Memorandum by the Commercial Radio Companies
1. The Commercial Radio Companies Association
(CRCA) is the trade body for UK commercial radio. CRCA members
include national commercial radio stations, as well as most commercial
local and regional stations. These account for almost half of
all the radio listening in the UK and around three quarters of
local listening. CRCA promotes the importance of commercial radio
and plays an active role in encouraging conditions that will enable
it to thrive into the future.
2. The BBC provides many programmes and
services that are enormously valued by listeners, viewers and
on-line users. It is recognised the world over for its quality,
creativity and authority. But it is also an enormous, state-funded
intervention in the market which impacts on the health and wealth
of other broadcasters. Commercial radio believes that, at present,
the BBC is too large, too powerful, too competitive, and inappropriately
regulated. This paper sets out why commercial radio is valuable,
and therefore worthy of consideration when framing the BBC's future,
and why we seek changes to the BBC's size, shape and scope.
Commercial radio's value
3. Commercial radio is the only terrestrial
broadcaster not given Public Service Broadcaster status by the
Green Paper. However, acknowledgement is made of the industry's
considerable public service output, 
as set out in a recent audit of over 200 stations' output conducted
by CRCA. 
The audit found that:
The news broadcast by commercial
radio equates to the output of more than thirteen 24-hour news
Around half of all news provided
by commercial radio is local news.
Commercial radio's information services
include over two million weather forecasts a year and almost 1.4
million minutes of travel news.
The amount of news, weather and travel
information broadcast by commercial radio has risen by more than
60 per cent in the past four years.
Commercial radio promotes almost
half a million local events on air every year, and a further 300,000
on station websites.
Stations attend over 44,000 community
events every year.
In 2004, commercial radio raised
£8.5 million for charity. UK Radio Aid, a unique industry-wide
initiative (listened to by over 27 million people and organised
in just 10 days) raised a further £3.5 million for Tsunami
victims in January 2005.
4. This contribution to communities across
the UK, and at a national level, is of significant social and
economic value. Commercial radio's welfare and provision therefore
merit careful consideration when establishing the remit, funding,
size and framework for publicly funded radio.
The BBC's new purposes and characteristics
5. The Green Paper sets out six new purposes
for the BBC. 
Whilst these are admirable purposes which the BBC should "strive
to fulfil", the Green Paper proposes insufficient means to
require the BBC to meet them. We do not believe, for example,
that programmes should be permitted to avoid meeting any single
one of the listed purposes so long as they are able "to justify
themselves in terms of their excellence or distinctiveness".
6. If all of the BBC deserves public funding,
then all of it should be required to fulfil public purposes. To
permit otherwise would allow the BBC to continue to compete vigorously
for ratings and audience share to the detriment of commercial
broadcasters (we explore this theme later in this paper).
7. The committee asks whether the BBC should
play a primary role in leading the process of switching Britain
over from analogue to digital television. We therefore hope it
is helpful if we provide some thoughts on the BBC's role in developing
and promoting digital radio, and also set out commercial radio's
8. The BBC started trialling DAB digital
radio in 1995. It argued that, in the Charter period now ending,
it should be awarded increased public funding for digital television,
radio and web activity. Arrangements were made in the 1996 Broadcasting
Act that allowed the Radio Authority to advertise a single national
and a number of local DAB multiplexes. The national commercial
radio multiplex (Digital One) was advertised in 1999. It became
clear to commercial digital operators that digital radio might
enable them to compete with the BBC's national analogue dominance
whereby 4FM and 1AM national stations compete with 1FM and 2AM
INRs. Commercial radio resolved that its digital services needed
to increase audience choice if receivers were to be sold in mass
market numbers. This it achieved by launching five digital-only
national services and a host of digital-only local services. The
BBC swiftly followed suit with five new national services and
moved to match commercial radio's 85 per cent UK coverage. Both
the BBC and commercial radio came together within the Digital
Radio Development Bureau in recognition that, if DAB were to be
a success, both sides of the industry had their important parts
to play. The BBC has been able to invest significant public funds
into digital-only content while extending its brands via the internet.
Commercial radio's pioneering role has been supported by significant
shareholder investment of £35 million worth of analogue radio
profits, mainly on multiplexing infrastructure. Development of
digital radio is thus a joint rather than a BBC-led venture.
9. CRCA sees no obvious reason why the BBC
should not be established by statute rather than Royal Charter.
It is difficult to see, for example, in what way BBC Radio 3 is
more independent than Classic FM thanks to the Charter. Radio
3's deep resources are the result of generous public funding rather
than its chartered status. Statute has satisfactorily developed
a truly independent regulator and licensor in the form of Ofcom.
Why should it not create something along the lines of the proposed
Trust with powers to license BBC services for suitable periods?
10. Irrespective of Charter duration, it
is, as the Green Paper has recognised, necessary to re-examine
the licence fee mechanism with a view to possible change in five
years' time. The funding of broadcasting is undergoing significant
change following the power afforded to consumers by media digitalisation.
We are entering the age of "pull" rather than "push"
media. Subscription will play an increasingly important part in
this. If the State continues to provide guaranteed subscription
to the BBC, it will grow while its competitors falter.
The BBC Trust
11. Commercial radio has consistently argued
that securing a more appropriate model for governance, management
and regulation of the BBC is crucial to the health of the entire
UK broadcasting ecology.
12. To inform our thinking in this area,
CRCA commissioned international corporate governance expert, Stilpon
Nestor, to propose such a model. His contribution is acknowledged
in the Green Paper. 
We are therefore pleased that the Green Paper proposes a model
which achieves greater separation of governance, management and
regulation, but believe the proposals for the BBC Trust do not
go far enough.
13. CRCA believes there is insufficient
separation between the executive board and the BBC Trust. A board
comprising senior executives and non-executive directors should
run the BBC. This BBC Board should have a non-executive chairman
who is the champion of the management, and a supporter, advisor
and confidant for the Director General.
14. The chairman of the BBC Trust should
be just that. S/he should not be the chairman of the BBC. In his
evidence to the Select Committee, Michael Grade said "you
cannot have two people [. . .] speaking for the BBC. You have
to have a single chairman. It has to be very clear who is looking
after the money". We agree that there should not be two
people speaking for the BBC; there should be one speaking for
the management (the chairman of the BBC Board), and one for the
licence fee payer (the chairman of the BBC Trust). They may not
always agree. The chairman of the Trust should look after the
money and the needs and interests of licence payers. The chairman
of the BBC Board should look after the running of the BBC.
15. CRCA has commissioned Stilpon Nestor
to examine the BBC Trust proposals against the backdrop of international
best practice. He will report in June 2005.
16. We believe Ofcom should have an increased
role in regulating the BBC, focusing on the "negative public
interest", ie those things that the BBC should not do, rather
than those which it should (which should fall under the remit
of the BBC Trust). Therefore, Ofcom should apply any type of regulation
which commonly applies to all broadcasters, including that relating
to impartiality and fairness. External regulation of such matters
will bring increased scrutiny, improve public confidence and deliver
important cross-industry consistency in adjudications.
The National Audit Office
17. CRCA believes that there should be greater
transparency in BBC accounting, with increased involvement from
the National Audit Office (NAO). The involvement of the NAO need
not threaten the BBC's editorial independence from Parliament,
so long as its remit is appropriately drawn.
18. It is currently difficult to extract
meaningful financial information from the BBC Annual Report. A
body in receipt of generous public funding should be fully financially
accountable to its licence fee payers, and its accounts should
be presented in a wholly transparent and consistent manner.
19. In establishing Ofcom, Parliament invested
power in, and the industry has since invested money in, a regulator
with substantial broadcasting and competition expertise. This
competition expertise should be applied to the BBC as it is applied
to all commercial broadcasters.
20. We support the view that Ofcom should
be given ex ante, not just ex post, powers over the BBC. In addition
we recommend that:
Ofcom should run industry-wide consultations
as part of the process of carrying out market impact assessments.
Ofcom should be asked to make recommendations
to the BBC Trust following any relevant market impact analysis
21. Market impact analyses should be carried
out for any substantial/material change to existing services as
well as for the launch of new services.
The BBC's impact on competition for commercial
revenue and broadcasting rights
22. We are concerned by the increasingly
prevalent practice of BBC broadcasts giving on-air commercial
value to sponsors of events. Recent high profile examples of this
include "The RBS Six Nations" on radio and television,
"Crufts sponsored by Pedigree" on BBC2 and "The
British Academy Television Awards sponsored by Pioneer" on
23. Sponsors like to have their events aired
on the BBC because it is less cluttered with other commercial
mentions than commercial channels. Event owners like being on
the BBC because the sponsored presence will attract more sponsorship
money to them. But this practice is taking money away from commercial
broadcasters and giving it either to the event owner, or to the
BBC in the form of artificially deflated rights prices (artificially
deflated because the BBC is using licence fee payers money to
provide advertising opportunities for commercial companies).
24. Such activity reduces the already diminishing
pot of money available from advertisers for commercial broadcasters
and also gives the BBC an unfair advantage when negotiating coverage
rights. It constitutes advertising on the BBC by the backdoor
and should be prohibited.
25. We note that in his recent review of
the BBC's digital radio services, Tim Gardam stated that "One
would expect the BBC to be especially rigorous in not mentioning
sponsors names, or giving other potentially valuable commercial
exposure, in its coverage". Such rigour is not currently
evident and should be imposed by the Licence and Agreement.
Bi-media talent deals
26. The BBC has, in the past, locked performers
into bi-media deals which prevent them from appearing on commercial
radio even if they are not appearing on BBC radio. We welcome
Mark Thompson's recent statement that the BBC no longer approves
of the activity. However, current behavioural change is insufficient
guarantee of future compliance and therefore the Licence and Agreement
in the new Charter period should prevent such arrangements.
27. In 2004, Tim Gardam wrote, "It
is impossible not to conclude that the DCMS, in framing BBC 7's
conditions, was surprisingly indifferent to a commercial service
already in the marketplace, pioneering a technology that it was
government policy to encourage . . . In public policy terms, it
might have been better if the opportunity to engender public service
competition had taken priority over the BBC's institutional interests
in expanding its own services." 
28. In the following paragraphs we set out
why achieving the right balance between the BBC's interests and
those of the wider radio market is so important.
29. BBC radio enjoys many structural advantages
over commercial radio including an advert-free environment, better
spectrum access, the obvious funding privileges, cross-media cross
promotional might and an ability to invest in digital radio without
risk. Given this "head start", it is therefore particularly
important that licence fee resources are used to fund output that
could not be provided commercially.
30. The BBC argues that, if it is asked
to meet market failure, it will be confined to providing unpopular
and dull programming. We do not agree. There is a good deal of
popular programming which cannot be funded commercially, and we
believe that this should be the focus of the BBC's activities.
Examples of this include Radio 4's speech output, the live music
on Radio 1, and programmes which appeal to the large percentage
of the population that advertisers are less interested in reaching.
31. The Green Paper states that commercial
radio stations "tend to cluster towards the middle ground
of taste, in order to reach the widest possible audience",
but we are concerned that a similar type of central-ground clustering
has characterised changes to BBC radio output over recent years.
It is our clear impression that BBC radio is intent on building
audience share through popular and contemporary programming targeted
at an increasingly young audience. For example:
Radio 2's refocus has dramatically
increased its appeal to younger listeners. 
BBC local radio appears to be reformatting
its output to appeal to younger listeners (see later in report
for more detail).
BBC 6 Music, having been primarily
charged with playing music from the 1970's to the 1990's, now
plays 45 per cent of its music from the last four years.
95 per cent of Radio 1's daytime
music is from the past four years.
"New" music alone accounts
for 70 per cent of 1Xtra's tracks.
32. There is no lack of audience choice
in the 15-44 demographic which advertisers want to reach. Nevertheless,
commercial radio has invested in new formats (such as Capital
Disney, Saga Radio, AbracaDABra and oneword) all designed to widen
the industry's demographic appeal. But such investment requires
financial risk and, if at the same time, the BBC is using its
inherent structural advantages to compete aggressively for audience
share amongst commercially-attractive younger demographics, considerable
damage will be done. As Tim Gardam noted in his review of the
BBC's digital radio services, "The Radio 2 experience
shows how effective the BBC can be when it focuses its mindand
its unparalleled resourceson increasing audience share."
33. At the BBC Charter Review Seminar on
Radio in October 2004, BBC radio controllers continually justified
competitive, populist output because it allowed listeners subsequently
to hear elements of public service broadcasting. However, this
analysis ignores three vital points:
It gives the BBC licence to do just
about anything most of the time, so long as it provides specific
points of claimed uniqueness from time to time.
It wrongly implies that valuable
content (such as news) is not being provided on the station(s)
from which the BBC has attracted its increased audience.
By using its cross-promotional, marketing,
budgetary and spectrum power to attract those listeners from commercial
stations, the BBC is undermining the commercial sector's ability
to invest in quality content. A strong commercial broadcasting
industry is vital to plurality, competition and quality. If the
BBC is allowed to continue to expand and compete without restraint,
the wider communications ecology will be damaged.
34. Unless the future regulation of the
BBC pays better attention to the wider market impact of the BBC's
activities both in terms of new services and the character of
existing services, it is hard to see how the situation which Tim
Gardam observed in relation to BBC7 will be avoided in the future.
BBC Radios 1 and 2
35. The BBC has argued that, because Radios
1 and 2 provide a unique mix of speech and music (which, by definition,
every different station does), they are worthy of public funding.
There is no doubt that these stations are popular, but we question
the extent to which they deliver the maximum public value to the
maximum number of listeners.
36. For example, although the stations play
more live music than their commercial competitors, this is concentrated
in off-peak. Similarly, their specialist music schedules are consigned
to the evenings with lower potential audiences.
37. Instead, some shows programmed at peaktime,
such as "Steve Wright In the Afternoon", rely heavily
on populist programming techniques. For example, over five randomly
chosen days, more than 50 per cent of the songs played on Wright's
show were top 10 hits, 
and the speech content of the programme is based on trivia and
38. The public value of Radios 1 and 2 should
be measured primarily in daytime output, when most radio listening
takes place. These well-funded services should not simply be benchmarked
against commercial radio (a predominantly local medium) but should
be benchmarked against the delivery of core objectives with public
purposes at their heart. Crucial to this is the extent to which
their output could not be commercially funded and therefore deserves
BBC Local Radio
39. ITV's de-regionalisation, and any resulting
need for increased BBC regionalisation, is not echoed in radio.
CRCA's audit of public service broadcasting showed a significant
increase in local informational content on commercial radio.
40. Plurality in the provision of local
public service broadcasting, including the new third tier of Community
Radio, will be threatened by an increasingly aggressive, and even
better resourced BBC local radio unless restrictions are imposed.
41. We are therefore concerned by plans
which BBC English Regions are developing for five new local radio
stations in Somerset, Dorset, Cheshire, Bradford and the Black
Country. They are listed in the Corporation's Statements on Programme
Policy for 2005-06.
42. It has also become apparent to us that
BBC local radio is seeking to refocus its local radio music output
towards a younger 45-54 age group. This move has already started
43. For example, Mia Costello of BBC Radio
Solent was recently quoted in Xtrax magazine as having overseen
"a lighter, brighter, younger and more relevant station,
with a new jingle package." She also says "we're
now trying to attract people aged 45+" rather than the over-60
age group to which the station's appeal apparently used to be
confined and the over-50 target referred to at Lord Burns' radio
day in October 2004.
44. BBC Radio Bristol is playing more new
and current songs than in the past. It has even started to broadcast
music sweepers containing refrains from artists such as Keane
and Madonna with the strap line "we pick the best of the
songs from across the eras to suit any ears". This sounds
rather like the post 1999 BBC Radio 2 concept to commercial radio
45. At other stations, commercial radio
programmers are noticing increased music content at key listening
times, features to attract at-work listening and more music from
current artists such as Joss Stone, Daniel Bedingfield and the
Scissor Sisters. All of this seems to point to an attempt to attract
a younger audience to BBC local radio.
46. Using such commercial programming techniques
to make BBC local radio appeal to younger listeners will not only
disenfranchise those older listeners whose loyalty to Radio 2
has waned with the programming changes, but, by making further
audience inroads, will undermine commercial radio's ability to
provide quality local services.
1 Para 8.9, pg 91. Back
Copies of "Commercial Radio: In the Public Service"
have been forwarded to the committee. Back
On pg 8. Back
Our Policy, pg 20. Back
Para 5.52, pg 78. Back
Review of BBC Digital Radio Services. Back
Para 1.4, pg 21. Back
Since 1999, Radio 2's share of 65+ listening has dropped, its
share of 55-64 listening has dropped, share amongst 45-54 year
olds has grown by 25 per cent, share amongst 35-44 year old has
grown by 60 per cent and share amongst 25-34 year olds has more
than doubled. Back
Source: Intelligent Media (18-25 April 2005). Back