Making waves

Digital radio is enjoying resurgence in the wake of the recession.
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While all eyes have been focused on the emergence of HD and rising ad revenues through the recession, radio has enjoyed its own successes through the downturn. Top regional radio executives tell Digital Broadcast what’s next for the medium.

The Middle East has a very unique radio market. The region had satellite TV before it had FM radio stations. The BBC had an Arabic-language station running as far back as 1938 but it is only recently that the format has enjoyed a boom – one that has survived the recession.

Today there are around 350 FM radio stations in the Arab world, according to the Arab Advisors Group. Half of these stations are privately-owned and many of these – as well as some of the state-owned channels – are operating on commercial terms. And for many of these, business is booming.

“Dubai is a perfect radio market. It’s a perfect storm for radio and the medium is currently getting a far lower share of the advertising budget than it should,” says Steve Smith, COO, ARN. “At present it is only getting a three per cent share of the total advertising spend, that means there is still a lot of growth to be had in this industry.

“Take Dubai as an example, it’s multicultural, that means it has many different target markets, radio stations can be specifically created to target that culture. The traffic here means, on average people are commuting for two hours a day, that’s a good chunk of time that radio has a monopoly on their attention, radio fares well there,” claims Smith. “Online listening is going through the roof in this region too. Demand is strong and if the quality is there, people will keep listening when they get to work and are increasingly listening at home via the internet.

“ARN had a very good year in 2009 – radio fared well in general – and it has some good growth this year as well,” says Smith. “We’re up on last year and we’re happy with the progress.

While the recession cut swathes out of marketing budgets, there were still budgets to be seized in what became a case of survival of the fittest.

“Luckily for us we could foresee some of what was coming and we made a lot of changes before the recession really hit the Middle East. ARN put its focus where it was going to get the best return. Any recession will do that, it will refocus the company,” claims Smith. “So it was a great time for some people to step up and take on new responsibilities.

“It enabled ARN to consolidate. It is now in a strong position. It’s gained share, from both an audience and an advertising point of view. There have been some fundamental changes, on our sales side in particular. The sales operation is very different to what it was two years ago.”

The UAE is one of the most active radio markets in the region and the success is not limited to the stations under Smith’s helm at ARN.

The Abu Dhabi Media Company’s (ADMC) radio network is also under a period of expansion, benefitting from what it also views as a very prosperous market for the medium.

“Radio is very strong in this region. There are 230 million people listening to the radio regularly and already there are 78 million people listening to the radio through the internet,” says Abdulrahman Awadh Al Harthi, director of Abu Dhabi Radio Network. “The terrestrial networks for FM and MW are still relied upon heavily at the moment but in the next 10 years, radio will be predominantly internet based. There have been trials in Europe of technologies such as DRM and in the US there is HD radio and also subscription based satellite radio. There are high costs with the initial infrastructure for the networks and then the receivers for the listeners can also be too costly.”

Al Harthi explains that consumer habits are already spelling out the future for radio.

“No one is buying dedicated radio sets anymore, they are listening to the radio via their cars, through their phones, computers and other internet connected devices. Wireless internet access is the future for radio,” adds Al Harthi.

In preparation for this transition the network is already leveraging ADMC’s significant digital division to develop online homes for its radio brands.

“Star FM is already available on the internet and we are currently revamping the websites for our five radio stations so soon each will have a site capable of offering streaming too,” he says.

Al Harthi says that the network – like ARN – had a good year in 2009 revealing that it exceeded its sales targets by between 10 to 15 per cent.

“It’s still early this year but we have continued to meet our own targets and the performance is fine even when concerned to last year,” says Al Harthi.

“All the stations are doing well. Qu’ran Kareem has the highest listenership across the UAE, Emaraat FM has the highest listenership among UAE nationals. Before the morning show on Abu Dhabi Classic FM was even launched there was a sponsorship deal in place.”

Al Harthi believes the formula for success in radio broadcasting is fairly straightforward.

“If the content is creative and innovative, then the ad revenue will be high.”

Both ADRN and ARN are in part government owned, however, both are operated commercially and suggestions otherwise are inaccurate says Smith.

“Even though ARN is government owned – or to be more accurate the government is a major shareholder – it is a commercial business. I have only ever worked in a commercial business and this looks very much like any commercial business I’ve worked in before,” he says. “ARN is all about gaining more share of advertising and that won’t change in the near future as far as I am concerned.

“I think a lot of people – from a listener point of view – probably don’t even realise ARN is government owned. Again, it comes back to the fact that – no matter who you are owned by – if you’re entertaining and you’re relevant to the listener then you’ve got a real future,” says Smith.

“I don’t view see public radio as a threat. There is room for both and there is a need for public radio in every market.”
The TV advertising market has become severely fragmented with only a handful of channels currently profitable, is there a danger that a deluge of radio channels could emerge.

“There can be as many community stations as you like, if it’s not entertaining and if it is not of high-quality, people won’t put up with it. The audience is used to great content, great music. If it is great quality, it can work. But if it’s just a mish-mash of different formats and the like then if you haven’t done your homework you are going to miss the mark.

“If everyone was given a license – and I don’t think that will happen – it could really hurt an industry, it gets far too fragmented but I don’t think that will happen here in this market.”

And this point brings Smith to the issue of industry regulation.

“Codes of conduct are required in every market. In Dubai there is a good morality basis that all the stations adhere to, those codes of conduct are in place and adhered to. There is a responsibility on the media owners to ensure that they are befitting, or that whatever content they are providing is of a certain standard. From a radio perspective, all the competitors are producing some pretty good content that is not offending any particular social group and now that’s a good thing.

“I’ve worked in markets before where that hasn’t been the case and it leads to some real issues. They have got it right here, there is a general consensus about where the line is when it comes to morality but there needs to be a code of conduct. An industry body would help of course. ARN has a responsibility as the largest radio network – in the absence of an industry body – to set the standards, and that helps the entire radio industry. The hope is that if ARN is doing things better, the whole radio industry will shift,” claims Smith.

The radio market certainly still has room for growth in the Middle East in terms of the percentage of total ad spend that it claims and also in the number and variety of station broadcasting in the region.

“I think there are a few opportunities in the market. The Hindi and English markets are well served but there are other opportunities in this market and there are some great opportunities going forward… but we’ll keep those pretty close to our chest. The amount we have invested in research means that we know the market pretty well, very well now and there are areas in this market that could very much be entertained from a new frequency,” says Smith.

“Sport will be a very important component for Dubai as it grows. There are some major competitions to be hosted here in the future. There are a number of players in the region looking to host the Olympics and of course this is a football mad region. Sport will play a big role and could perform well across all media formats.”

So does this mean that ARN would consider bidding for the radio rights to major sports competitions?

“That would depend on cost,” says Smith. “Of course we would pay for the rights if and when we see it fits and the audience really want it. This is an area where I think we’ll see a whole lot of opportunities and it is definitely something that is one our agenda.”

Meanwhile, ADMC has already acquired the exclusive TV broadcasting rights for the English Premier League, but does have any plans of adding radio coverage to its multiplatform broadcast plans?

“We are still doing the business plan and feasibility study for having the EPL on the radio and we need to make our mind up about whether we take the EPL on air or not,” says Al Harthi, who also confirms that the radio rights are not part of the package that it has already acquired and would require an additional investment.

“We have been broadcasting the UAE Football League and according to Ipsos research done during the past six months, the reach of Abu Dhabi FM triples when the matches are on,” reveals Al Harthi.

Whether or not radio networks can monetise bumper audiences induced by sports content remains to be seen. With the EPL TV services available online from next season, it is hard to say whether an FM-only audience could deliver sufficient numbers. This will be made even harder as so many EPL matches take place outside of the typical Middle East rush-hour commuting periods, when listenership peaks.

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