The Big Question: Why are radio audiences rising, and how come the industry is in crisis?

Why are we asking this now?

Figures released yesterday by the industry body Rajar caused delight in the radio sector as they showed that the overall audience for the medium rose in the first quarter of 2009 to a record 45.76m, or 90 per cent of the entire population of the United Kingdom tuning in every week. Commercial radio had an audience of 31.5m adults, increasing its reach and share of the audience compared to the previous year.

But isn't the radio industry in crisis?

Yes. The commercial sector – at least – is in dire trouble with 13 stations having closed since the start of last year (including Edinburgh's Talk 107, Bollywood station Zee Radio and magazine spin off Mojo radio). In a recent government-commissioned review, John Myers, a former chief executive of the GMG Radio group, warned that 50 more stations could go under as the economic downturn restricts advertising spend.

The sector has consolidated in recent times but the largest group, Global, last week announced further job cuts likely to hit its Xfm and Gold networks. The digital audio broadcasting platform (DAB) has badly faltered, with a cash-strapped Channel 4 having last October withdrawn plans to go into radio.

So why are audiences suddenly on the increase?

Andrew Harrison, chief executive of the RadioCentre, which represents the commercial radio industry, admits the figures were "counter-intuitive with all the doom and gloom in the media sector". But he says that radio has shown itself to be a "naturally complementary medium" well-suited to an era of digital technology and multi-tasking.

The Rajar figures showed that 20 per cent of radio listening is now on digital platforms, such as personal computers, MP3 players and satellite televisions. "Go back five years and the vast majority of radio listening was in the kitchen, bedroom or bathroom, and the moment you left your home you were cut off from radio," says Harrison. "But MP3 players, mobile phones and computers are portable and radio sits quite naturally on those devices."

Radio has also become more easily accessible online, he says. "Bill Gates's famous mantra of wanting a PC on every desk also means that there is effectively a radio on every desk as well."

But don't modern consumers like to compile and listen to their own playlists?

Yes they do, witness the success of iTunes and music websites such as Spotify. But what these latest figures tell us, says the BBC's head of radio Tim Davie, is that many listeners value more than ever the personal touch of a good radio presenter. Radio 1's breakfast host Chris Moyles grew his audience last quarter to 7.7m, up from 7.3m in the previous three months.

Johnny Vaughan and his co-host Lisa Snowdon held on to the leading position in the London breakfast show market, growing their audience to 1.07m. "It's that talent which connects beyond the playlist and will become more valuable over time," says Davie. "Why these numbers are encouraging is that they reinforce the value of people who build a personal relationship with the audience or provide context."

So it's all to do with technology, is it?

Not exclusively. Content has played a major part in the recent upturn in audience, most notably the coverage of economic turmoil. BBC Radio 4 has seen its weekly reach grow to 9.98m and its share of the audience rise to 12.5 per cent, the highest figure it has achieved since the current ratings methodology was introduced a decade ago.

Mark Damazer, the network's controller, believes the recession has attracted listeners worried about the possible effects of the credit crunch. "I'm not saying that we are the exclusive purveyors of good programmes on the recession but Radio 4 offers The World at One, PM, the Today programme and The World Tonight. These form the backbone of the schedule and are going to give you more depth per square minute." The new figures show that PM, which is presented by Eddie Mair, recorded its biggest ever audience.

What about the rest of the output?

The number of big news stories in recent months have played another significant role in the listener increase, with Damazer believing that interest in the economic crisis and the early days of the Obama presidency have helped to drive new listeners towards other parts of the Radio 4 schedule, such as The Archers and the network's comedy output. "It may be that people are seeking some light relief after the slightly depressing news," he says. "What happens is that a rising tide carries both ships."

Who were the other winners in radio?

All the major BBC networks enjoyed an uplift, with the exception of Radio 2 which, though it remains Britain's most successful station, seems to be suffering from the sudden departure of controller Lesley Douglas over the "Sachsgate" scandal last October. Global Radio, although it saw national station Classic FM lose audience, enjoyed an increase in total listenership to 18.53m across the group. Absolute Radio, which had recently lost audience following a rebrand from Virgin Radio, saw its numbers improve sharply. Clive Dickens, its chief operating officer, says the company was embracing digital technology rather than seeing it as a threat. "We have had 1.5m podcasts downloaded in the last six months," he says.

So what's the true state od commercial radio?

Not great. Although commercial stations are now being listened to on these many new devices the companies have to pay for the right to transmit on those platforms and their operations are becoming increasingly complex, Harrison points out. "Our transmission costs are going up and we don't necessarily get the audience [increase] for it to be an exponential gain," he says. "Mobile phone listening tends to be on FM so the stations need to pay to keep their FM signal going as well. Although audience is growing it is fragmenting across distribution platforms."

The task now is for commercial radio companies to persuade media buyers that they offer a great platform on which to advertise. "Stations can now go to advertisers and say, 'We've now got more listeners and are more relevant to you than ever'."

Then how can it survive?

Partly by holding on to its talent. Tim Blackmore, chairman of the Sony Radio Academy awards, which take place on Monday, says the lack of opportunities to broadcast nationally on commercial radio means that the sector's best young presenters are invariably poached by the BBC. "Commercial radio has always grown talent but those people have moved to the BBC because perfectly naturally they want a national outlet." In those circumstances he argues that the commercial sector has done well to increase its audience. "It has been a challenging year and yet through it we have seen radio continue to deliver high quality audio," he says. "It shows that people think the product is good – the issue is to what extent the stations can guarantee revenues to continue providing that work."

So does radio have a healthy future?

Yes...

* Radio is a uniquely flexible medium which audiences engage with, even when performing other tasks.

* Rather than being threatened by the growth of digital technology, radio gains from it.

* In covering big news stories, radio provides a depth of information that television cannot match.

No...

* Commercial radio remains in big financial trouble with no sign of an upturn in advertising.

* Audiences demand visual entertainment from media and radio is hardly best placed to provide it.

* The BBC unfairly dominates the sector and attracts all the best presenters.

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