Annual Report on the Sector 2010/2011

Published 24|11|11

Executive summary

1.1 Community radio stations are not-for-profit radio services designed to operate on a small scale and to deliver community benefits, known as 'social gain'. The legislation enabling community radio services to be licensed was introduced in 2004 and amended in January 2010. The first community radio station launched in November 2005. This is Ofcom's fourth annual report on the community radio sector.

1.2 Ofcom has to date licensed 231 stations over three rounds of licensing. 196 of these are broadcasting and a further 23 have either decided not to launch or have handed their licence back, largely due to funding problems. The remainder are preparing to start broadcasting. The second round of licensing concluded in August 2010 and a third round of community radio licensing commenced in April 2011.

1.3 Community radio serves a diverse range of communities. The majority of stations serve a general audience in either an urban/suburban area (16%) or a town/rural area (43%). Many services, however, serve smaller communities of interest. This includes, for example, those aimed at minority ethnic groups (13%), a youth audience (11%) and those with a religious focus (6%). Of the licences awarded, 187 are in England, 14 in Northern Ireland, 20 in Scotland and 10 in Wales.

1.4 The legislation governing community radio sets out the characteristics of community radio services and defines social gain. Each station has a set of 'key commitments', which forms part of its licence and sets out how it will meet these characteristics and deliver social gain. The key commitments includes how a station will make itself accountable to its target community and ensure access, its programming aims and its commitments with regard to training and other social gain objectives.

1.5 The legislation also requires that Ofcom sets licence conditions limiting the amount of income that individual stations can generate from on-air advertising and sponsorship. For the majority of stations this limit is 50%. However, two stations have lower limits (25% and 10%) and a further 18 stations cannot take income from on-air advertising and sponsorship at all. These additional restrictions have been put in place to protect existing small commercial services whose coverage areas overlap with the community services.

1.6 Each station that has been broadcasting for more than a year is required to complete an annual report. The reports detail how each station has performed against its key commitments and identifies its sources of income and expenditure. The financial aspect of the reporting enables Ofcom to check whether the station has stayed within the legislative restrictions on funding.

1.7 For the period April 2010 to March 2011 Ofcom received key commitments annual reports from 163 stations and financial annual reports from 161 stations. One station was excused from providing a financial report and one station did not provide its financial report in time to be included in this report. Another station did not submit either its key commitments or financial reports.

1.8 Annual reports were not required from stations that launched during this period or subsequently and are therefore not included in this report.

1.9 In 2010/11 the average (mean) station's income was around £63,000. The median figure, the mid-point in the distribution of stations' income, was considerably lower at £42,000. This is because a small number of stations are earning significantly more than the majority.

1.10 The total reported income of the four highest earning stations, each reporting over £250,000 income for the relevant period and earning a total of just over £1.5m, equates roughly to the total income of the 74 lowest income stations. If we exclude the four highest earning stations' income then the average income drops to £54,500. The median figure remains relatively similar at £41,000.

1.11 Stations targeting a community of interest (rather than a geographic community) reported a higher income than the sector average. Stations serving a general audience in an urban area reported a higher average income than town/rural stations (£89,500 as opposed to £45,000).

1.12 The average (mean) sector income is down by around 19% on the previous year's reported figure. In the 2009/10 period income had dropped by around 6% compared to the period prior to this. The median income for the current reporting period has dropped by 7% compared to the 2009/10 period.

  2010/11 2009/10 2008/09 2007/08
Average (mean) income £63,000 (-19%) £74,500 (-  6%) £79,000 (-12%) £101,000
Median income £42,000 (-  7%) £44,500 (-11%) £50,000 (-25%) £  66,500

1.13 Trend analysis undertaken on the stations which have reported in each of the last two years (i.e. 2009/10 and 2010/11) indicates that the average (mean) income for these stations has dropped by only 0.05% (£70,500 in 2010/11 compared to £74,500 in 2009/10 for the same group of stations). This may indicate that the financial situation for those stations that have submitted annual reports for the last two financial periods has remained relatively stable.

1.14 When compared to previous years, the proportion of income from specified sources appears relatively similar. The most significant type of income for the sector is grant funding, which accounts for 37% of the total. Income from on-air advertising or sponsorship accounted for around 21% of total income across the sector. 23% of stations submitting financial returns did not take income from advertising and sponsorship in this reporting period. Of these 37 stations, 25 chose not to take this type of income as a matter of choice or policy. The remaining 12 stations were prohibited under their licence from doing so.

1.15 Public sources of funding accounted for 25% of the total sector income. Local authorities accounted for around 13% of the sector's total income. 8% of income came from other public bodies such as the Arts Council, health providers, educational establishments and various national lottery award schemes.

1.16 The Community Radio Fund, which is administered by Ofcom on behalf of the Department for Culture, Media and Sport, accounted for £321,500 (around 3% of the sector's total reported income). The Community Radio Fund continues to be the largest single source of income for the sector.

1.17 Community radio stations, on average, are spending slightly more than their income. Stations cost, on average, around £64,500 to run. This has declined by 13% compared to the previous reporting period. The median expenditure for this reporting period has dropped to £40,000 compared to £52,000 the 2009/10 period.

  2010/11 2009/10 2008/09 2007/08
Average (mean) expenditure £64,500 (-13%) £74,500 (-8%) £81,000 (-20%) £101,000
Median expenditure £40,000 (-23%) £52,000 (  -  ) £52,000 (-19%) £  64,500

1.18 Trend analysis undertaken on the stations which have reported in each of the last two years (i.e. 2009/10 and 2010/11) indicates that the average (mean) expenditure for these stations has dropped by only 0.03% (£72,000 in 2010/11 compared to £74,500 in 2009/10 for the same group of stations). This analysis gives some insight into how those stations reporting for two full financial periods have fared year-on-year.

1.19 The highest cost for community radio stations remains staff expenditure, which accounted for around 50% of stations' costs. Premises and technical costs, as in previous years, accounted for the next most significant outlay.

1.20 Around 44% of stations that returned a financial annual report were in deficit. Of these 71 stations in deficit, 24% (39 stations) reported this to be in excess of £10,000 (the highest was £90,000). At the other end of the scale, one station had a surplus of £75,000. In most cases, large deficits are being funded by parent organisations; any surpluses are typically invested in the operation of the service.

1.21 Community radio stations broadcast live for around 82 hours per week on average, and, in general, broadcast a further 12 hours per week of original pre-recorded material. On average around 32% of daytime output is speech which can feature a wide range of local organisations and community initiatives.

1.22 Some stations focus on particular genres of music, while those serving a geographic audience generally broadcast more mainstream music during daytime programming, moving to specialist output in the evening.

1.23 The average station reports the involvement of around 78 volunteers annually, although there is a wide variation. Together these volunteers give on average of around 295 hours a week of their time in total. Time given by volunteers can vary considerably from an hour or two to over 1,000 hours per week.

1.24 At a cost of just over £10 million pounds, based on the reports received from stations in this reporting period, community radio in the UK delivered:

  • A total of more than 12,500 volunteering opportunities
  • Over 45,000 volunteer hours each week
  • Over 15,000 hours of original radio output each week
  • Output broadcast in a wide range of community languages

1.25 There are now over 190 stations broadcasting and Ofcom estimates that volunteers contribute close to 250,000 hours a month to community radio.

1.26 Given that the community radio sector is now relatively mature, Ofcom does not intend to publish an annual report of this type for 2011/12. However, all relevant stations will still be required to submit an annual report as part of their demonstration of compliance with licence and other statutory requirements.