Downfall Of Analogue FM/AM Radio Digitization Is Accelerating The Process

digital radio

Highly respected music industry expert, and head of the Steinhardt Music Business Program at New York University, Larry Miller, released a special report, titled PARADIGM SHIFT: WHY RADIO MUST ADAPT TO THE RISE OF DIGITAL, which details the current state of terrestrial FM/AM radio. The report examines the significant business and social challenges faced by one of the world’s oldest media sectors. The report provides an in-depth analysis of how and why audiences are abandoning Analog FM/AM radio as their primary source of music discovery and enjoyment and the resulting diminishing economic importance of radio to the music industry.

“Terrestrial or Analog radio is facing monumental challenges as streaming continues on its path to becoming the go-to place for current and future generations to enjoy and discover music,” says Professor Miller. “The emergence of new platforms and the corresponding behaviors of Generation Z listeners have reduced radio’s relevance to a very important and growing demographic. Advertisers are challenging radio’s audience targeting and measurement methods as they seek ways of connecting directly with consumers via mobile telephones and other platforms. Radio is at a crossroads as an industry.”

The report also reveals that the rise of digital music services like Apple Music, Spotify and Pandora are causing traditional radio listeners, particularly younger ones (12-24 years old), to flee terrestrial radio on a massive scale. This exodus is creating a dire situation for radio where the format’s long-held monopoly as the only audio choice behind the wheel is overthrown by new technology. Additionally, radio’s dominance as a promotional vehicle for popular music and as a taste-making platform for new recording artists is being contested like never before.

Among the report’s conclusions:

  • New research confirms that Generation Z, who are projected to account for 40% of all consumers in the U.S. & World  by 2020, are showing little interest in traditional media, including radio, having grown up in an on-demand digital environment.
  • AM/FM radio is in the midst of a massive drop off as a music discovery tool by younger generations.
  • By 2020, 75% of new cars are expected to be “connected,” breaking radio’s monopoly on the car dashboard and relegating AM/FM to just one of a series of audio options behind the wheel.
  • Year over year, radio advertising revenue dropped 4% while digital/mobile spend was up 11% according to Standard Media Index’s Q2 2017 report, showing that even in local advertising, radio cannot sustain its dominance.
  • Notwithstanding the digital radio platform developed by iHeartRADIO, for which the payment of a performance royalty is required, broadcast radio does not pay a sound recording performance royalty to artists and rights owners. Economists have concluded that innovation has stalled out, because, in general, the business remains focused on driving EBITDA through reduced content cost (no sound recording royalty obligation) as a result of government price suppression (to $0) by current public policy.
  • As a result, radio’s importance to music industry revenue is rapidly diminishing. In a business now driven by access to music versus ownership, record labels have shifted their focus to digital platforms to introduce new artists and monetize back catalog.

Situation around the World

Surge in digital listeners has brought about a “new golden age” of radio which could trigger the beginning of the end of FM listening as early. The renaissance has been fuelled by an increase in people accessing radio digitally, through devices such as tablets and smartphones, with the balance shifting so quickly that analysts predict digital listeners will become the majority in resent time. Many countries have said that once that milestone is reached it will undertake a review which could result in the FM signal being switched off. Norway became the first country in the world to end FM radio when it cut the signal in January 2017.

“Even five years ago this situation was unthinkable,” said Ford Ennals, chief executive of Digital Radio UK, the company overseeing the nationwide digital switchover. “People predicted radio would fall away — it’s extraordinary when you think about the fragmentation of the media,” he told.

Despite its current success, digital radio will have to adapt to shifting listening habits as younger listeners replace older ones. Data suggests that just over half of people between the ages of 15 and 24 listen to live radio, compared with 88 per cent of people over the age of 55.

BBC Radio 1, which is principally focused at a younger audience, lost 1 million listeners last year. Bob Shennen, director of Radio at the BBC, said: “Young people are just not listening for as long,” but added the medium was “very good at reaffirming its core values.” The BBC currently enjoys a dominant share of the total listening hours in the UK, accounting for 53 per cent, with Radio 2 alone accounting for 17 per cent.

If you’re sick of all-talk AM radio, scratchy static or shortwave signals that sound like they’re being sent from Mars, take heart. Just like television, radio is going digital. But lines are being drawn in a battle between the U.S. choice and the standard set for the rest of the world.

The most part in US, AM radio has remained unchanged from the early days of broadcasting. In the United States, AM radio, once their main music medium, is now mostly relegated to talk, sports and all-news formats — because voice sounds good on AM and music sounds not so good.

But what if AM transmissions could be improved to the point where the quality was equal to, or slightly better than, FM transmissions today? And what about CD-quality United States FM broadcasts? The US Federal Communications Commission approved digital broadcasting for U.S. radio stations using a system from a company named iBiquity. Within the next few years, AM and FM radio stations across the country will begin broadcasting a digital signal alongside their current analog signals on the same frequency. Of course, you’ll need new radios to hear the new iBiquity “HD” radio signal; they should be available for sale to the public later this year.

A small but growing number of stations, in places as varied as New York and Birmingham, Ala., have already begun broadcasting digital signals. Currently, 130 stations are licensed to do so, according to iBiquity. It will take up to ten years to convert all 13,000 AM and FM stations in the United States, said Jeff Jury, a senior vice president at iBiquity.

The Digital Future of FM

The DRM terrestrial radio broadcasting standard has been created by broadcasters for broadcasters.  It  has  been  designed  specifically  as  a  high  quality  digital  replacement  for current  analogue  radio  broadcasting  in all  the  frequency  bands,  the  AM  as  well  as  the FM/VHF  bands;  as  such  it  can  be  operated  with  the  same  channelling  and  spectrum allocations as the former analogue transmissions. The simulcast option allows for a smooth transition from analogue FM and MW to an all-digital DRM broadcast.

The DRM standard comprises two operating modes:

  • ‘DRM30’ configurations, which are specifically designed for the AM broadcast bands below 30 MHz.
  • ‘DRM+’ configurations, which serve the spectrum above 30 MHz up to and including VHF band III, centred on the FM broadcast band II.

Digital Radio is already established worldwide

Digital radio makes spherics and crackling interference in radio broadcast a thing of the past. New digital technologies make it possible for digital radio to replace analogue short and medium wave broadcasting around the world. Even local FM transmissions are being converted to digital. As a result, Digital radio listeners benefit from clear reception, a wider range of programming, and additional information via data services without having to pay for a costly Internet connection.

Alexander Zink, researcher at the Fraunhofer Institute for Integrated Circuits IIS based in Erlangen, Germany, would like to provide clarification around a common misunderstanding: “Digital radio works the same way as terrestrial FM radio via air waves, but with better quality, more variety and innovative extra features. Digital Radio is independent of the Internet and available to the listener free of charge.” Together with Martin Speitel, Max Neuendorf and an extensive team, Zink developed several necessary basic technologies, as well as transmission and receiving solutions for digital radio applications. Today, these technologies are utilized around the world in nearly all digital radio systems.

Digital radio is already implemented throughout the majority of Europe. Many developing countries are in the planning stage to convert from analog to digital for short and medium wave, and the digitalization of local FM broadcasts is in development as well. For instance, India is among the front-runners for digitalization, and on its way to becoming the world’s largest digital radio market.

In addition to audio quality, digital radio’s innovative technology offers critically important advantages to radio listeners, manufacturers and radio broadcasters. For example, the data service Journaline makes it possible for listeners to interactively access and read text information such as news, weather, and traffic or airport updates directly from the radio receiver’s screen. “Even in the age of the Internet, radio systems continue to serve as the most reliable distribution medium for news and emergency alarms. Especially in countries where Internet infrastructure is poor or non-existent, the new solutions allow access to information and education on a wide-scale basis and free of charge,” says Alexander Zink, emphasizing the political dimension of the Fraunhofer development. For broadcasters, Digital radio offers benefits such as more efficient program transmission, which cuts costs by reducing broadcast energy consumption and also allows for transmitting a larger number of programs. Deutschlandradio, the national German public radio broadcaster, has benefited from the advantages of Digital radio for several years. “There aren’t enough FM frequencies available. Digital broadcasting is the only way we can cover the entire area,” says Deutschlandradio director Dr. Willi Steul.

Conclusion

The overall amount of listening remains as high as ever and listeners are benefiting from a rapid increase in the number and range of stations they can choose from, including new community stations, additional local and national services and stations from around the world via the internet. All of this choice is available across a wide range of platforms from traditional AM and FM radio, to digital radio via DRM, digital television and the internet. There will be other new technologies to come.

For established radio broadcasters this explosion of choice brings new challenges through increased competition for listeners and revenues. Broadcasters also face increased costs from having to invest in new platforms and must deal with increased competition from an ever wider range of media. All of these changes create significant pressures on the traditional pattern of local radio, which has emerged as a result of deliberate public policy by successive governments and regulators.

This situation presents challenges to broadcasters and to regulators. There is evidence that the changes in listening habits, together with emerging new technologies have had a more rapid and profound impact on the radio industry than was foreseen just a few month ago when the TRAI asks Indian FM industry for comments on digital radio broadcasting was put in place. As a result, the familiar ways of regulating radio, designed for a largely local analogue radio system, which have served listeners and the industry well, may be ineffective and disproportionately costly in the digital era.

The goal of this document is to outline an approach to regulation which is capable of delivering radio’s agreed public purposes as a healthy radio industry makes its transition to a digital world. Radio still has a vital role in fulfilling a range of public purposes – a role shared between the All India Radio, Indian commercial FM radio and the new community radio sector – and regulation should be focused squarely on ensuring that those public purposes are met in the interests of listeners as citizens and as consumers.

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