Germans and Swiss snub DAB
Still too costly, reckon broadcasters
By Grant Goddard
2nd July 2009
The commercial radio industries in Germany and Switzerland have both rejected proposals that they should invest in developing the DAB digital radio system in their countries to replace existing FM/AM transmissions.
The German argument against DAB was that the significant investment required simply did not justify the lengthy wait for a financial return, based on evidence from other European countries that have already introduced DAB radio.
This news is a blow to UK broadcasters and technological companies who have long hoped that the DAB system would become the pan-European digital radio broadcast standard. In June 2009, the Digital Britain Final Report (pdf) had proposed the government would “work with our European partners, including the European Commission, to develop a common European approach to digital radio”. This proposal drew on the work of its predecessor, the Digital Radio Working Group, whose Final Report had noted in December 2008 that “Germany has plans to launch DAB+ across the country in 2009, while France will launch DMB audio services at around the same time”.
Not only do the German and Swiss announcements impact the prospects of UK consumers benefiting from economies of scale that could have reduced the retail prices of DAB receivers. They also cast doubt over the willingness of European car manufacturers to install DAB radios in new cars, if the broadcast technology is still only implemented in a handful of countries.
A week ago, UK technology company Imagination Technologies – whose processors are used in over 80 per cent of DAB radio receivers – had said that “recent announcements from France, Germany, Denmark and Eastern Europe… mean that the global market for digital radios and digital radio technology is due to take off”. Frontier Silicon, the UK’s leading supplier of DAB radio chips, had announced a US$10m investment in production of a new advanced DAB chip at the beginning of 2009 and had noted that “penetration of DAB radios in the year continues to rise, with ageing analogue broadcasting systems [due to be] switched off in Switzerland”. The profitability of both companies is very dependent upon the uptake of DAB technology more widely than only their home market.
In Germany, the association of private broadcasters (VPRT) issued a statement (http://www.vprt.de/index.html/de/press/article/id/197/or/2) on Thursday which said:
The conditions required for a successful introduction, always a prerequisite, have not been met… For VPRT’s private radio companies, the significant initial and operating costs are too great. Against the backdrop of the economic crisis, such investments are a certain risk…
The VPRT member radio companies have, therefore, concluded that DAB+ has no economically viable future. Even with significant promotion of the system by public funds for at least the next five to ten years and under regulatory pressure, there is only a slim chance of partially recovering (the costs) within the market. Against this background, the VPRT speaks against the planned introduction of DAB+ in the autumn of 2009.
The others are only dabbling
The World DMB Forum, the international agency promoting the adoption of DAB technology, describes Germany as “among the leading European proponents of DAB Digital Radio”, with 546,000 DAB radios sold to date and 116 different radio services available on the platform. Its June 2009 update said that “it is planned that by 2012 most of the German population will have access to the [DAB] services”. Without the co-operation of commercial radio operators, it now looks unlikely that this target will be met.
In Switzerland, the Association of Private Radios (VSP) issued (http://www.kleinreport.ch/meld.phtml?id=52281) a statement the same day as the Germans, which said: “Today’s ruling by the VPRT makes even more difficult the launch of DAB+ in the whole German-speaking world and VSP recommends that all members use realistic calculations before beginning.” VSP said that the pursuit of DAB radio could create an additional cost of five to eight million Swiss francs “until break even is reached”.
Whilst it acknowledged that such an investment could “make sense for strategic market reasons” for one or two players, for the rest of the commercial sector it felt that the financial requirements “exceed the entrepreneurial risk”.
Switzerland presently has around 20 million FM radio receivers, but only 300,000 DAB receivers and an unknown quantity of newer DAB+ receivers. The commercial radio industry there noted that it anticipates greater competition for radio listening will derive from internet-delivered services.
Both German and Swiss commercial radio have warned that a phasing out of FM technology would lead to lower revenues, reduced investment and fewer jobs in their companies, and would thus reduce diversity of media voices in their markets.
At the same time, elsewhere in Europe, the decision by the French government that every new car in France will have to include a digital radio from 2012 is looking increasingly challenging. At the recent EBU Digital Radio conference, it was revealed that the decision had been made by the Ministry of Industry without the benefit of prior consultations with technology companies.
The French media regulator, the CSA, is only now meeting industrialists this month to discuss the urgent requirement to manufacture car radios by 2012 that include the T-DMB digital standard (a variant of DAB) adopted in France.
Although both the DAB+ and the T-DMB technologies are part of the DAB family of standards, the overwhelming majority of the nine million DAB radios purchased to date in the UK are unable to process either DAB+ or T-DMB signals and would therefore be of no use in Germany or France. Swiss commercial radio, meanwhile, has expressed more interest in using another technology, ‘HD Radio’, which is not part of this DAB family of standards but is the digital radio broadcast system already used in the US and which requires altogether different radio receivers.
[Many thanks to Michael Hedges for his translations and for his excellent ongoing coverage of these issues in Follow The Media
Grant Goddard is an independent radio analyst. Read his Radio blog here.