GODDARD January 2007

Ofcom has approved BBC proposals to include radio show podcasts within the on-demand services offered through the 'iPlayer' interface to be launched later this year. In its newly published Market Impact Assessment, the regulator noted that “from an audience standpoint, it is in many respects an exciting prospect” as the value of on-demand audio services is growing at 74% per annum and is currently worth around £1.6bn. Despite RadioCentre’s complaint that “the iPlayer is likely to affect adversely commercial broadcasters’ ability to monetise their own content”, Ofcom decided that “the BBC service could help to increase listener familiarity with audio downloading, and this in turn could boost demand for competing services.” It concluded that “there is a possibility that the BBC proposal would help to kick-start the growth of the market” in which it estimates that BBC podcasts will attract 770m hours of listening per annum by 2011. GCap Media plc had suggested to Ofcom that the BBC’s podcasts would undermine listening to its own simulcast radio services, but the regulator’s consumer research found that only 17% of potential iPlayer users said they would reduce their listening to radio over the internet. More significantly, 50% said they would reduce their listening to broadcast radio, while 44% said they would reduce their listening to CDs. Ofcom concluded that the iPlayer would only have “minor impacts on [commercial] radio revenues” while “the effects on paid downloads and CDs may well be significant.” RadioCentre and GCap had argued that commercial radio podcasts should also be made available from the iPlayer, but Ofcom said it “did not believe that the BBC should be obliged to open up access to the iPlayer to non-BBC content” because this “could increase the likelihood of the iPlayer becoming the dominant platform for the provision of audio downloads.” According to Ofcom, GCap and Chrysalis plc had “strongly asserted that the BBC’s non-audio downloads will further inflate the cost of acquiring rights to a level that is unfeasible for the commercial sector”. Chrysalis reported that the BBC had signed a £0.5m three-year deal with The Alliance for the use of copyright material in its 'Listen Again' service. However, Ofcom concluded that, “given that the markets are in their infancy, it is impossible to assess whether the prices being paid are an accurate reflection of market value or represent the BBC paying ‘over the odds.’” Ofcom’s forecasts of the demand for 'audio services' predict listening to “noninternet radio” falling from 53bn hours per year in 2006 to 49bn by 2011, while listening to “internet radio” doubles from 2bn hours in 2006 to 4bn by 2011. Ofcom said its projections demonstrate that “radio listening is expected to decline over time, with increasing substitution from non-internet radio to internet radio.” The only two provisos suggested by Ofcom to the BBC are that free downloads of book readings “could stifle the recent growth in the market for
News: Ofcom Approves BBC 'iPlayer' Proposal To Offer Consumers Live, On-Demand And Podcast Radio Content page 2 ©2007 Grant Goddard

audio books” on CD and cassette; and that high quality recordings of popular classical pieces “could have a direct negative impact on commercial sales of the same work.” The Ofcom assessment only considered podcasts that do not include fulllength songs because the BBC is still in negotiation with The Alliance for the relevant rights. The regulator noted that “making available full-track commercial music is likely to have a significant negative impact on commercial music download services” and should be the subject of a further Public Value Test. Ofcom’s research found that music comprises 91% of the output of 'BBC Radio One', 84% of 'Radio Two' and 92% of 'Radio Three'. After receiving Ofcom’s report, BBC Trustee Diane Coyle commented: “The Market Impact Assessment forms only one part of the Public Value Test process. In reaching our eventual decision, we must also consider the potential public value created by the on-demand proposals.” She added: “It is the Trust’s responsibility to examine both the Market Impact Assessment and the Public Value Assessment [to be performed by the BBC Trust], and our decision will be based on an informed judgement of the evidence, in the best interests of Licence Fee payers.”

[First published in 'The Radio Magazine' as 'Ofcom Approves BBC Podcast Proposal' [sic], #773, 31 January 2007]

Grant Goddard is a media analyst / radio specialist / radio consultant with thirty years of experience in the broadcasting industry, having held senior management and consultancy roles within the commercial media sector in the United Kingdom, Europe and Asia. Details at

News: Ofcom Approves BBC 'iPlayer' Proposal To Offer Consumers Live, On-Demand And Podcast Radio Content page 3 ©2007 Grant Goddard

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