The UK commercial radio industry has grown dramatically since the first station launched in 1973. The history of the industry can usefully be divided into two chapters:
1. 1973 to 1990
At the beginning of this period, local commercial radio stations were opened only in the UK’s biggest cities and then, in the 1980's, new stations were launched in smaller cities and in largely rural counties. The regime was characterised by the word 'monopoly', as only one commercial station was licensed in each location (London was the only exception, with two stations licensed with very different formats). Each station broadcast its programmes simultaneously on the AM and FM wavebands, enabling it to reach the maximum possible audience in its coverage area. Each station’s success depended upon its ability to attract listeners away from national and local BBC stations, and its ability to attract advertising to the new radio medium and away from competitors such as the local press and regional television.
Listening figures to local commercial stations were generally very high. They were new, exciting and offered something more local and less stuffy than BBC stations. Because each local station was a separate local company, run by a local Board and financed by local shareholders, each station cultivated its 'localness' to the maximum in order to attract listeners. London’s 'Capital Radio' was a prime example of the success such a strategy could have. Using the slogan 'In Tune With London', every day the station used its converted red double-decker bus to visit a different London location, handing out stickers and leaflets, as well as offering listeners the opportunity to meet presenters and request songs. These 'personal contact' strategies paid enormous dividends and generated substantial loyalty between listeners and their local station. By the 1980's, they were supplemented by community outreach projects and charity fundraising marathons. 'Capital Radio' had a JobCentre branch and a flat share information service in its foyer [see blog], which became young Londoners’ first means of finding accommodation in the city.
By the end of the 1980's, local commercial radio was a big success with listeners and had developed a loyal following across two generations of listeners, giving it substantial audience figures across a wide variety of ages. Up and down the country was a range of fiercely individualistic, quirky stations, each with their own name, each with their own 'star' presenters, and each adopting their own idiosyncratic music format. By now, each had woven itself into the fabric of its community and was as much a part of local life as the town’s football team or the local bakery chain.
The one aspect of local commercial radio that proved problematic was stations’ inability to surpass their 2% share of total UK advertising expenditure. This percentage stubbornly refused to grow, even during times of an advertising boom and radio became known within the advertising industry as the '2% medium'. It was viewed as an 'extra' to be added to media campaign plans in times of boom, but quickly struck off when the economy was not so good. As a result, advertising revenues fluctuated enormously during downturns in the economic cycle and one local station was even forced into liquidation.
Radio’s main problems in attracting national advertising were:
• Even all the stations added together did not cover the whole UK
• Because each station was independently owned, buying a campaign on all existing stations was a labour-intensive task
• Station advertising rates and packages varied hugely, more dependent upon stations’ ability to extract such prices from local advertisers than any standard cost per thousand
• Station formats varied as much as their names, so that some stations delivered considerably older or more female-orientated audiences than others.
Because national advertising was so problematic, the majority of advertising sold on local commercial stations was derived from local businesses. By the late 1980's, local radio had proved its effectiveness at marketing local products to local listeners, and a bond had been forged between local business owners and the local sales teams of stations that was the economic lifeline of these broadcasters.
At the same time, by the late 1980's, complacency started to infiltrate local radio that resulted directly from stations’ lack of competition for listeners and lack of competition for local advertisers. Stations started to work less hard than they used to in order to please both their audience and their local business community. The government’s regulator released stations from having to fulfil many of their community obligations. Instead of seeing that work as an intrinsic part of their loyalty-building strategy, stations such as 'Capital Radio' closed their Community Department overnight [see blog]. At the same time, stations had their eye on merging with nearby stations to increase profitability, or arranging stock market flotations to generate capital for acquisitions. Several stations diversified into all sorts of businesses from theatres to restaurants, seeing themselves as 'entertainment' rather than purely 'radio' companies. In the 1980's, anything that involved making money seemed a good idea.
For the first time in its history, the late 1980's saw 'Capital Radio' suffering declining audiences and, like other local commercial stations, it had no idea what to do about the problem. It had only ever competed against the BBC for audiences and, only then, back in its very early days. Since then, it had always taken its audience for granted and simply presumed that listeners would never turn to any other station. All the local stations still enjoyed a monopoly over commercial radio advertising in their patch. It was something they felt they had a right to. The 1980's economy was booming. Everyone was getting rich quick.
2. 1990 to now
The existing radio stations received their first major shock when the regulator suddenly licensed a range of 'incremental' stations in areas that already had existing local stations. This was the first time that the so-called 'heritage' stations had ever faced competition from newcomers. For example, in London, 'Capital Radio' lost audience straight away to 'Melody Radio' (targeting older people), 'KISS FM' (young people), 'Jazz FM' (wealthy middle-aged people) and 'Choice FM' (the Afro-Caribbean community). Suddenly, the audience that 'Capital' had taken for granted for so long was deserting it in droves for stations that sounded new, fresh, innovative and in touch with London, something that 'Capital' had done less and less of in recent years.
The second shock came when the regulator licensed three national commercial radio stations, a full thirty years after local commercial stations had been introduced. The industry had been arguing for years that it could never break through the 2% barrier (of all advertising spend) unless businesses and agencies were able to offer clients a proper 'national' opportunity to book a single campaign across the whole UK. New national commercial stations could offer such a deal and give the existing local radio stations a chance to share in radio’s enhanced visibility. As a compromise, the new stations were deliberately introduced in such a way so as not to impact local commercial radio audiences too greatly. The national 'popular music' station was to be confined to the poor-quality AM waveband, while only a minority-interest music station would be allowed the coveted national FM slot.
The third shock came when, having seen the success achieved by some of the specialist music stations that were part of the 'incremental' experiment, the regulator decided to roll out a programme of many more new local stations in more areas with existing 'heritage' stations. Thus, the 1990's heralded the biggest and fastest expansion of radio stations the UK had ever seen, immediately after a period of relatively slow industry growth in the 1980's. The shock of moving from a stagnant period of complacency to suddenly being immersed in a highly competitive situation where they had to fight for both listeners and advertisers proved a wake-up call for many local stations. What followed still has a considerable impact on the radio landscape of today. The radio industry underwent a fundamental re-structuring that included:
a. The emergence of radio groups
A limited amount of consolidation had occurred during the 1980's, largely based on regional geography, whereby groups were formed from the combination of several local stations in a region (i.e. Midlands Radio Group Ltd, Suffolk Group Radio Ltd). As early as 1985, GWR Radio Ltd started a series of acquisitions based on the simple motivation that 'big is better' and the trend continued throughout the 1990's with stations bought and sold for greater and greater sums of money.
b. The entry of media groups
Starting in 1990, large cross-media groups such as EMAP plc, Virgin Group Ltd and Chrysalis plc bought their way into the radio industry, acquiring a mix of heritage stations and newly launched stations. This substantially increased the sale prices of local stations.
c. National advertising
The launch of the three national radio stations had the desired effect of attracting national advertisers and agency media buyers to radio for the first time. With local stations now consolidated into fewer groups, it became easier to buy campaigns through a single selling point to run on stations across a region or regions. Both the national and local stations benefited from the influx of national revenues.
d. Cost cutting
In an industry where costs are mostly 'fixed costs' and revenues are almost infinitely 'variable', GWR Group pioneered the strategy of cutting costs to the bone at the many stations it acquired. According to GWR CEO Ralph Bernard: “It became very evident that if you don’t have size, you don’t have the ability to do things and you are forever trying to find the money to fix leaks, literally.” GWR’s policy of implementing economies of scale across its stations led to the centralisation of many tasks.
e. Local advertising
As stations became incorporated within larger and groups, national advertising became of more and more importance to their owners. The bedrock of local radio, local advertisers, soon became serviced by regional rather than local sales teams, until eventually they were serviced hardly at all from a national sales office. As a result, local advertising revenues became less and less important to groups that were growing bigger and bigger.
f. London agencies
With the rise of youth brands in the marketplace, and the evident success of London youth station 'KISS FM' [see blog] in creating a commercial focus for a demographic that had never before been served by commercial radio, London advertising agencies suddenly wanted to buy campaigns on stations that delivered 15- to 34-year-olds. Faced with both local and national competition for audiences and revenues for the first time, local heritage stations suddenly started chasing a younger audience. As a result, the middle-aged audience that had been loyal to their local commercial stations for many years started to drift away (mainly to 'BBC Radio Two'), alienated by stations playing too much dance and rap music.
g. 'BBC Radio One'
Although the turn of the 1990's had been a scary time for local heritage stations as they suddenly faced competition in their own areas from competing commercial stations for the first time, they were all helped immeasurably by the BBC’s decision to change drastically the programming of its most popular station, 'Radio One'. Until then, this station had a remarkably large audience of diverse ages that overshadowed local commercial stations in most regions of the country. As a direct result of the BBC’s bizarre volte-face, between 1992 and 1994 five million listeners left 'Radio One' and most sought refuge in local commercial radio. These latter stations’ audiences suddenly boomed and they became the most listened to in their markets, without having to change or do anything different. The BBC had unintentionally saved their backsides.
h. Lack of investment
With audiences growing hugely because of the demise of 'BBC Radio One'; with revenues booming because of the ability to sell national advertising on larger and larger groups of stations; and with stock market values of radio groups buoyed by the industry’s breakout from its former position as the '2% medium', group owners were quick to redistribute their substantial profits to shareholders. After a relatively lean period in the 1980's, 'radio' was suddenly riding on a 'high' in the financial community. Ignoring the fact that their product had only become popular as a haven of last resort for listeners fleeing 'Radio One', group owners invested almost none of their lucky profits back into the development, improvement or update of their product.
i. Networked programmes
Instead, station owners sought ways to cut even further the fixed costs of their station operations. Led by GWR Group plc, groups persuaded the regulator to let them network some programmes from a central production studio, instead of each of their stations producing all of its own content. In a lengthy process of attrition, by bullying a regulatory agency that lacked any long-term strategic plan for the industry, group owners were allowed piece by piece to extract the 'localness' from their local stations. Local voices, local station names, local celebrities, local music, local content and local news all became sidetracked or dispensed with by many group-owned stations.
j. The rise of brands
Led by EMAP plc, which championed the notion that nationally recognisable brands were preferable to local identities, many local radio stations were stripped of the very characteristics that had made them 'local' in the first place. In an attempt to make their product controlled, homogenous and universal, the largest radio groups invested considerable sums in state-of-the-art technology that enabled stations up and down the country to be playing exactly the same record at exactly the same time, appended at the end of the song by a jingle that said 'Coventry' or 'Newcastle' as appropriate, depending upon the station’s location.
k. Format convergence
Although the listener is now offered a considerably wider choice of commercial radio stations in most local markets than was the case in the 1980's, the industry is plagued with competitors who are all trying to move towards the same middle ground [see blog]. In yet another war of attrition that the regulator has lost again and again, many stations have stretched the definition of their prescribed programme formats to (and often beyond) their limits. This has created a situation where stations that are (by the regulator’s definition) meant to be complementary are in fact found to be competing for the same audience demographic and for the same advertisers in the very same market, by playing exactly the same music. This leads to substantial market 'cannibalisation' whereby competitors merely steal audience from each other, rather than attract listeners from the biggest competitor, the BBC.
l. The decline of the music industry
Commercial radio in the UK, modelled on 'BBC Radio One', has always relied upon the universal popularity of 'popular music' to be the cornerstone of its programmes’ appeal. Until around 1990, almost everyone in the UK had a common notion of what a 'pop hit' was. But from the time that 'Radio One' refused to play the first 'house music' record that reached Number One in the singles chart, it was obvious that such communal experiences were on their way out. The subsequent rise of 'dance' music amongst young people polarised popular music and led to a substantially fractured music market. Now, the market for singles is all but dead, CD sales are at an all-time low, and the cult of 'celebrity' has replaced the cult of 'pop stars'. Frankly, commercial radio stations have almost no idea any more what music they should play to attract listeners.
[Excerpt from 'A Brief History Of United Kingdom Commercial Radio & A Strategy To Create Genuinely Local Radio', Grant Goddard, 2005, 33 pages]














