No Match Found
The radio market comprises the revenues from public and private radio licence fees, as well as advertising and sponsor spending on radio stations and networks. All figures relating to advertising are expressed net, i.e. excluding agency commissions and discounts.
Not included in this chapter, due to the lack of available data, are radio programmes offered by music streaming or online music providers that are financed through subscription or advertising models.
In an Internet-connected world, information is delivered and consumed in huge amounts across multiple channels, preferably in realtime. This interconnectivity also comes to radio when it is combined with mobile devices. Tonio, an Austrian-based start-up, has focused on connecting the radio audience with a second mobile screen or, in the case of stand-alone radio, even to a first screen. Via an inaudible code, transmitted simultaneously with the actual audio signal, radio stations can send content-related information to the listener.
With this technology, radio stations can synchronise their platforms in a way that allows the audience to access realtime data relating to content they are listening to at the moment. For example, a listener hears a song of interest for the first time on radio but doesn’t know the artist. By looking up the radio station’s app, additional information can be gathered. And by being linked to the responsible ticket shop, concert venue or corresponding music video, the audience can benefit even more from this multi-screen experience. Through mobile location tracking, radio channels can even display tailored information like local traffic jams. This technology uses the display as an additional channel for advertisement, thereby supplementing audible-only radio ads as well as showing independent adverts.
In a saturated Swiss radio market, this multichannel approach could open up possibilities for nationwide and local radio stations to earn additional marketing revenues, interact more with the target audience by means of a cross-channel strategy, and differentiate themselves in the radio market by establishing a new dimension of user experience.
Swiss Radio landscape
Radio remains widely popular in Switzerland. A Swiss market survey reports that about 5.9 million people – aged 15 and above – listen to radio on a daily basis. This is equivalent to 84 per cent of the Swiss population. By way of comparison, Internet is only reached by 80 per cent of the population on a day-to-day basis. Moreover, this daily consumption of radio is not merely a quick tune-in/tune-out: it amounts to an average of roughly 114 minutes in the German and Italian parts of Switzerland and nevertheless all of 96 minutes in the French part. These numbers have declined slightly compared to the previous year. Market shares vary greatly depending on the particular region and are held mainly by Swiss public channels from SRG SSR (with a command of about 75 per cent), followed by Swiss private radio stations which account for about 20 per cent. Foreign radio channels only reach some 5 to 10 per cent of the overall market, depending on the area. Public broadcaster SRG SSR, as a not-for-profit organisation, is responsible for providing all parts of Switzerland with adequate radio coverage. With a current share of 76%, this public service is mainly funded by licence fees, and the rest of its income is derived from commercial activities, e.g. TV advertising, sponsoring, programme sales and co-productions, as well as from government direct payments.
In contrast to public channels, private channels can also earn money from radio advertising in addition to their share of the licence fees. The advertising market is volatile depending on the state of the economy, which makes private radio more vulnerable to a possible decrease in advertising spending. The car industry is seen as a key driver for the radio market: it is accountable for about 25 per cent of all radio advertisements. However, in the first half of 2017, investments in radio spots for the car industry were comparably low. Retailers are also an important source of radio ad revenues. This segment as well was less active. In 2017, radio advertising revenues resulted with a 4.8 per cent decline to a total of CHF 114 million. Later in 2017, advertisers found more and more their way back to radio after detouring to online advertising or abandoning other traditional advertising formats. Radio as an advertising medium allows national campaigns to obtain a wide reach even at short notice, which is necessary to generate traffic. On the other hand, due to its very local focus radio advertising is quite a unique advertising format in Switzerland. This highly targeted medium always addresses a special clientele and accordingly a small niche market which is not effectively accessible by other formats such as music, TV or filmed entertainment. Mini advertising markets of this kind hold are not opportune for big international players because the format is so localised that it offers very little potential for economies of scale and profitable market entrances. Not even the Internet, which otherwise poses such a challenge to most of the traditional advertising channels, is expected to supplant good old radio advertising.
The average Swiss citizen is exposed to radio for up to two hours every day. During that time, the consumer listens actively and passively to a mixture of music, news and commentary. Passive listening is important to radio broadcasters, because it doesn’t force the consumer to make a dedicated choice. Even though streaming services such as those from Apple and Spotify are integrating this mixture of content and advertising, the local focus of radio ensures that it is in a strong selling position. This, in combination with licence fees that are radio’s main source of income, helps Swiss radio to remain a stable industry.
Switch to DAB+
Radio reception in Switzerland is possible in three ways: conventional FM transmission, digital transmission and Internet radio. As of February 2018, more than 60 per cent of the Swiss population listened to radio in a digital format, with 34% doing so by means of DAB+ radio and the rest either via the Internet or cable reception. This represents an increase of 10 per cent compared to the end of 2016. While digital radio is growing rapidly, traditional FM transmission is on the wane. Over 600,000 DAB+ radio units were sold in 2017, bringing the total to 3.5 million DAB+ compatible radios currently operating in Switzerland.
In late 2017, the Swiss Federal Council announced the schedule for the transition from FM transmission to digital radio DAB+. After Norway, Switzerland would be the second country to abandon FM completely. With the rising popularity of digital radio, new insights have emerged, indicating that this phase-out is likely to be completed earlier than initially foreseen, namely in 2021 – three years ahead of the original schedule.
For the successful switch to DAB+, several challenges need to be mastered. First and foremost, the DAB+ network must cover every nook and cranny of Switzerland: closing gaps, especially the dead spots associated with tunnels, is a priority given that listening to radio while driving is one of the most common ways to do so. Full coverage has yet to be achieved, but most tunnels should be properly equipped by the end of 2018. Sales of radio systems that don’t meet the required international norms are still being made. Furthermore, as the transition to digital radio in Norway showed, user rates dropped after the deactivation of conventional FM transmission. This leads directly to lost revenues for the radio stations. A lack of access to the new technology and especially the high switching costs of car radios are hindering the adoption of DAB+.
Because of the importance of radio consumption in cars, accessibility of the DAB+ technology needs to be prioritised. As of today, over 85 per cent of newly sold cars are equipped with DAB+ compatible radios. Yet, at the start of 2018, the total number of such car radios amounted to only 1 million in all of Switzerland. For this transition to be a success, it is absolutely crucial that as many users as possible have access to DAB+ by the time the project is completed. In effort to encourage broad public acceptance of this new radio technology, the Federal Office of Communications plans to spend CHF 5.5 million, funded by public fees, on an image campaign.
Moreover, this digital network can only be operated cost-efficiently if all radio stations implement the technology. If certain radio stations choose not to embrace DAB+, the costs to the other radio stations would rise. So that full conversion can be achieved, the government is granting subsidies for the adoption of DAB+ until 2022. After the phase-out, the lower costs of digital radio in contrast to FM transmissions should compensate for the elimination of those subsidies.
Due to technological and economic advancements, as well as the change in media usage behaviour, the Radio and Television Act is to be replaced in the medium term by a new law on electronic media. In light of the increasing importance of media consumption via the Internet, the outdated existing law needs to be supplemented. As a result, it will no longer matter on which channel Switzerland’s Service Public will be offered; rather, that is simply made available and a diverse content is provided in all language areas.
While each language region in Switzerland has its own preferences, one constant remains: Swiss public radio reaches the largest audience regardless of region and claims overall the biggest market share. Around 1.5 million people tune in to SRF 1 on a daily basis, while around 1.1 million people listen to SRF 3. The combined channels of SRG SSR lead the rankings in the different language regions, with the public channels achieving a 74 per cent market share in the Italian speaking part and 64 per cent in the German and French speaking parts.
Energy Zurich remains the most popular private radio broadcaster in Switzerland. Together with Energy Bern and Energy Basel, they are subsidiaries of Ringier. Radio 24 is no longer the second most listened-to station, as FM1 took its place. Even though Energy Zurich holds the top spot, the radio station has lost listeners: the total daily number declined by 15 thousand to 260 thousand listeners per day. Swiss private radios have a market share up to 31 per cent in the German speaking part, and as little as 18 per cent in the Italian speaking part. Foreign private radios hold a relatively low market share in the 5 to 10 per cent range.
"There is a trend towards branding for Swiss radio stations. To achieve this, one must be able to differentiate oneself through content and actively generate a fan base on various channels such as social media or live events."
Swiss Radioworld AG recently introduced “programmatic radio” and has united more than 50 radio stations in a single network that uses an automated spot ad delivery system. This facilitates data-based campaigns that are fully automated and playable in realtime. Advertisers have the ability to dynamically launch campaigns at the right time to a relevant audience. The first data-based campaign in Switzerland was carried out during the Swiss national football team’s initial World Cup match on 17 June 2018, when different messages were transmitted depending on whether the Swiss national team was winning or losing. Event-related data of this nature might also include weather or traffic information, and the spot that is best aligned with that data is then played. There are four different categories of targeting: A/B targeting – i.e. broadcasting multiple spots which change based on the event’s outcome; single targeting – broadcasting a spot only if a specific event takes place, e.g. when the sun shines in a region, a local ad for ice cream is run; targeting combo – if there is heavy traffic and hail starts to fall, an advertisement for car insurance is played; exclusive targeting – customer-specific targeting, like information on a nearby shop’s special offers or deals on overstocked items. With this step towards digitalisation, the radio market aims to achieve growth again after years of stagnation..
"The radio market was static for a long time. Due to innovations in programmatic radio, a fresh breeze is blowing through the industry. We believe that the media genre of radio will be revolutionised by data-based products.”
After the previous changeover to of FM-only radio, Swiss radio is now at the threshold of its next technologically inspired (r)evolution. With the implementation of Swiss-wide DAB+ and Internet radio, FM broadcasting will be relegated to the history books. The full switch from FM to Internet and DAB+ is expected to be completed by 2021. With this change, Switzerland will follow Norway as one of the first countries to apply a fully digital system. But the complete shutdown of FM broadcasting is expected to take a while due to high switching costs of car radios and the partial lack of access to the technology.
Data analytics impacts radio broadcasters
The collection of data and understanding the findings is also gaining importance for radio stations. Analysing listener data, advertising and content gives broadcasters a more complete understanding of the audience they want to address and what content those people are interested in. Tracking user data is easier with online or subscription-based satellite radio than with traditional FM broadcasting. With the upcoming switch to DAB+, analysing the related data should become simpler for radio stations, and they can expect to benefit from the improved measurement methods.
Focus on local audiences
Compared to other media genres, radio has always had a sharp focus on its local audience. This gives traditional radio an advantage over global broadcasting and streaming services. Given today’s increasing desire for individuality, a single major radio provider alone can hardly fulfil listeners’ need for specialised content. Based on the audience’s information, broadcasters can tailor the content they want to send and thereby gain relevance. Radio stations need to approach listeners on a personal level by building a relationship with them and creating a community as a way of benefitting from the social and local networking dimensions. This can be achieved by being active on social media in combination with live events, new music and original, meaningful content.
Mandatory licence fees
As mentioned in the market overview, mandatory licence fees are here to stay in Switzerland. Swiss public radio is mainly financed by subsidies in the form of radio and television reception fees, which are paid by every Swiss household and business that owns a device with radio- or TV-reception capability. After Swiss voters rejected the surfeit of mandatory licence fees, the Swiss Broadcasting Corporation has started a reform process to optimise its operations and costs. At the same time, reception fees are set to be lowered from CHF 451 to CHF 365 per year as of 2019 but will be charged to every household – whether or not they actually possess a device capable of receiving radio or TV – as well as companies with revenues in excess of CHF 500,000.
Radio advertising and sponsoring is expected to remain in slightly negative territory. The decrease of 0.6% is mainly cushioned by radio stations’ local focus, steadily high listenership and population growth which allows advertisers to reach a broader audience. Licence fees will decline in 2019 for public radio stations, while the related income will increase for private broadcasters. The overall fee will be lowered from CHF 451 to CHF 365 but charged to every household regardless of the possession of a device capable of receiving radio or television. This increases the number of households chargeable for the fee, albeit at the lower rate. Mainly due to the decrease in licence fees, the radio market is expected to shrink slightly with a -0.3% CAGR through 2022.
Radio continuous to be part of the daily routines in Switzerland and Western Europe. Radio stations and the related advertising remain notable for their focus on a local audience, news and events. Despite the expected increase in revenues through licence fees in Switzerland, the radio market in Western Europe is expected to grow slightly more than its Swiss counterpart. In contrast to the -0.3% growth rate in Switzerland, the Western European radio market should experience steady growth at a 1.4% CAGR over the next five years.
Director Advisory, Strategy and Digital Change Expert, Bern, PwC Switzerland
Tel: +41 58 792 77 51