Executive Summary

The success of national commercial radio stations has combined to produce a sustained long-term growth in advertising revenues to the commercial radio sector as a whole. Today, commercial radio in the UK consists of 245 International Local Radio (ILR) services, three International National Radio (INR) services and Atlantic 252, which — although broadcasting from the Republic of Ireland — is directed at the UK market. The commercial services have over 31 million adult listeners every week. In 1999, commercial radio advertising revenue reached £464.4m.

Commercial radio's audience has not grown as fast as the number of stations, but its revenue from advertising and other sources has risen significantly. In part, this is because many of the new stations cater for specialist interests. This has drawn in new advertisers keen to reach small, but dedicated, audiences. In spite of the segmentation of the audience, most of the new advertising revenue has come from mass-market brands such as Coca-Cola and McDonald's. However, this is a trend from which other advertising media, such as outdoor advertising, are also benefiting. The appeal of alternative advertising media has grown as television (TV) and print have lost their dominance. Audience fragmentation and the soaring costs of TV advertising have prompted clients to consider alternatives.

The UK has led the world in the introduction of digital radio, and the first UK commercial stations went on air in digital format in November 1999. The next decade will be an exciting one for radio, as digital becomes established. Currently, most radio programmes are broadcast in analogue, where the radio waves are a direct representation of the original sound. Atmospheric conditions and some electrical equipment can produce electromagnetic waves that cause sound interference. Tall buildings and hills can also distort the signals.

There has been much speculation over the data capabilities of digital radio, but as yet the consumer demand and commercial benefits of data services are unproven. Capital Radio and Emap are currently testing a wide variety of data applications in a real situation in Birmingham, working with cable television provider NTL, receiver manufacturers, advertisers and potential data suppliers. Although take-up of digital radios will be slow, there is no doubt that in a digital world, the future of radio is also digital.

During the start-up phase, it is unlikely that broadcasting additionally on Digital Audio Broadcasting (DAB) will produce any extra revenue. In fact, for the simultaneous broadcast (simulcast) period, DAB will add substantially to a station's costs because two sets of transmission equipment will be in use. By the end of 2000, commercial radio advertising revenue should reach £507m, and Key Note forecasts that this will rise to £676m in 2004.

More Information

  Denotes a required field.