DCMS Consultation - The Outcome
The DCMS consultation, launched on 13th February last year, set out policy proposals to relax current financial restrictions on community radio, whilst not altering community radio's unique role in terms of supporting localness and community engagement. It sought specific views on:
The consultation closed on 23th April 2014.
- The lifting of the restriction on community radio stations preventing them from taking any income from on-air advertising or sponsorship if they overlap with a commercial radio licence whose coverage area includes 150,000 adults or fewer.
- On the restrictions preventing community radio stations from taking more than 50% of their annual income from on-air advertising and sponsorship, if they remain appropriate, and what, if any changes, are justifiable.
- On the case for further licence extensions for community radio stations in the event of a decision to implement a radio switchover.
- On improving the effectiveness of the Community Radio Fund.
The consultation closed on 23th April 2014.
What is means for community radio.
It took almost 9 months but finally the Department for Culture, Media and Sport’s Community Radio Consultation is published and here is The Radio People's 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?
The outcome of the consultation was release by the DCMS on Thursday 22nd January.
The outcome is that the Government is planning to bring forward the following package of changes to the Community Radio Order 2004
Where a community radio station has an annual income of £100,000 it would be allowed to raise £15,000 per annum from advertising and/or sponsorship and a further 50% (maximum) of their annual income disregarding the £15,000 (i.e. (£100,000-£15,000=£85,000) x 0.5=£42,500) from the same sources. The total raised would be (£15,000+£42,000) £57,500.
The Government recognises that evidence base evaluating on the impact of community radio on the communities served is currently limited and we will consider whether research is needed to address this gap. They will involve the Community Media Association and Radio Centre, (the Commercial Radio representative body), in this project.
The amendments to the Community Radio Order 2004 will include transitional provisions to ensure stations whose licences are due to expire later in 2015 can renew these for a third 5-year term from that date.
Read the full report here