Digital could be the answer to a declining AM radio market

Radio industry hopefuls aren’t jumping at AM radio these days. CRTC statistics may paint a picture of a dwindling sector, but it’s far too soon to say whether business on the AM dial is for naught. Experts say that the declining AM radio industry, if it can hold on another 10 to 15 years, may be saved by the arrival of digital radio. According to the commission’s 2010 Communications Monitoring Report, there were 150 AM radio stations operating in 2009, eight less than the previous year. In 2005, the CRTC counted 180 private AM stations. In January this year, Corus Entertainment shut down two unprofitable AM stations in Montreal, and on Tuesday the CRTC approved another application by the company to return its broadcasting licence for now-defunct AM station CJUL Cornwall. Other AM stations are migrating to the FM band or rebranding in an effort to gain popularity. On Tuesday, Rogers Communications Inc. announced it is converting Ottawa’s CIWW 1310-AM from an oldies music format to an all-news station, 1310 News. The number of new AM stations entering the market has also reached a standstill. In 2009, only one new licence was awarded, compared to 36 for the FM band. As of this month, the CRTC had received only one request for an AM licence this year, and the application was returned due to a shortage of information. Listening statistics also show that AM is losing in popularity. In 2009, AM radio drew 18.8 per cent of total listening hours for radio, compared to 22.9 in 2005. As a result, AM station revenues are declining. In 2009, they grossed $306 million in revenues, down from $331 million in 2008. In comparison, FM stations earned $1.2 billion in 2009. While the number of AM stations declines, the number of private FM stations continues to grow, from 385 in 2005 to 495 in 2009. Wayne Stacey, a spectrum expert at Wayne A. Stacey & Associates in Ottawa, said part of the reason for AM’s fall in popularity is that it’s a more expensive medium. “The transmitting plants are expensive to operate and so you get to a point sometimes, especially if it’s possible to convert an AM station to the FM band, that it becomes a more economical proposition for the broadcaster to do that,” he said. “Your operating costs are always increasing, so you get to the point where you begin to wonder if it’s practical to keep it running.” Richard J. Paradis, a lecturer at the Université de Montréal’s communications department who specializes in media and communications, said in an interview that AM’s slow decline over the years can be attributed to a trend towards more music on the radio. “Basically, the quality of FM music over the years has just been much better, and AM has just been slowly losing,” he said. “Overall, radio in general has been slowly losing because of demographics and the fact that young people have all kinds of access to the music they want.” But Paradis said he isn’t concerned by AM’s decline. “I think it’s the normal progress of technology,” he said. David Bray, a partner at Toronto advertising agency Hennessy & Bray Communications who chaired the former Digital Radio Programming Committee, comprised of radio industry representatives, said in an interview that AM radio, and to some extent radio in general, has been declining for so long it is now a question of how to save the medium as a whole. He said FM radio is also an aging technology, and that over the past five-to-seven years, radio has lost a significant number of listeners among teens and youth. But experts say the industry—AM especially—could be saved by digital radio and other mediums like the Internet. Paradis said digital radio may help boost AM’s popularity because the technology will even the sound quality between it and FM. “Digital music means you’re going to have the quality of sound you would have on a good TV,” he said. “That’s why AM frequencies may eventually find some new value in the marketplace.” But digital radio, which launched in several countries in 1995, has yet to gain popularity in Canada despite its higher spectral efficiency and improved sound quality. In 1994, the federal government modified its table of frequency allocations to make way for digital radio, followed by the release of an allotment plan for AM and FM stations two years later. The stations were allocated to the L-band, which ranges from 1435 MHz to 1525 MHz. By the late 1990s, the CRTC had licensed 76 digital stations in six urban centres. But by 2009, the number of digital stations dropped to 41. While digital radio flourished in the United States and Europe, the technology struggled in Canada in part due to the high price of receivers and a decision to employ a distinct Canadian channelling system that demanded the customization of imported receivers. In December 2009, Industry Canada launched a consultation on the band’s spectrum utilization policy, suggesting that the portion of the band used for digital radio be reallocated for “flexible use,” including fixed and mobile wireless and broadcasting services. Despite the L-band’s lack of success, digital radio is now being taken up in another band. In late 2009, Industry Canada said it would allow experimental authorizations to broadcast hybrid digital HD radio in the FM band. In an email to The Wire Report, Astral Media Inc.’s manager of corporate communications, Hugues Mousseau, said the company, which owns 83 AM and FM stations across Canada, continues to monitor digital radio, despite its lack of success. “Astral, much like other broadcasters and Canadian regulatory authorities, continues to follow the evolution of new technologies and market conditions, but no precise plan has yet been advanced by industry in that regard,” Mousseau said. Elmer Hildebrand, president and CEO of Golden West Broadcasting and former chairman of the now-closed Canadian Association of Broadcasters, said in an interview that it remains unclear when Canada will make the move to digital radio. “When will we move to digital? That’s anybody’s guess at this point,” he said. Despite digital radio’s slump, Stacey said Canada may convert to the technology in the next 10 to 15 years. “That’s not an unusual timeframe in broadcasting when you do a conversion,” he said. Stacey added that one of the reasons the transition has lagged is that the spectrum freed up by the move isn’t all that appealing to broadband providers. “Probably the only other group that would be interested in the AM band, if the broadcasters didn’t have it, would be the radio amateurs. It’s not a band that is particularly useful from a commercial point of view,” he said. AM radio currently occupies 1.17 MHz of spectrum, from 535 KHz to 1705 KHz in the MF band. FM radio occupies a much larger spectral space of 20 MHz from 88 MHz to 108 MHz on the VHF band. Bray said the survival of many AM stations will hinge on their ability to remain in business until the move to a new medium or technology. “ is one of the only reasons why some have held on to their AM stations while they are losing substantial amounts of money … whatever form that digital may take,” he said. Despite these challenges, not all AM stations are struggling. Talk-radio formats on the dial are fairing better in English Canada than in French Canada, where listeners migrated more rapidly to FM’s music stations. Hildebrand noted that AM is particularly strong in Western Canada and Toronto. He said a station’s success has nothing to do with its band but with its management and programming. “One of the stations with the biggest audience is the news station in Toronto , and it’s an AM station,” he said. “It has more to do with what you program than what the equipment is.” Rod Francis, a producer at CTVglobemedia’s The Team 990 AM in Montreal, said successful AM stations thrive on the emotional and intellectual connections they make with the audience and by focusing on local content and promotion. “With a healthy AM radio station, it is more than just background noise in people’s lives,” he said. “There’s still room for . As long as people want to voice an opinion, as long people want to talk, as long as there are hot button issues, I think AM radio can still exist … in a strong way.” Francis added that the increasing popularity of broadcasting AM content on the Internet and smart phones has helped renew interest. “AM radio stations are now available on smart phones, Blackberrys, iPhones … We are striving to stay relevant, to stay connected with people in the technical sense.” kfournier@thewirereport.ca

Digital could be the answer to a declining AM radio market

Broadcast | October 15, 2010

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