Over the past year, we in sales have been out and about with a presentation called “the Age of Consent” (double entendre, audience already on our side) in which we argue the case for commercial radio’s successful future. In the presentation, we suggest 6 key elements that a radio station needs to do well in order to flourish, in an era of unprecedented choice and opportunity for the consumer to spend his or her time:

Brand
Content
Distribution
Transaction
Community
Technology

Let me flesh that out a bit.

Brand

When given a choice of a lot of product in any market, people gravitate towards brands, towards what they know, trust and understand. Brands help people make choices. There are hundreds of brands in commercial radio, some stronger than others. We’re lucky enough to currently work for one of the strongest brands around, but even then, we have our work cut out to get people to understand what the station truly stands for. The phrase Rock n Roll, for example, has a different connotation for consumers, and some have clearly chosen not to engage with Virgin Radio as a brand.

Content

Music is still the crucial, determining factor when a listener chooses a music radio station, but music is increasingly available everywhere, to everyone. If you want to listen to The Killers and you have broadband access, you can be listening and watching them within seconds, no longer do you have to wait for the Virgin programmer to put it on the playlist. Most people don’t do this yet, they are still relatively happy with the choices we make on their behalf. However, the generation behind them, will.

So, the bits between the records are crucial. What the DJs say, how we report the news, sport and travel, is increasingly important because that is the scarce content. You want to listen to JK and Joel, you get two LIVE chances a week. I’ll wager that Russell Brand attracts people to Radio 2 who don’t go near that station at any other time. They aren’t listening to him hoping he’ll play a great set of records, that’s merely a by-product of listening to him, for him.

Having said that, Geoff made a great point in his earlier blog about surprising the audience and the reaction that he got when he went “off” playlist. Radio is a discovery medium, a reminder, a prompt. That’s what it does so well. I heard the Beat’s “Mirror in the Bathroom” the other day and went home and downloaded in on iTunes. Radio = job done. As an aside, what I’d like to do is to download that from our site in the future and complete the purchase cycle - maybe that opportunity is coming too.

A playlist that delights in occasional surprises, combined with great bits between the records, and radio can handsomely match the ipod shuffle.

“Content is king” is the cliché, and like many cliches, has an element of truth to it. Content is valuable because it is scarce and the talent that provides valuable content is expensive because it is scarce. Take our own Iain Lee. Iain has a cult following. He’s a DJ, but he’s digital, not disc. He permeates chat rooms, YouTube and blogs and his show lives far beyond the 3 hours he has on air each week. This is the scarce content that we have to deliver to remain relevant to the coming generation. By the way, I have no idea how expensive he is, I’m merely using him as an illustration.
Distribution

Frankly, we’re not clever enough to yet know how the listener habit is going to fully evolve, so we say, hedge your bets. We call it the MARTINI solution – ANYTIME, ANYPLACE, ANYWHERE. If you’re under 35, skip that reference.

Anyway, get on all the platforms you can, if you can afford it, because the distribution picture is uncertain. Emap were the first group on Freeview, and their brands have certainly benefited from the exposure. Virgin is still the world’s most listened to commercial radio station. The picture is changing rapidly, as Adam’s blog on the Ofcom report illustrates so well. We’re very well placed here, as the most widely distributed commercial radio station in the UK. It’s expensive, undoubtedly so, and we all saw the choice Fru Hazlett laid out in her time at Gcap, but I think we have to be on these platforms until it becomes clear what will win out.

Brand, content, distribution. At this stage, I should confess that I nicked that three word mantra from an Emap presentation a couple of years ago. What we did is add the following three to it:

Transaction

Companies like Sky and Vodafone have a key “metric” called ARPU (average revenue per user). If you divide the revenue we made last year with the number of listeners we had last year, each listener “generated” about £9. That ain’t a lot, frankly. Going forwards, can we get them to they buy a t-shirt, a mug, a download, a concert ticket, a bottle of wine? It is worth noting that Classic FM now generates over 20% of their revenues from beyond the world of “spots and space” - a significant number that will run into £millions every year.

Increasing transactional revenues helps insulate a radio station from a turbulent ad market - I’m sure you know that the market is pretty tough at the moment, and is forecast to remain so well into 2009. Growing our transactional revenues would thus begin the process of being dependent solely on advertising.

One thing is for sure, the ad budgets of clients are not growing in proportion to the increasing number of opportunities out there. Ten years ago, the Evening Standard had something of a monopoly when it came to occupying the time of commuters on their way home, and thus, a greater handle on advertisers wanting to get the attention of the commuters. Now, you have at least two free newspapers thrust at you every evening, plus Short List and Sport magazine every week, digital bill boards, and that’s before we get to the pleasures of mp3 players (or listening to someone else’s), PSPs etc. With the choice available in the Age of Consent, it’s no wonder that the circulation (and, I suspect, revenues) of the Standard has declined over time.

Community

A media agency called OMD conducted a piece of research that concluded, “music is possibly the single greatest mechanism by which young people fulfil their social needs.” This research has recently been backed by a further study from MTV and Microsoft. They discovered, world-wide, that the most popular leisure activity for 16-24’s is listening to music.

Music is loved, across demos, across the world. It isn’t going away as a social currency. We take great comfort in the knowledge that music is used by advertisers to engage with their consumers – and they often use us to engage consumers on their behalf. Our existing brands, content and distribution should give radio an advantage over new methods of music platform, if we get the programming right.

The other areas we have to get right is to create an easily understood community that our advertisers can tap into. They still need scale, but scale like a well constructed tribe. talkSPORT and Kiss are two examples of radio stations who have carved out big but well understood audiences, and they reap the rewards.

Technology

The 21st Century consumer is currently interested in things that are FREE, MOBILE and WIRELESS. Handily for us, radio does that job rather nicely.

The walkman didn’t see radio off, nor has the MP3 player. It’s worth remembering that the limitation of an mp3 player is you and your knowledge; by definition, you can only download songs that you know. Radio extends your knowledge base; it has an ability to delight and surprise and feed our love of music. You don’t remember all the records you love until you hear them again, and chances are, someone else has to play them to you. Currently, the industry best placed to do that is radio. We think that radio gives you the key words that you then Google.

The conclusions to draw after that swift canter?

As Virgin Radio, we could tick many of those six boxes. Great brand and content (the latter is always subjective, of course), distributed across a variety of platforms. Against those six criteria, we fell down in our inability to generate revenues beyond “spots and space” - those transactional revenues were in large part unavailable to us because of the Virgin brand licence agreement.

The new brand, by contrast, is unfettered in that commercial world. So, if we think we can make money from a music subscription service, we can plan and execute accordingly.

The challenge will be to create a brand that has resonance with both the existing audience and the many millions who have decided that Virgin Radio is not for them. Rather than be frightened by this, we should view that challenge in the same way as the US fighter pilot outnumbered by Japanese planes in the Second World War. He described it as a “target rich environment”, and that’s what the people who don’t currently listen represent to us.

We can’t get carried away. Young people are currently listening to less radio than they were, and that demographic time bomb is slowly ticking. There are enormous challenges facing commercial radio in the UK - a turbulent ad market, the advances in the free market, regulation, the BBC, audience fragmentation, and changing consumer habits to name but six. Young people are currently listening to less radio than they were, and that demographic time bomb is slowly ticking.

In order to move ahead, we have to confront the brutal truth, and the brutal truth is that UK commercial radio has made many mistakes. And we shouldn’t kid ourselves, we’ve made our fair share. We have created radio stations that have little or none of the things described above: no brand, little interesting content and poor distribution - that combination tends to equal no audience. Little wonder that we decided to close Virgin Groove and can Viva, for example.

However, those challenges to radio can be successfully met (learning the lessons from the past is a good start).

Total radio audiences in the UK are at near record levels, despite living in the Age of Consent, where we are all substitutable, and despite unprecedented changes in technology.

Music is still incredibly important to consumers, the most important thing young people value, and advertisers continue to buy into the communities that music creates.

If we’re available when they want and where they want, we can remain relevant to the next generation

And radio is a LIVE medium, which is a real strength.

Radio is a simple business, on paper. If we develop an audience of sufficient scale, a community, then it will attract advertisers. If we get advertisers, we can invest that back in the business, and grow the audience, which will attract more advertisers, and we can invest that back again. Money tends to follow audience and create a very virtuous circle.

The beauty of the new brand is that many of those attributes we on the sales floor consider to be crucial for a successful commercial future are already in place. And sales people love a new train set to play with, and that’s what we’re just about to get. Happy days!

Nick