KN64014

KEY NOTE Commercial Radio : May 2004

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This report covers:commercial radio, content providers, rights owners, software applications, developers, hardware, operational and production services, radio content, independent production companies, news sources, satellite media services, syndicators, listeners, amount of time per week spent listening to the radio, etc.

Companies covered include: Capital Radio, Chrysalis Group, EMAP, Guardian Media Group, GWR Group, Scottish Radio, Holdings,SMG, The Wireless Group, CN Group, Forever Broadcasting, KM Radio, Lincs FM, Milestone Group, Radio Investments, Sunrise Radio, Tindle Radio, UBC Media Group, UKRD Group,

TABLE OF CONTENTS

EXECUTIVE SUMMARY

This report examines the UK market for commercial radio, which is defined as any free-to-home radio service, broadcast terrestrially or non-terrestrially, that derives all or most of its revenue from the sale of advertising airtime. In 2003, UK revenues from commercial radio advertising, sponsorship and promotion reached £601m, which represents an increase of 6.8% on 2002 and 17.8% since 1999. In terms of revenue, the commercial radio market is segmented into three sectors: advertising on national radio stations, advertising on local radio stations, and sponsorship and promotion on both national and local stations.

National radio stations account for the largest share of total revenues but, since 2000, local radio has taken share from national stations. Sponsorship and promotion have also shown strong growth. Highly targeted audiences and strong brand-building capabilities have made the radio highly attractive to commercial organisations. In 2003, radio accounted for 6.8% of UK display advertising, compared with 5.5% in 1999. As the number of stations increases, each offering its own advertising and sponsorship opportunities, radio is proving to be a flexible medium for marketing investment.

Digital technology, in the shape of digital audio broadcasting (DAB), the Internet, and cable and satellite TV, is playing an increasing role in the market and has paved the way for new broadcast channels, fresh listening experiences and even additional revenue streams. While radio is essentially a very fragmented medium, it is becoming increasingly dominated by large groups such as GWR Group PLC, Capital Radio PLC, EMAP PLC and Chrysalis Group PLC. These are the only broadcasting groups commanding more than 10% of commercial radio listening hours. GWR Group is the clear market leader, being the largest national commercial radio broadcaster in terms of its share of listening.

Capital Radio is the second-largest group and is the largest local radio broadcaster. In terms of advertising revenue, GWR Group and Capital Radio are the largest players in the market and are of broadly equal size. Only one other company, Chrysalis Group, holds more than 10% of the market.

Consolidation has allowed the industry to build strong brands and raise programming quality. This has improved radio as an advertising medium, as numerous individual local stations have been replaced by national, regional or pan-local networks of stations, making it easier for advertisers to build campaigns that stretch across several local franchise areas.

Key Note forecasts strong growth in revenue from radio advertising between 2004 and 2008. The commercial radio market will increasingly be shaped by the growth of new digital means of listening, including DAB, the Internet and digital TV. Moreover, there will be growing competition in the market as the number of new services continues to grow and licence trading comes into force. As competition increases, the market will become steadily more fragmented, with the largest operators taking a growing share of revenues.

Text © 2004Key Note

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Last updated by Amanda Porteous June 2004