) Group owner Address 437 High Road, London N12 0AP Web site lgr.co.uk Character of Service A targeted news, information and broad Greek music service for London's Greek and Greek Cypriot community. Studio location Locally-made hours At least 10 hours a day during daytime weekdays (must include breakfast). At least 4 hours daytime Saturdays and Sundays. Programme sharing No arrangements. Local news At least hourly at peaktime weekdays and weekends. Outside peak, UK-wide, nations and international news should feature. Weekly reach (% adults) [no RAJAR data] Weekly reach (no. adults) Hours listened per week Estimated revenues Operating profit y/e 2012 -£51,878 [estimated] Chinese population (%) 1.5% Chinese population (no.) 15,386 NOTES:  Ofcom might be reluctant to approve a format change as this is the only local commercial analogue radio station serving the Greek community  Licence expires in 2014  10 hours per day of programmes have to be produced locally  Local news bulletins have to be broadcast hourly  The potential Chinese audience is relatively small  Suggested offer price: [insufficient financial data] page 18 of 30
  19. 19. LONDON TURKISH RADIO Licence no. AL172 Radio station London Turkish Radio Service area North London FM/AM AM Frequency 1584 Measured Coverage Area 1,915,684 DAB multiplex Licence expiry 16/8/2015 Licensee Kirmizi Beyaz Kibris Limited (07817726) Group owner Address 14 Inverclyde Gardens, Romford RM6 5SJ Web site londonturkishradio.com Character of Service A targeted news, information and broad Turkish music service for London's Turkish and Turkish Cypriot community Studio location Locally-made hours At least 4 hours a day during daytime weekday and weekends. (In all, at least ten hours of weekday daytime programming should be broadcast from within England) Programme sharing No arrangements. Local news At least hourly at peaktime weekdays and weekends. Outside peak, UK-wide, nations and international news should feature. Weekly reach (% adults) [no RAJAR data] Weekly reach (no. adults) Hours listened per week Estimated revenues Operating profit y/e 2012 [no filed accounts] Chinese population (%) 1.5% Chinese population (no.) 29,120 NOTES:  Ofcom might be reluctant to approve a format change as this is the only local commercial analogue radio station serving the Turkish community  Acquired from previous owner in 2011  Licence expires in 2015  10 hours per day of programmes have to be produced locally  Local news bulletins have to be broadcast hourly  The potential Chinese audience is relatively small  Suggested offer price: [insufficient financial data] page 19 of 30
  20. 20. RADIO XL Licence no. AL171 Radio station Radio XL Service area West Midlands FM/AM AM Frequency 1296 Measured Coverage Area 3,104,253 DAB multiplex Wolverhampton (64 mono) Licence expiry 29/5/2020 Licensee Central Air Radio Limited (03018278) Group owner Address KMS House, Bradford Street, Birmingham B12 0JD Web site radioxl.net Character of Service A music and information service for the Asian communities * of the West Midlands in varied and appropriate languages (* programmes for the Chinese community may be broadcast as appropriate) Studio location Locally-made hours At least 4 hours a day during daytime weekday and weekends. (In all, at least ten hours of weekday daytime programming should be broadcast from within the station's nation) Programme sharing No arrangements. Local news Asian news at least hourly at peaktime weekdays and weekends. Weekly reach (% adults) [no RAJAR data] Weekly reach (no. adults) Hours listened per week Estimated revenues Operating profit y/e 2012 £17,654 [estimated] Chinese population (%) 0.8% Chinese population (no.) 24,310 NOTES:  Ofcom might be reluctant to approve a format change as this is the only local commercial analogue radio station serving the Asian community  10 hours per day of programmes have to be produced locally  Local news bulletins have to be broadcast hourly  The potential Chinese audience is relatively small  Suggested offer price: [insufficient financial data] page 20 of 30
  21. 21. SABRAS RADIO Licence no. AL058 Radio station Sabras Radio Service area Leicester FM/AM AM Frequency 1260 Measured Coverage Area 740,667 DAB multiplex Leicester (64 mono) Licence expiry 6/9/2020 Licensee Sabras Sound Limited (02872741) Group owner Address 63 Melton Road, Leicester LE4 6PN Web site sabrasradio.com Character of Service A music and information station for Asian listeners in and around Leicester, broadcasting a variety of languages and Asian musical genres Studio location Locally-made hours At least 4 hours a day during daytime weekday and weekends. (In all, at least ten hours of weekday daytime programming should be broadcast from within the station's nation) Programme sharing No arrangements. Local news At least hourly at peaktime weekdays and weekends. Outside peak, UK-wide, national and international news should feature. Weekly reach (% adults) [no RAJAR data] Weekly reach (no. adults) Hours listened per week Estimated revenues Operating profit y/e 2012 £2,498 [estimated] Chinese population (%) 0.5% Chinese population (no.) 3,987 NOTES:  Ofcom might be reluctant to approve a format change as this is the only local commercial analogue radio station serving the Asian community  10 hours per day of programmes have to be produced locally  Local news bulletins have to be broadcast hourly  The potential Chinese audience is very small  Suggested offer price: unsuitable to make bid page 21 of 30
  22. 22. SPECTRUM RADIO Licence no. AL050 Radio station Spectrum Radio Service area Greater London FM/AM AM Frequency 558 Measured Coverage Area 10,433,014 DAB multiplex London 2 (64 mono) Licence expiry 21/12/2019 Licensee Spectrum Radio Limited (02388187) Group owner Address 4 Ingate Place, London SW8 3NS Web site spectrumradio.net Character of Service A special speech, news and music station aimed at a minimum of six different *, varied ethnic minority communities in London, whose family origins lie outside Britain [* no more than 10 out of any 24 hours should be Asian-based programming (and two of those should be a special out-of-daytime programme for Sikhs). for the purposes of format regulation, Asian-based programming is defined as programming for communities from the Indian sub- continent] Studio location Locally-made hours At least 4 hours a day during daytime weekday and weekends. (In all, at least ten hours of weekday daytime programming should be broadcast from within the station's nation) Programme sharing No arrangements. Local news As appropriate. Weekly reach (% adults) [no RAJAR data] Weekly reach (no. adults) Hours listened per week Estimated revenues Operating profit y/e 2012 £78,399 [estimated] Chinese population (%) 1.5% Chinese population (no.) 158,590 NOTES:  Licensed as a multi-ethnic station required to target diverse communities  Not suitable for a singular ethnic radio service  Sizeable potential Chinese audience in London market  Broadcasts 1 hour/day of China Radio International content 5-6pm Mon-Fri  Suggested offer price: unsuitable to make bid page 22 of 30
  23. 23. SUNRISE FM Licence no. AL037 Radio station Sunrise FM Service area Bradford FM/AM FM Frequency 103.2 Measured Coverage Area 368,977 DAB multiplex Bradford (64 mono) Licence expiry 31/12/2019 Licensee Bradford City Radio Limited (02355348) Group owner Address 55 Leeds Road, Bradford BD1 5AF Web site sunriseradio.fm Character of Service A broad Asian music, entertainment and information service for Asians in the Bradford area, in appropriate languages. Studio location Locally-made hours At least 10 hours a day during daytime weekdays (must include breakfast). At least 4 hours daytime Saturdays and Sundays. Programme sharing No arrangements. Local news At least hourly at peaktime weekdays. Outside peak, UK-wide, nations and international news should feature. Weekly reach (% adults) [no RAJAR data] Weekly reach (no. adults) Hours listened per week Estimated revenues Operating profit y/e 2013 £24,007 [estimated] Chinese population (%) 0.4% Chinese population (no.) 1,473 NOTES:  Ofcom might be reluctant to approve a format change as this is the only local commercial analogue radio station serving the Asian community  10 hours per day of programmes have to be produced locally  Local news bulletins have to be broadcast hourly  The potential Chinese audience is very small  Suggested offer price: unsuitable to make bid page 23 of 30
  24. 24. Digital Platforms The digital broadcast radio platforms in the UK are:  DAB digital terrestrial radio platform o National coverage o Local coverage  Satellite TV platform o Sky (national) o Freesat (national)  Digital terrestrial TV platform o Freeview (national) DAB digital radio  No scarcity of spectrum  Cost of platform carriage negotiated directly with DAB multiplex owner  No fixed price list  Cost related to spectrum usage (i.e. 128kbps stereo costs more than twice 64kbps mono)  Cost related to geographical coverage  National coverage @ 128kbps stereo could cost £500,000 per annum  Local coverage costs vary considerably  Additional ongoing cost of wired link to multiplex owner ingest  DAB receiver take-up below 50%  DAB platform share of total radio consumption less than 25%  DAB radio reception poor in built-up urban areas  No DAB radio station has yet proven profitable (DAB launched in 1999) DAB radio multiplexes in UK7 service area population (15+) licensee National Arqiva Aberdeen 345,745 Switchdigital/UTV Ayr 299,882 Arqiva Birmingham 1,837,793 CE Digital/Bauer Bournemouth 464,085 CE Digital/Bauer Bradford & Huddersfield 843,378 UTV Bristol & Bath 827,079 Arqiva Cambridge 345,939 Arqiva Cardiff & Newport 843,602 Arqiva Central Lancashire 1,328,578 Bauer Central Scotland 2,820,552 Switchdigital/UTV Cornwall 675,507 Arqiva Coventry 621,835 Arqiva Dundee & Perth 449,483 Bauer Edinburgh 1,167,267 Bauer Exeter Torbay & North Devon 496,468 Arqiva Glasgow 1,800,930 Bauer Gloucestershire 460,042 MuxCo Greater London 1 9,812,248 CE Digital/Bauer page 24 of 30
  25. 25. Greater London 2 9,812,248 Switchdigital/UTV Greater London 3 8,990,511 Digital Radio Group/Global Radio Herefordshire & Worcestershire 586,300 MuxCo Herts Beds & Bucks 1,829,329 Arqiva Humberside 674,772 Bauer Inverness 238,129 Bauer Kent 1,147,861 Arqiva Leeds 1,071,045 Bauer Leicester 722,711 Arqiva Liverpool 1,819,227 Bauer Manchester 2,465,786 CE Digital/Bauer Mid & West Wales 400,065 MuxCo NE Wales & West Cheshire 646,638 MuxCo Northamptonshire 504,775 Arqiva Northern Ireland 1,314,520 Bauer Norwich 593,301 Arqiva Nottingham 1,061,060 Arqiva Oxfordshire 494,390 Arqiva Peterborough 385,743 Arqiva Plymouth Arqiva Reading & Basingstoke 636,144 Arqiva South Hampshire 1,088,560 Arqiva South Yorkshire 1,253,127 Bauer Southend & Chelmsford 1,290,796 Arqiva Stoke 880,440 UTV Surrey & North Sussex 1,411,122 MuxCo Sussex coast 877,567 Arqiva Swansea 551,262 UTV Swindon 563,881 Arqiva Teesside 673,138 Bauer Tyne & Wear 1,388,795 Bauer West Wiltshire Arqiva Wolverhampton Shrewsbury & Telford 1,086,632 Arqiva Yorkshire 4,380,443 MXR Satellite & Terrestial TV  Sky: cost of EPG from Sky, wired link to Sky ingest and satellite slot  Freesat: no available space currently for new radio clients  Freeview: no available space currently for radio clients  Digital TV take-up almost universal  Digital TV platform share of total radio consumption only 5% NOTES:  Digital platforms useful as an incremental distribution route, but not as a primary system where the objective is to maximise audiences and revenues  Some analogue broadcast radio stations also broadcast on digital platforms, the contracts for which will be included in their acquisition price page 25 of 30
  26. 26.  UK government decision in December 2013 not to fix a DAB radio switchover date likely not to stimulate DAB platform usage page 26 of 30
  27. 27. Online/Internet Radio Significant differences exist between the business model for broadcast radio and online radio. Most notably:8  No distribution/broadcast licence is required for internet radio  No regulation of the content broadcast  No regulation of advertising and sponsorship announcements  Internet radio is scaleable to the size of the audience  Internet radio is dominated by variable costs, whereas broadcast radio is largely a fixed-cost business9  Audio server costs are falling  Necessary bandwidth is decreasing with more efficient audio codecs. An internet radio station can be set up very cheaply without the need for specialist hardware. There are no reliable statistics regarding internet radio usage in the UK, although:  Smartphone ownership and mobile broadband take-up is high  Internet usage and online transactions are some of the highest in Europe. NOTES:  Costs of establishing a basic internet radio station can be very low  Majority of set-up costs comprise hardware and software  As the station attracts more consumer usage, audio streaming costs increase in absolute terms and as a proportion of total costs  The audience for an internet radio station is global, rather than limited to the UK  Audiences for internet radio tend to be spread thinly, so the station's impact on London or the UK may not be particularly significant  Online radio can be useful to reach specialist audiences, but is not as useful as broadcast radio to reach a general audience  Usage of internet radio in the UK is skewed towards younger people  Additional costs of marketing a brand online to get it noticed amongst the glut of content. page 27 of 30
  28. 28. Suggested Strategies There are a number of issues that require consideration and decisions in order to proceed. These include: Determine objectives for radio station:  Maximise audience  Maximise revenues  Maximise profitability. Determine business model:  Define target audience  Revenues from programme makers  Revenues from spot advertising sales  Revenues from programme sponsorship  Revenues from public funds  Revenues from listeners. Determine content:  Speech or music or both  Live or pre-recorded or both  Programme schedule: stripped or by-appointment  Repeat cycle. Determine budget:  Acquisition costs  Ongoing overheads  Capital costs. The outcomes of these strategic decisions will then determine which platforms prove the most appropriate to pursue for distribution of radio content. At present, it would appear the most appropriate courses of action are: Analogue radio station as the primary distribution platform:  Approach radio stations for acquisition, initially: o Sunrise Radio 1 o Sunrise Radio 2 o Sunrise Radio 3  Approach radio stations for airtime leasing: o Seek regulatory advice from Ofcom initially Digital radio as the secondary distribution platform:  DAB radio: o Determine multiplex carriage costs o DAB may be included in acquisition of analogue station  Online radio: page 28 of 30
  29. 29. o Determine suitability and costs It would be possible to establish an internet radio station relatively quickly. However, it may be more productive to focus efforts on negotiations for an analogue radio station that would generate considerably greater impact, even if it takes longer to conclude. page 29 of 30
  30. 30. page 30 of 30 Appendix: Letter Sent To Ofcom Radio Division Dear Sirs I have been charged by a client to ask Ofcom a question concerning the regulation of local commercial radio licensees. The client wishes to lease editorial time from an existing analogue local commercial radio licensee to broadcast its content, either for a substantial part or for the whole of the station's output. The client is familiar with the operation of 'Local Marketing Agreement' radio stations in the US (wiki here) and wishes to understand if such arrangements are a regulatory possibility in the UK. I cautioned the client that, before approaching potential UK radio station partners, it would be advisable first to seek clarification from Ofcom because I am not aware of an existing arrangement in the UK (except for Spectrum Radio's quite particular licence). Additionally, the content my client intends to broadcast will target an ethnic audience that is presently unserved by analogue radio stations in the UK. As a result, if the client came to an agreement with an existing Ofcom local radio licensee, an amendment to that station's Character of Service would be necessary. My client has operated a satellite-delivered television station in the UK on the Sky EPG for several years and is aware of Ofcom rules concerning content and commercial messages. The client now wishes to extend its existing UK brand by expanding into the broadcast radio market, addressing an audience that has been unserved to date. I would be grateful if you could respond in writing, at the earliest opportunity, in order that I can assure the client that a formal regulatory opinion has been solicited. Many thanks. Yours, Grant Goddard 6 January 2014 1 RAJAR, Q3 2013 2 ibid. (the remaining 6% of listening is unspecified by respondents) 3 Ofcom, Digital Radio Report 2013, 25 September 2013, pp.8-10 4 Ofcom, Communications Market Report 2013, 1 August 2013, Figure 3.20, p.228 5 source: Grant Goddard 6 ibid. 7 ibid. 8 Detailed analysis at http://www.scribd.com/doc/77647159 9 Detailed analysis at http://www.scribd.com/doc/107099932

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