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'Radio Authority Local Licence Award: West Lothian' by Grant Goddard

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Evaluation of application for the new local commercial radio licence in the West Lothian market of Central Scotland in the UK, written by Grant Goddard in April 2003 for The Radio Authority (and edited substantially by management).

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'Radio Authority Local Licence Award: West Lothian' by Grant Goddard

  1. 1. RA PAPER 24(03) 3 April 2003 LOCAL LICENCE AWARD: WEST LOTHIAN Paper by the Staff MATTER FOR DECISION 1. Members are asked to decide whether to award the local radio licence for West Lothian, in Central Scotland, to the sole applicant, River FM (Almond Radio Ltd.). STAFF SUMMARY 2. The group's experience of running two successful RSLs in West Lothian has generated an impressive groundswell of enthusiastic listener support which bodes well for the station's future. The applicant benefits from having observed the recent experiences (some good, one bad) of similar small-scale ILR start-ups in the same region. It has assembled a strong, keen board of local directors and has secured funding from a radio group with extensive small-scale station operational experience. The programming proposals will broaden listener choice by providing news and information about West Lothian that is unavailable from existing local stations. The applicant has demonstrated through its market research the affinity of the local population to its own district, rather than to nearby Edinburgh, and has convincingly demonstrated the extent of local support for its plans. However, the station's marketing campaign at launch will need to be effective enough to establish the new brand name in the audience's mind, and the programming will need to promise and deliver a palpably 'local' product to capture the attention of long-term listeners to Radio Forth and more recent competitor Real Radio. The group's revenue projections are rather optimistic while its budgeted costs, particularly with regard to staffing, seem high for a station of this size, particularly as the available working capital is limited. However, the station certainly has the potential to become as successful as Central FM and Kingdom FM have been within other parts of the Radio Forth TSA, if its financial
  2. 2. RA PAPER 24(03) Page 2 targets can be adhered to during the launch phase. If the licence is granted to the applicant, River FM would become the second Scottish station in which UK Radio Developments Ltd (UKRD) holds an interest, the other being Clan FM, whose coverage area is contiguous to the west with River FM's planned TSA. Clan FM's performance to date has been dismal, both in terms of listenership and advertising revenue. Although not proposed explicitly in this application, it is probable that, in the long run, UKRD might seek to reduce its overheads by sharing some off-peak programming (see paragraph 10) and combining sales operations between the two stations. If River FM proves successful, such cost reductions could throw a much- needed lifeline to Clan FM, which has under-performed consistently since its launch four years ago. BACKGROUND The licence area 3. West Lothian was added to the 'working list' of planned new licences in June 2000, largely as a result of the existence in the area of the River FM group (then known as Real Radio), which had conducted its first RSL in Livingston in the previous year. Neighbouring station Central FM (ILR Stirling & Falkirk) had also expressed interest in providing an opt-out service for West Lothian from its Falkirk studios, while the local council had urged that a licence be advertised to facilitate coverage of the whole of the unitary authority area rather than just Livingston. In the event, the licence was advertised last October for "a service covering as much of the West Lothian area, in central Scotland, as proves to be technically feasible." The coverage brief makes two FM frequencies available for the station. The main transmitter in the Livingston/Bathgate area will broadcast on 103.4 MHz at a maximum power of 200 Watts, with a relay transmitter providing coverage of Linlithgow on 107.7 MHz at a permitted power of 100 Watts. The applicant's main transmitter site at Cairnpapple Ridge will give good coverage to most of West Lothian, with the exception of Linlithgow, which will be served by a small relay at Grougfoot Farm. The sensible TSA of 120k adults will cover virtually the whole of West Lothian. Transmission equipment will be supplied by either NTL, Crown Castle, SBS or Radica, all of whom are reputable companies, while the £138k budget for studio facilities, to be located at Livingston Football Club, should prove adequate. 4. In the local government reorganisation of 1996, West Lothian was designated as a new unitary authority, combining parts of the former Lothian and Central regions that had been created in 1973. Prior to that, West Lothian was known as the county of Linlithgowshire. It covers an area midway between Edinburgh and Glasgow, and has a population of around 160k. The proximity of Edinburgh and Glasgow airports, the M8 and M9 motorways and three cross-country railway lines make West Lothian a desirable location for industry. The area was traditionally known for its coal mining and shale oil industry, but the pit closures of the 1980s forced West Lothian to switch to attracting inward investment, the success of which means it now boasts the fastest growing local economy in Scotland. Local commercial radio services available across
  3. 3. RA PAPER 24(03) Page 3 the whole of the applicant's TSA are the two Edinburgh services – Forth One (FM), a contemporary and chart music and information station for under-40s, and Forth Two (AM), a full-service station aimed primarily at over-35s – and the two Central Scotland regional FM stations – Real Radio, an adult contemporary music and speech mix, and Beat 106, a fresh dynamic mix of new rock and dance music for listeners below 40. Within their TSA, the two Forth stations have a combined listening share of 18%, though the West Lothian TSA will form only a tenth of this area. No specific RAJAR data are available for the West Lothian area, but the applicant's own market research has shown that "radio listening in West Lothian, as in Scotland as a whole, is far less London-centric than in other parts of the UK" and "it is clear that radio listeners in West Lothian prefer Scottish-based radio services" (p.46). Neighbouring Clan FM, launched in 1999 in North Lanarkshire, has failed to achieve a listening share above 4%, whereas Central FM in Stirling and Falkirk and Kingdom FM in Fife have both quickly become market leaders. The ratings success of these latter two stations demonstrates the potential that exists to develop new locally-focused stations within a part of the Radio Forth TSA. Local response 5. At the time of the licence advertisement, staff wrote to the area's MPs (Robin Cook and Tam Dalyell) and the relevant local authority inviting their views. No responses were received, and neither were any unsolicited letters received from the public. However, the applicant has of course assembled its own evidence of local support. This is discussed in paragraph 15. Assessment of application 6. Four members of staff have been involved in the assessment of the application and the questioning of the group about its proposals: Grant Goddard (Development Officer), Janet Lee (Programming), Gary Carey (Finance) and Terry Dowland (Engineering). Thomas Prag provided valuable insights as the 'nominated Member' for this licence. As the licence is uncontested, marking was not undertaken. THE APPLICATION History and composition 7. The prime mover behind River FM, Jimmy Young, has lived in West Lothian since 1961. He was a founder member in 1989 of Radio Grapevine, West Lothian's Hospital Radio service, becoming chairman in 1993, and successfully expanded the station from a nine hours per week service to a 24-hour operation serving three hospitals. In December 1998, Young arranged a meeting with Russell Rodger, founder member of the Clan FM group which was about to apply for the new radio licence in neighbouring North Lanarkshire. In early 1999, Young called an open meeting in Livingston to discuss the idea of a new radio station for West Lothian, inviting local business people and professionals. According to the applicant, "initially much of their
  4. 4. RA PAPER 24(03) Page 4 interest arose from their desire to have a medium through which they could communicate with their customers in the West Lothian area," but soon "it became apparent that, apart from the commercial advantages to them, such a station would have a great local appeal." Almond Radio Ltd was created, a board of directors was appointed and UKRD (which already held a controlling interest in neighbouring Clan FM) became involved as a shareholder and investor. The board decided to involve UKRD, rather than other potential radio partners whom it had approached, because "the difference was significant in terms of cost" and "we thought we were getting a better product," according to chairman Paul Gebal. In May/June 1999, the group organised its first 28-day RSL under the name of 'Real Radio.' The station used the facilities and presenters of Radio Grapevine, playing a broad mix of music during the day, and local magazine programmes and specialist music shows in the evenings. The local paper West Lothian Herald & Post provided assistance to the four-person news team, and the resultant coverage of local news established good working relationships with local emergency services and community organisations. The success of this first RSL broadcast encouraged the group to organise a second 28-day RSL a year later in May/June 2000. Using the same team of broadcasters, the format was more finely tuned, reflecting feedback received from listeners to the first RSL. 80% of advertisers who had bought airtime during the first RSL re-booked airtime on the second. During late 2000, the 'Real Radio' brand name was sold to Guardian Media Group and the new name 'River FM' was adopted, reflecting the preponderance of rivers in the West Lothian region. Since then, the applicant has organised more than 45 consultative meetings to explain its campaign for a local radio licence, and has distributed pre-paid survey cards at local events to build local support. 8. The board of nine directors has a long collective history, having met 35 times during the last four years. All of the directors are resident in Central Scotland, with the majority based within the station's TSA. However, staff consider the size of the board may prove too cumbersome, as the number of directors merely reflects the share capital having been divided nine ways. Furthermore, the two largest shareholders (UKRD and John Boyle), with a combined shareholding of 50%, command only two votes out of nine, whilst only three directors offer previous full-scale commercial radio experience. Russell Rodger's track record as a founder director and shareholder of Clan FM is not particularly inspiring, considering that station's poor performance, but John Collins' present responsibility as managing director of Clan FM gives him radio management experience, and four of the group's local directors (including Jimmy Young) were recently included in a local newspaper's list of the "100 most influential people in West Lothian." UKRD has a 64% shareholding in neighbouring Clan FM. Although the Cornwall (formerly Guildford)-based company's shareholding in River FM is limited to 25%, there is a substantial crossover of interest with Clan FM. Three of the applicant's nine directors are either directors or shareholders in Clan FM (plus Jimmy Young presents programmes on the station), while 55% of the shares in the applicant group are held by parties with a financial interest in Clan FM (plus Jimmy Young's 5%). Asked by staff about the close relationship between the applicant and Clan FM, chairman Paul Gebal, whose own background is as a lawyer, explained that the contribution of directors from Clan FM/UKRD was "in terms of looking to their
  5. 5. RA PAPER 24(03) Page 5 expertise, rather than letting them drive the enterprise." Management and staffing 9. The staffing plan accounts for ten full-time staff, three part-time staff and four freelance presenters (14 full-time equivalents). The news team comprises a full-time news editor with one full-time and one part-time journalist. A station director post will be taken on a part-time basis by Jimmy Young (who will maintain his existing career as an IT service manager) "as a mentor, guide and sounding-board for the day-to-day management team," working alongside the full-time station manager/head of sales (p.18). As founder of the group, Young's continuing involvement in the station will be critical, and he explained to staff that his day job was too lucrative to give up for a full-time position in River FM. The staffing levels look to be rather on the high side for a station of this size (see paragraph 16), though the applicant argues that this number is required "to deliver a quality programme schedule and achieve our intended revenue projections" (p.18). The group says it plans "to work closely with our neighbours at Clan FM" though it "does not currently have plans for any formal staff- sharing arrangements" (p.18). Rather, Clan FM managing director John Collins' presence on the board "will provide a good deal of help and advice during the set-up stage" and thereafter "there will be a mutually beneficial exchange of ideas and know- how" (p.18). In addition, it is proposed that UKRD will provide back-office functions to River FM "on an ongoing basis." Programming 10. River FM plans to "provide a full-service local radio station for the people of West Lothian" in which "news and information about West Lothian will be the foundation" and "classic pop tracks familiar to a broad 25+ audience will make up the bulk of [the] playlist" (p.22). The applicant rightly believes that "the key to capturing the hearts of the West Lothian listeners will be to provide high quality, locally focused speech content" and notes that "existing radio services audible in the area carry very little pertinent news and no relevant local information" (p.22). The station's ability to deliver this promised 'localness' will be the key to its success. It promises that its programming will be "wholly locally produced at launch," but then adds guardedly that it has "the intention of remaining forever locally produced, at least during peaktime" (p.24). Locally originated programming is promised for the minimum periods of weekdays 0700-1900 and weekends 0800-1400, on the grounds that industry conditions "in coming years may make it appropriate at some future point in time to share some programming from other sources" (p.25). In response to staff's concerns that such arguments could open the door to an element of simulcasting between Clan FM and River FM, the applicant stated that "it is unlikely that River would take live local programming from a neighbouring station unless there was a regional event or a particular show that made a compelling audience case for sharing." The applicant asserts that "it would almost certainly be more economic to produce local 'voice-tracked' output instead of arranging to network particular dayparts."
  6. 6. RA PAPER 24(03) Page 6 11. River FM would provide 15-35% speech content during weekday daytimes, falling to 10-15% between 1900 and 0600. Three-minute news bulletins will be broadcast 0630-1800 on weekdays, and weekend mornings. The applicant's news staff will produce their own bulletins incorporating IRN audio at peak times, whilst IRN national bulletins will be broadcast at other times. Sports reports will be added on the half-hour in weekday peak times, and a Saturday afternoon sports show will "be broadcast live on occasion from some of the many local sports grounds and facilities across the county." The applicant promises that this will cover "not just the fortunes of Livingston Football Club" (which holds 10% of the applicant's shares, and is represented on its board) but also amateur and minority sports (p.23). Through its RSL broadcasts, the group says it has established a good working relationship with the West Lothian Courier with which it will pool news stories and will run on-air activities in support of the paper's community campaigns. A similar agreement has been forged with West Lothian's internet news site owner/editor Eddie Anderson. In addition to the standard features of weather, travel and what's on, River FM has also committed to broadcasting three-minute help and advice features with local experts discussing topical issues and twice-daily community issue items. Collectively, these speech elements should help the station to convey a distinctive local identity. 12. Musically, the station would provide a daytime mix of hits drawn from the 1960s to the current chart, with an emphasis on tracks from the 1990s. Four specialist shows at weekends would provide exposure for the genres of country, rock and dance music, but the applicant does not regard these shows as "integral elements in the character of the River FM service" because it may wish to vary the specifics during the term of the licence (p.33). Asked by staff how its music programming will broaden listener choice in West Lothian, the applicant explained that "the inclusion of specialist strands and student-produced programming will allow the station to feature genres like rock and folk which don't feature on either Forth 2 or Real Radio." Scottish music will be included as "a part of the natural music mix" rather than as a specific genre. In response to staff concerns as to whether there would be some similarity in programming with Clan FM, the group states that "River [FM] will be distinct to Clan FM in that music will be locally selected and scheduled……. Current thinking suggests a slightly older mix [of music] than Clan's with more 60s titles than currently on air on Clan." Market research 13. The applicant's monitoring of the weekday output of local and regional commercial stations audible within its TSA demonstrated that their programming included scarcely any editorial or advertisements directly relevant to the West Lothian area. Additionally, two market research projects were commissioned in 2002 that involved interviews with respondents from across the West Lothian region in the Almondvale Shopping Centre, Livingston. The most listened-to stations were found to be Real Radio, Forth One and Beat 106. The research also found that residents prefer to eat out, go to the cinema and purchase major household items in Livingston rather than Edinburgh, leading the applicant to conclude convincingly that "the people of the
  7. 7. RA PAPER 24(03) Page 7 area overwhelmingly opted for Livingston, despite the proximity and allure of the Scottish capital" (p.47). Asked what changes they would like to make to the radio station they listened to the most, around two thirds of respondents seemed remarkably satisfied with existing music content, news coverage and sports news. Similarly, two thirds said that the launch of a new station would make no difference to the amount they listened to their favourite radio station, while only 28% said they would listen to their favourite station less. Asked by staff whether it was disappointed with the level of satisfaction respondents expressed with existing services, the applicant argued that lower levels of satisfaction were demonstrated within specific constituent demographics. It added, somewhat confusingly: "Far from disappointed, we therefore found these results encouraging, reinforcing our view that local content, in particular, would be the key to River FM's success." These results do illustrate, however, the challenge of launching a new radio station in an area where two long-established ILR stations (Forth One and Two) are audible and have loyal audiences, BBC Radio Scotland is strong, and two newer regional services (Beat 106 and especially Real Radio) have already made a strong impression. It will be important for the applicant to commit itself to a substantial and ongoing off-air marketing campaign if it is to make an impact on the natural inertia of radio listening habits illustrated in this research. The River FM launch will also need to overcome the hindrance that the 'Real Radio' name it had used for both RSL broadcasts now belongs to the Guardian Media Group's station, against which it competes in the market. Audience forecasts 14. The group's projections of its likely audience (a first-year weekly reach of 22%, rising to 26% by year three) are based on a sensibly-sized TSA population of 120k adults (aged 15+), and were calculated "by reference to actual audience figures achieved by a number of local stations launched in recent years in markets with populations up to 200k" (p.51). It argues that "by projecting audience figures in the mid-range of those achieved by these stations, we believe we are being realistic and prudent" (p.51). However, its choice of stations (Bath FM, Star 107.7 Weston Super Mare and 2BR Burnley) and the RAJAR quarter (which in all cases was simply the most recent figures prior to the application) is quite selective. If the applicant had performed a more in-depth analysis, it would have found a much wider spread of station start-up performance in their first and second years on-air. More surprising is that the applicant neither analysed nor referred to the ratings track records of Scottish stations such as Clan FM, Central FM and Kingdom FM which are much closer to home than the three English stations it selected. Questioned by staff about these omissions, the applicant responded that "similarity in terms of TSA size made them better yardsticks for comparison than Clan or Kingdom which, while in Scotland, were much larger radio stations." It added: "Clan FM and Central FM, for differing reasons, both experienced launch problems and have only in the last few years turned the corner. Kingdom has a unique listener base that is fiercely protective of Fife as a region." But, in terms of its programming plans, the applicant acknowledged that "the experiences of Clan and its RAJAR results since launch were taken into account – particularly in putting 'localness' at the heart of the brand." Asked which existing
  8. 8. RA PAPER 24(03) Page 8 station it believed would lose the most listeners to the proposed West Lothian station the applicant nominated Real Radio, which its market research showed to be the market leader. Local involvement and support 15. The applicant's interaction with the local community is particularly impressive. Its main promotion and publicity activity took place around the two RSL broadcasts in May/June 1999 and May/June 2000 under the 'Real Radio' brand and elicited 5,000 letters, phone calls and response cards from listeners. The broadcasts received extensive, positive press coverage in the local press. As noted previously, however, the station will need to overcome any potential confusion which has been caused by its rebranding to River FM. Through its association with Radio Grapevine and Jimmy Young's experience in organising outdoor events, the applicant has had a high profile at gala days and roadshows within West Lothian, and has made extensive presentations to local organisations since 1999. Last year, the applicant sponsored an award in the JobCentre Plus New Deals awards, formed a listeners' advisory panel that has met twice to date, and organised a seminar 'The Beginners' Guide To Radio Advertising' at Livingston Football Club in association with the West Lothian Chamber of Commerce and the Federation of Small Businesses. Letters of explicit support for the application were received from, among many others, numerous members of staff of West Lothian Council, Robin Cook MP (Lab., Livingston), Alex Salmond MP (SNP, Banff & Buchan), Mary Mulligan MSP (Linlithgow), Fiona Hyslop MSP (Lothians), West Lothian College and two West Lothian Councillors. A short, more general letter of support was received from Tam Dalyell MP (Lab., Linlithgow), the Father of the House. When added to the almost 4,000 letters received in response to the two RSL broadcasts, this is convincing evidence of widespread local support for River FM. Finance 16. The assumption behind the business plan is that an emphasis on 'localness' will enable this small station to differentiate itself from larger, established competitors in the market. However, experience suggests that this model can often lead to financial difficulties, as budgeted revenue streams are difficult to achieve in the face of strong competition and the high cost of creating local identity (usually news resources) can delay the prospect of profitability even longer than envisaged in the business plan. Nevertheless, River FM has demonstrated, through its market research, that the West Lothian population has a strong affinity with Livingston, rather than nearby Edinburgh, and this could prove critical to this type of small station's ability to attract both audience and advertisers. At £379k per year, the proposed cost base of the applicant looks too high, primarily because of the 14 full-time equivalent staff. In a station of this size, seven to ten staff is more customary, and the main excess appears to be in the programming and news departments which comprise three journalists and five presenters. However, the group argues with some conviction that these resources are a prerequisite to achieve 'localness.' Although the group is likely to have a sizeable
  9. 9. RA PAPER 24(03) Page 9 profile in the local area from its history of RSLs and attendance at public events, marketing expenditure of £6k over the first three years seems under-funded, and no provision has been made for local sales commissions. In addition, the cashflows show that working capital will be stretched and the danger exists that these budgeted amounts may prove insufficient, given UKRD's apparent inability to control costs at Clan FM (currently £600k per annum and 50% above forecasts). Between its launch in 1999 and September 2002, Clan FM lost £915k. The group's revenue projections, like its audience projections, are based upon the track records of Bath FM, Star 107.7 Weston Super Mare and 2BR Burnley, and seem too optimistic. The year-one prediction of £2.56 per adult is high, even compared to these stations' performances, and is massively higher than the £0.55 per adult achieved by Clan FM since launch. 17. In terms of funding, staff have some concerns about one of the applicant's main shareholders, UKRD, whose last accounts (September 2001) show an annual loss of £2.1m on operating activities and cash reserves of £4m (a result of a £4m share issue). Only recently has the company adopted any semblance of a coherent, long-term corporate strategy, under the leadership of new group managing director William Rogers. The other main shareholder in River FM, John Boyle, is a director and investor in TV production company Wark Clements. However, he also was the chairman and majority shareholder in Motherwell Football Club when the club was put into administration in April 2002, and his ability to provide further funding if necessary is unknown. Boyle's shareholding in the applicant is represented at board level by non- executive director Bryan Burnett, the Glasgow-based TV/radio broadcaster who is already a director of Clan FM and also prospective applicant group Glasgow FM. Members might wish to note that Clan FM launched with a similarly diverse ownership structure, until high losses and the reluctance of smaller shareholders to take up their entitlement to rights issues forced UKRD to increase its shareholding from 48% to 64%. However, a licence award to River FM could help to improve the financial position of Clan FM by enabling the two neighbouring stations to share resources, and the strong local identity felt by residents of West Lothian augurs well for the success of a radio station in the area. Grant Goddard 3 April 2003

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