Digital discontent : hit the re-start button

Michael Hedges October 22, 2007

It seems like a different century. Digital broadcasting could offer everything to everybody…and more. There was enthusiasm. There was hope. It was a different century.

The ‘Quo Vadis Digital Radio’ forum recently organized by the Bavarian media regulator BLM (Bayerische Landeszentrale für neue Medien) was more a summit meeting of broadcasters, regulators and other interested parties. While the meetings’ intended focus was Germany, and largely DAB standards, the discussions were pan-European if not global and included all standards on the digital menu. The message was clear: it’s time to hit the re-start button.

BLM President Wolf-Dieter Ring opened the forum with three questions that carried through the two days. First, what happens to FM? “Doesn't there have to be a kind of warranty on FM, which would be important both for local stations and for large radio enterprises that will undertake enormous investments in the course of digitization?”

“It is an open secret that the KEF rejected the public broadcasters’ demand for DAB (switchover) funding. What does this mean for the public broadcasters’ digital plans?”

The KEF (Kommission zur Ermittlung des Finanzbedarfs der Rundfunkanstalten) sets license fee rates and policies for Germany’s public broadcasters. In that regard it wields enormous power over public broadcasting policies and strategies.

“The question of cost very probably proves as problematic. Money is earned over the short and medium-term and we talk about the parallel continuation of FM. We talk about new digital offers. If we put this in the perspective of today's advertising incomes, but not today's promotion cost because that is a complete illusion, the problem becomes very clear.”

“The media regulators’ task is to create basic conditions for possibilities. Business models must come from the broadcasters. On a long-term basis new digital radio offers are only economically possible if the programs encounter appropriate listener acceptance and an accompanying increase in the radio advertising market.”

There was little disagreement. Dr. Gerd Bauer director of Landesmedienanstalt Saarland (LMS) also tackled the FM shut-off and simulcast questions. He was blunt in valuing existing radio brands as “ a substantial component of digital radios’ penetration strategy.”

“The existing programs enjoy a considerable demand, many channels have strong brands. If digital radio wants to become a success, it must use this attractiveness. I am convinced that radio broadcasting has a chance in the electronic media competition only with the proven and, then, with additional new radio broadcasting programs and forms.”

Business models in private sector broadcasting are based on advertising. Erwin Linnenbach from sales house Regiocast pointed to radios’ dismal ad market share in Germany, 4.1% and ranked 18th of 22 European countries. Audio is the growth engine, he said, and the future is in nation-wide digital licensing, which pits the public and private sector broadcasters against each other and, often, at odds with Germany’s patchwork of regulators.

Appropriately ‘Quo Vadis Digital Radio’ was held at the spacious Audi Forum in Ingostadt near Munich. The symbiotic relationship between radio and the automobile has always been strong.

The automobile industry remains supportive and, generally, platform neutral, said Dr Riclef Schmidt-Clausen, Audi’s guy. The automobile manufacturers’ development cycle is about five years, he said, casting a slightly disparaging tone to the on-going debate over DAB, DAB+ and other digital standards. Audi has DAB radios in upper-end automobiles now and Dr. Schmidt-Clausen reminded broadcasters that, replacement cycles being what they are, they would remain in those cars through 2020.

“The long-term introduction and migration scenarios must be developed and coordinated considering the realities of the automobile industry,” said Dr. Schmidt-Clausen. DAB+ radios might be added to the Audi lines as early as 2012, he added, but the proposed 2009 introduction of the newer DAB+ standard, not downwardly compatible with DAB, is a bad idea and not supported by the automobile industry.

BLM’s Johannes Kors put an economic perspective on the “redemption” of digital radio. His macroeconomic forecast sees growth in the German radio ad market at €1.6 billion by 2015,up from €1.22 billion in 2006. “The crucial financial factor for private digital radio is fast market penetration,” he said. By 2025, he forecast, digital radio would reach 75% market penetration.

“Relatively high development costs for country wide digital radio limit the possibilities for private radio, “ he observed. “A goal must be to find a cost model that contains or spreads risk.”

Risk, of course, is the basis for digital discontent. The German private broadcasters association (VPRT) has been lobbying for changes in the State Broadcasting Treaty to allow nationwide digital broadcasting in the private sector, therefore spreading some of the risk. VPRT vice president Hans-Dieter Hillmoth fears “radio will be locked out of digital platforms.” A European Broadcasting Union (EBU) representative, speaking at the BLM forum, gave public broadcasters complete credit for DAB development in Europe, discounting the widely known collaboration between the BBC and commercial broadcasters in the UK, the only country where digital radio has actually ‘taken off’.

Re-starting digital radio is not, obviously, a German problem alone. The International Telecommunications Union (ITU) starts its annual spectrum meetings this week, with the potential to agree on spectrum-neutrality issues. Pressure on regulators will only increase to migrate broadcasting to digital space. Top-down policies – and economics – ignore listeners and viewers, proven by the rise of personal media players, mobile media and IP media. Continuing to ignore the listeners and viewers – who in every respect pay the bill – will lead to a digital broadcasting winter.

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