Today’s blog post is an interview with our friend Philip Pilcher, Director of Policy and Regulatory Affairs at Bauer Media Audio. Philip has some interesting insights into the future of radio at a time when listening habits are changing and the digital platforms are playing an increasingly central role. He will describe in particular how voice assistants like Amazon’s Alexa, Google Assistant and Apple’s Siri are becoming a vital gateway for radio stations in reaching their audiences.
Tom Smith (“TS”): Hi Philip, thanks so much for joining us today. Could you please give us the background context on Bauer Media Audio and the issues that radio broadcasters are currently facing?
Philip Pilcher (“PP”): Hi Tom, thanks for having me! At Bauer Media Audio, we are passionate about radio, a trusted, reliable and culturally enriching companion, a social compass in a digital era plagued by disinformation and other forms of online harms. We provide some of Europe’s most-loved commercial radio stations including Magic Radio, Jazz FM, Absolute Radio and KISS in the UK, to an audience of 57 million listeners per week, across 8 European countries.
The radio industry is at a critical juncture. We are facing significant disruption, brought about by the rapidly growing popularity of new listening platforms with global reach, typically embedded within smart speakers and increasingly within connected car infotainment systems, and rapidly changing consumer behaviour.
It is imperative that such innovation can be harnessed to support (rather than undermine) media plurality and the broad range of public value that radio brings to listeners. Ultimately, politicians will need to decide what’s in their citizen’s best interests, as they consider how to regulate digital markets.
TS: How is the landscape changing?
PP: Historically, radio broadcasters have enjoyed a secure position in the audio value chain, where licences for broadcast have been granted by regulators, and broadcasters have owned or leased their own transmitters to reach their audiences at scale, at significant cost. Commercial radio broadcasters have aggregated these audiences to sell to advertisers, who value radio for its reach, price attractiveness, local targeting and speed to execute campaigns. Thanks to proper regulatory oversight, listeners have developed significant trust with radio brands, who are responsible for ensuring news is accurately reported, public messages are shared and content is appropriate for audiences.
This model is changing with the advent of Big Tech. As radio listening continues to migrate from analogue to digital channels, commercial radio is increasingly distributed through voice assistant platforms such as Amazon Alexa, Google Assistant or Apple Siri.
Big Tech platforms have benefitted from the longstanding trust established in radio brands to drive take-up of their smart speakers, including Amazon’s Echo, Google Nest and Apple HomePod, in-car infotainment systems, such as Apple CarPlay and Android Auto, and Android and Apple mobile devices, enabling them to become a popular way for listeners to access radio and provide an increasingly important route to market for the radio industry. Data shows that listening to radio is by far the biggest use case for smart speakers and digital voice assistants (on a par with listening to music streaming services). This, coupled with on-air “calls to action” which radio operators provide to educate consumers on how to use digital voice assistantplatforms, is driving the uptake of these platforms.
TS: Could you describe the opportunities that the new landscape produces?
PP: The radio industry is alive to the opportunities that disruptive innovation can bring. At Bauer, we see an opportunity to strike new strategic partnerships, increase the appeal of radio to younger, increasingly digital native, audiences, and diversify revenue.
Thanks to the long-term investments that we and others are making in digital audio product innovation and distribution, digital radio listening, which includes listening via voice assistants, DAB, smart phones and tablets, now outstrips listening via analogue means. In the UK, Bauer’s largest audio market, the digital share of all radio listening was around 58% in 2020. Also, the percentage of adults in the UK that listen to live radio via a smartphone or tablet has been increasing consistently since 2011, encompassing 27% of all adults in Q1 2020.
As consumers grow accustomed to new ways of listening, we see the opportunity for a new wave of digital innovation, benefitting listeners, radio broadcasters and advertisers alike, bringing higher levels of consumer choice and empowerment, new routes to market and the potential for tailored advertising. For example, Bauer has launched Audio+, which is a subscription digital radio service with online radio stations, on-demand shows, and other content. There are no ad-breaks and subscribers can skip up to 6 tracks per hour, even on live radio.
TS: I suspect you will say that the digital disruption also poses some significant risks for radio broadcasters?
PP: Yes, that’s right, it does. The balance of power is shifting: as radio consumption continues to migrate from analogue to digital channels, the distribution of radio is increasingly reliant on smart devices empowered by voice assistants, creating new spaces for audio innovation, but also putting at risk the secure position that radio has enjoyed in the audio value chain until now.
The popularity of smart speakers is impressive – the numbers speak for themselves:
- According to recent OFCOM research, “since their introduction into the UK market in 2016, smart speakers have steadily grown in popularity and are now owned by 50% of UK adults. In 2021, over a quarter of those listening to live radio are using a smart speaker, although the take-up is less common among older age groups”.
- Also, according to PwC, in the US, more than two-thirds of 25-49 year-olds speak to their voice-enabled devices at least once per day. Overall, the number of digital voice assistants in use is expected to reach 8.4 billion units by 2024, which is higher than the world’s population.
So whilst we welcome the opportunities that disruptive innovation can bring, radio’s growing reliance on voice assistant platforms has the potential to be a significant threat if one of the most important routes to market for radio is effectively owned and controlled by Big Tech platforms who will be able to act as ‘gatekeepers’ to radio content and custodians of valuable audience data.
For radio businesses to remain viable in this new environment, their output needs to be available for free on all platforms and findable by listeners.
TS: Have you done any research into these issues?
PP: Yes, we have indeed. In order to better gauge the opportunities and risks that these new listening platforms bring, we asked Frontier Economics, a leading economic consultancy, to assess how the rising usage of voice assistant platforms, including smart speakers, will affect future outcomes for listeners, radio broadcasters and advertisers up to 2025. Frontier’s economic modelling confirms that smart speakers and other types of voice assistant platforms (such as in-car infotainment systems) have become an important distribution channel for radio.
Going forward, Frontier conclude that there is a material risk that there could be a shift in bargaining power in favour of voice assistant platforms vis-à-vis radio broadcasters. This is because:
- By 2025, smart speaker penetration will likely have matured (at least in the UK) and consumers will be accustomed to using these devices;
- It is likely that ecosystems of services and content will be more established around smart speakers;
- It is likely that a higher share of radio listening will be via voice assistant platforms, as the popularity of these platforms grows;
- The number of households with dedicated AM/FM/DAB receivers may decline.
TS: It’s not just smart speakers, is it?
PP: That’s right. A similar set of challenges is also facing radio on other online devices and in vehicles, where radio listening has traditionally been strong. Now a growing number of in-car entertainment systems are internet connected, inserting a platform in between the radio station and the listener, and impacting on prominence, navigation and ease of use for the end user. Without further action, both from industry and regulators, this creates a further risk of radio being de-prioritised and intermediated by powerful gatekeepers.
TS: You’ve convinced me that voice assistants are going to be really important gatekeepers, if they aren’t already, but how exactly could adverse effects manifest themselves?
PP: The risks are manifold, and include self-preferencing, data-hoarding, and sherlocking. Let me explain what I mean.
- Given that voice assistants are vertically integrated, offering their own music streaming services and radio-like stations, there is a risk that voice assistants will seek to preference their own music streaming services and radio-like stations to the detriment of radio broadcasters and consumer choice. Also, there is currently a lack of clarity around how voice assistant providers decide on what result to return to a user, based on their request.Unfortunately, a user may be redirected to a competing radio-like or playlist service offered by the connected platform.
- Voice assistant platforms collect vast amounts of data from different devices and services, but access to this data by 3rd parties is restricted. Audience and commercial data are important for radio broadcasters, who largely depend on advertising revenues. But as the use of voice enabled devices grows, data insights received from these devices are low. Free flow of data is crucial for direct relationships between listeners, broadcasters and advertisers to exist and grow. Any interruption to this data flow represents a commercial risk for radio broadcasters and a hindrance to innovation.
- Voice assistant platforms have access to data they have gathered due to their gatekeeping role which provide them with unparalleled market intelligence, allowing the identification of successful services or products and the development of competing services or products by the gatekeeper. This allows voice assistants to re-package playlists to form ‘radio-like’ products that have the added advantage of being customised to the preferences and behaviours of their users using the data they exclusively hold.
Such behaviours would have the potential to impact negatively on consumers as operators would have less opportunity to invest in content, but there are also associated risks to innovation, consumer choice, media plurality and the provision of easy and free access to both commercial and public service broadcasting on radio.
TS: We know that regulators are nowadays crawling all over Big Tech. Have they recognised these issues regarding voice assistants?
PP: We believe that a new regulatory framework is urgently needed to mitigate the challenges such as self-preferencing, data-hoarding, and sherlocking, and to create opportunities for increased digital audio listening and innovation. Our view is shared by the wider audio industry.
The European Commission’s proposed Digital Markets Act (the “DMA”) represents a unique opportunity for EU lawmakers to tackle the growing challenges that voice assistant platforms in a gatekeeping position pose to radio.
We understand that the German, Austrian, French and Belgian governments are calling for the regulation of voice assistants under this instrument, and hope other Member States will follow their lead, as we are concerned that there may not be enough support in the Council for this to happen.
In addition to the DMA, the Commission’s timely sector inquiry into the Consumer Internet of Things, with its specific focus on smart devices (including smart speakers) and voice assistants should help preserve the contestability of digital markets and allow European companies to innovate and scale-up. The commercial imbalances and competition concerns that arise from the gatekeeping position of voice assistant platforms have been recognised in the preliminary report setting out the key findings of its inquiry.
In the UK, the government has just published the results of its Digital Radio and Audio Review, which concludes that “the government needs to consider the introduction of regulation which (a) places radio on the same footing as TV in relation to carriage and prominence rules and which protects radio’s content and its ability to reach listeners, and (b) extends the role of the new Digital Markets Unit (DMU) regulatory framework to digital audio platforms in order to guard against types of ‘gatekeeping’ behaviour which may disadvantage the place of radio and its ability to reach audiences.”
Also, the UK government’s recent consultation on its proposals for a pro-competition regime for digital markets is due to inform draft legislation enabling the newly created Digital Markets Unit to adopt and enforce regulatory Codes of Conduct applicable to firms with “strategic market status” – Apple, Google and Amazon are all expected to fall within this category.
TS: Would you argue that some of these issues are not purely competition issues?
PP: The new regulatory regimes have never been purely about narrowly defined competition issues. They have also been about the interests of citizens, which are still competition issues in a broader sense. The new regimes will help to support media plurality and ensure that radio operators can continue to deliver a broad range of public value to listeners over the long term. Examples of such public value include:
- Radio’s output of trusted news bulletins, at a time when fake news is rife on social media networks;
- The role that radio plays as a source of companionship, for example supporting people who may be lonely or feel isolated, entertainment and music discovery, providing cultural enrichment; and
- Radio’s ability to amplify charitable causes and issues of major importance to society.
Listener behaviours during the COVID-19 pandemic lockdown are testimony to the significant contribution that radio makes to society. In the UK, for example, radio stations reported an increase in online listening of around 15-20% on average during the first lockdown, in 2020, with some news and information stations seeing even higher increases of over 40%.
To conclude, I would say that licensed radio plays an important political and societal role in Europe by supporting media plurality and improving social cohesion through the promotion of shared cultural and democratic values, making it a force for good.
TS: It sounds like the stakes are high?
PP: With the right regulatory framework in place, listeners will continue to enjoy unfettered access to radio, free at the point of use, and broadcasters will have a secure route to market on equitable terms. Media plurality will be preserved.
Absent this, innovation will suffer, and listeners will no longer have a full choice of listening options available to them in the future, leading to cultural impoverishment.
 Data from Ofcom shows that 63% of users have listened to radio on their smart speakers and an equal share of users have also listened to music streaming services on their smart speakers. Based on OFCOM nations and regions technology tracker 2020. 9th January to 7th March 2020. Table 85
 Ibid footnote 2.
 PwC, “Consumer Intelligence Series” (2018) (https://www.pwc.com/us/en/advisory-services/publications/consumer-intelligence-series/voice-assistants.pdf). This US study found that 65% of 25-49-year-olds spoke to their voice-enabled devices at least once per day and 94% of them did so at least a few times per month. This was in 2018, so we assume the figure will now be higher because the use of voice assistants is growing.
 Statista, “Number of Digital Voice Assistants in Use Worldwide” (2021) (https://www.statista.com/statistics/973815/worldwide-digital-voice-assistant-in-use/).
 “An assessment of the value exchange between voice assistant platforms and radio broadcasters to 2025 – A report for Bauer Media”, Frontier Economics, December 2020.
 Commission Staff Working Document, Preliminary Report – Sector Inquiry into Consumer Internet of Things, 9th June 2021, SWD(2021) 144 final. internet_of_things_preliminary_report.pdf (europa.eu)
 The Radiocentre, “Commercial Radio, a force for good”, July 2020.