Select Committee on Culture, Media and Sport Appendices to the Minutes of Evidence


Memorandum submitted by Lord Gordon of Strathblane, CBE

  I am currently non-executive Chairman of SRH and was Managing Director of Radio Clyde from its inception from 1973 till May 1996.

  I recognise that further deliberation on changes to cross-media ownership rules may have been required simply because many of the perceived synergies also raise delicate public interest considerations. The case for liberalisation of the ownership rules within radio itself is, however, much more clear cut and should be proceeded with separately and quickly. The changes suggested are designed, above all, with the interest of the listener in my mind, but also take account of the concerns of advertisers and staff and, to a lesser extent, any possible adverse impact on overall fairness of editorial policy.

  In very broad terms, from the point of view of the listener, I would suggest that plurality of ownership, far from producing diversity of output, may in fact reduce it for reasons both of motivation and availability of resources. It is, perhaps, obvious that if a single owner has several radio stations in the one marketplace, it is in his own self-interest that different services will be provided and listener choice enhanced. Happily, this also coincides with the public interest. Separate owners, however, might, although promising different services, tend to use the same sort of programming to reach that segment of the audience which is most attractive to advertisers.

  Pressure on resources and a consequential reduction in the amount of money available to be spent on programming will also be very much greater if different services are under separate ownership. A common owner can obviously amortise overheads over a number of services, thus leaving more resources available for the attainment of quality and diversity in programming. Historically, when independent local radio stations were required to cease simulcasting on FM and AM and instead produce separate programming streams, it was arguably the biggest leap in listener choice in the independent sector. Unfortunately, ownership regulations prevented the AM service being broadcast on FM and thus making it more acceptable to listeners. It is perhaps no coincidence that, since independent radio tends to cater for an older age group on its AM services, it is the one segment of the population in which the BBC still enjoys the highest market share, because of course Radio 2 is available on FM and is now the BBC's flagship national service.

  I can see no reason why a single operator should not be allowed to broadcast at least four or five services on FM in the same area. After all, the BBC are allowed to broadcast six! This would still leave three independent national services, all under separate ownership and competing for both listeners and advertising.

  As a broad rule, the narrower the niche the wider the population base has to be to ensure viability and it is significant that in the United States where it is widely recognised that the radio market is over-populated, the FCC have relaxed ownership rules to permit the provision of several FM services by the one operator in each area and are further encouraging Local Management Agreements to help provide cost synergies. It should be mentioned in passing that in the US, radio stations pay three per cent of their income in copyright charges whereas in this country it is 10 per cent, and that differential of seven per cent of income would wipe out the profitability of the majority of American radio stations! The problem is therefore more acute here where it should be recognised that the huge increase in the number of radio services has not produced any increase in overall listening to radio, but rather a cannibalisation of the existing audience. It should also be remembered that in the United States all radio accepts advertising, whereas in this country the BBC enjoys a 50 per cent share of overall listening which is therefore forbidden territory to advertisers.

  Advertisers would of course enjoy access to a wider section of the population attracted by more diverse programming and also of course have the independent national radio services also available to them. Nor does radio advertising constitute a discrete market: competitive media are readily available and constitute an adequate marketplace brake on any excessive pricing by radio.

  As well as permitting provision of multiple services by a single operator in a single local market, it would, I believe, also be sensible to permit a niche service to be provided across the nation by a chain of local services with the same programme format. After all, if it is in the public interest to have a single national service doing this, there must be some sense in the same objective being achieved by the creation of virtually identical format stations in each local marketplace.

  It should also be recognised that there are some marketplaces too small to sustain even a station providing internal diversity in its programming and enjoying a solus position in local terms. Such a station, after all, would still have to compete for audience with six BBC services and three independent national radio services and, with the latter, for advertising as well. Precisely because there are some areas which I believe are too small to sustain a wholly independent local service, I advocated to the Annan Committee way back in 1974 the "mother hen and chicks" concept, whereby a local service on a limited scale would be provided to the extent that it could be sustained by local advertising with a sustaining service being provided by a neighbouring "mother" independent station with which there was a considerable cultural affinity. Such a relationship, for example, exists between Oban FM and Radio Clyde in Glasgow.

  Currently, commercial radio is enjoying a sustained boom, particularly in national advertising. Even in such conditions there are many radio services currently broadcasting which are losing money and even the slightest economic downturn would increase that failure rate quite dramatically. The changes in the Ownership Rules I have recommended would enable many more programme services to the listener to be provided on a viable basis but quite separately the Radio Authority in licensing new service should have regard not only to the availability of frequencies and the ambitions of the new entrants, but also to the overall viability of the radio marketplace as a whole. Otherwise there is a very real danger that, even the more successful services will gradually have their audiences, and consequently revenue, whittled away and that overall quality will suffer.

February 2001

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