It took almost 9 months but finally the Department for Culture, Media and Sport’s Community Radio Consultation is published and here is our take on the recommendations:
The government has removed the ‘absolute rule’ restriction. This prohibited some stations from taking any income from on-air advertising or sponsorship, if they overlapped with a commercial radio licensee whose coverage area included 150,000 adults or fewer.
The ‘absolute rule’ was always overly restrictive and it’s good to see it abolished, albeit with conditions. Why this wasn’t included in the Community Radio (Amendment) Order 2010 I’m not sure. What’s worrying is that the underlying principle of applying funding restrictions to community radio was, to use the government’s own words, ‘to provide an appropriate level of protection to existing small commercial radio stations at a time when the impact of community radio stations could not be quantified’. Does this mean that the government is now able to quantify the impact of community on commercial and that impact is minimal? Should that be taken as a comment on the strength of small-scale commercial stations or the commercial-weakness of community radio? I’m not sure.
With the abolition of the ‘absolute’ rule the government has also said that Ofcom ‘may want to consider’ whether there is scope for the impact assessments on commercial radio to be carried out on a lighter touch basis. That will please the over worked and under resourced regulator I’m sure. But Radio Centre members are clearly unimpressed.
The government also asked if there should be a ‘relaxation’ of the restriction preventing stations from taking more than 50% of their income from on-air advertising and sponsorship.
Not surprisingly, the response from commercial radio was to oppose any increase in the 50% limit. The Radio Centre said that increasing the proportion of income a community station could take from commercial sources would alter the nature of community radio. Amongst community stations there was a clear consensus for introducing a Fixed Revenue Allowance (FRA) before applying the 50% rule. This was a classic ‘alternative close’ by the DCMS. By only putting two options on the table they predetermined the outcome. A ‘schoolboy error’ by community radio stations accepting one of these and not choosing the third option that the DCMS didn’t even put on the table.
Nevertheless, the DCMS report goes on to say ‘Having considered the representations made by commercial stations, the Government believes the fixed allowance should be set at £15,000 per year’. So that’s where the £15k has come from! It equates to around 25% of the mean average income reported by community radio stations in 2013.
We believe that the FRA and the £15,000 allowance are both problematic, but first the context of that 50% rule.
The legislators introduced the ’50% rule' in an attempt to ensure that community stations don’t become commercialised. At the same time, there are already a number of statutory mechanisms in place to regulate this. In fact, there are still areas of ownership, accountability and governance that need strengthening. So don’t be under any illusion, even with the Fixed Revenue Allowance, keeping the 50% rule is still a serious threat to community radio’s survival.
The Fixed Revenue Allowance introduces an income tax threshold-like system with a ‘tax-free allowance’ of £15,000 and a flat 50% rate immediately thereafter. It introduces a new layer of reporting for stations and compliance monitoring for Ofcom. Not that Ofcom’s compliance monitoring is fool proof. We all know of community stations that regularly and routinely apportion the income from mixed media campaigns — advertising, sponsorship, outside broadcasts, web advertising, etc. — in such a way that they don’t infringe the ’50% rule’. That doesn’t mean that less than 50% of their income is from advertising & sponsorship. It just means they are ‘smart’ when it comes to creating campaigns and invoicing funders. This Fixed Revenue Allowance will just give them a greater margin to play with.
And as for that figure of £15,000 - if it grows at the same rate that the community radio fund has grown over the last 12 years then it will be less meaningful with every year.
The unique nature of community radio is how it is expressed on air and how the listener experiences it. The focus should be on creating a distinctive sound for the sector not jeopardising its financial sustainability with increased levels of regulation and financial control.
Maybe it’s time for another Consultation?
David Duffy is a Partner at The Radio People