The European Radio Market Report 2005 AMR’s 2005 European radio market report was published in December 2005. Following the success of AMR’s groundbreaking European telephone directory market reports, which have established themselves as the industry bible, the European radio report provides unparalleled strategic analysis of the challenges and opportunities of a vibrant sector. Covering the major radio markets in Western Europe, the report focuses on the commercial sector, whilst keeping an eye on the impact of public service broadcasting in each market. The sector is experiencing consolidation, led by the UK and the merger of Capital Radio and GWR. The Netherlands has been something of a hot spot for private equity activity, seeing the purchase of the market leading commercial national station and then its subsequent sale in 2005, while in France the private equity owners of Skyrock are considering an exit. Meanwhile, the UK leads the field in technology trends and the take-up of digital radio. DAB and other delivery platforms (digital TV and the internet) are bringing unprecedented consumer choice but also the challenge of audience fragmentation. Selling the medium Radio is going places. After surviving the advertising crisis of 2001 and 2002, the medium is now enjoying a renaissance across Europe. In some markets the strong growth between 2001 and 2004 was a product of recovery from a low base. In others, such as Belgium and the Netherlands, growth has been stimulated by deregulation, whereas the Italian market is catching up with the rest of Europe with a period of strong growth. In many countries, however, the radio sector has simply been doing a better job of selling itself as a medium. Numerous studies have been conducted detailing the unique way that listeners relate to radio as a medium and the effectiveness of radio advertising. In Germany, after years of losing share to other media, radio has got its act together with a joint public / private association promoting the benefits of radio advertising. The experience of markets such as France shows that radio advertising spend can grow strongly even when commercial listening is declining, whereas the UK has seen strong growth in recent years in sponsorship and promotions (S&P). The audience is up to something Digital radio has arrived in the UK in a big way. Over 1.8m DAB radio sets have been sold in the UK and there are 170 stations available on digital, of which 37 are digital only brands. Incentives for investing in digital are uneven across Europe. France in particular lags behind with only 25% population coverage, but the UK is already providing lessons for where the market in the rest of Europe may go. In particular, DAB brings greater choice for the consumer, with an increased number of stations making it possible to broadcast stations targeted at niche demographics, for example new spoken word formats or ethnic music channels. This requires greater investment in programming but will also result in audience fragmentation. The winners in this new paradigm will be groups such as Emap in the UK, which have strong brands and multi-platform delivery capabilities. There is also a shift in the way people consume radio, with increased listening via digital television and an explosion in listening to the radio online, either via live streaming or audio on-demand. As well as presenting challenges to commercial radio stations and how they relate to listeners, these new audience habits will also bring about change in traditional radio audience measurement techniques. Local understanding with a European dimension The AMR European radio market report focuses on the seven biggest European radio markets by advertising revenue, covering countries with between €138m and €825m of net radio advertising. For each country the report provides a detailed overview of the radio landscape, including a description of the structure of radio (local / national, public / private) and the latest licence developments. The report unpicks the complex ownership regulations and structures of European radio, and includes incisive station profiles of individual brands and their audiences. We ask the essential questions: how is commercial radio developing, and why is there such a difference between European radio markets? As well as analysing the regulatory environment to identify ‘blocked’ development, the report addresses the strength of the commercial sector according to several key metrics. In the seven markets analysed, radio’s share of total advertising spend ranges from under 3% to as much as 8%. Public radio has over 50% audience share in the UK, but only 9% in Spain. Against this background, some radio stations punch well above their weight, achieving a disproportionate share of advertising euros based on their audience share, in other words, a high ‘power ratio’. The report examines these stations and the ‘halo effect’ which gives rise to particularly high power ratios. An indispensable guide With increasing prospects for deregulation and private equity appetite for the sector, there is likely to be further change and M&A activity in the European commercial radio market in the next few years. There has been resistance so far to cross-border M&A activity, but in the future media funds are likely to try to gain a slice of some of Europe’s most vibrant and lucrative media brands. AMR’s report is an indispensable and authoritative guide to the market and its future prospects.