Times Online: GCap's Fru Hazlitt switches off digital radio

What ostensibly seems like a short-term cost cutting measure in a bid to make GCap seem more profitable for potential suitors could end up having a catastrophic effect for the prospects of DAB digital radio in the UK despite healthy receiver sales in 2007.

So what exactly has gone wrong with DAB radio, and is it still heading for catastrophic failure despite recent public enthusiasm for a medium that offers improved choice (for the time being, anyway) as well as potentially better radio reception in certain areas?

Although radio listening hasn't declined like (for example) newspaper reading, the advertising market has still been affected by the internet, and it's this combined with the threat of an economic slowdown that is now causing a real problem.

In the run up to Christmas 2007 there was a controversial promotion for DAB receivers shown on BBC television channels, which no doubt helped to boost sales in relation to the additional choice of BBC stations available on DAB and other digital platforms. But it will take longer for these additional listeners to affect the commercial radio industry.

The radio industry as a whole realises that DAB radio is very much a long term project, but those long term projections have been blown off course by recent changes both in the UK and in other countries; most notably a lack of enthusiasm for DAB abroad.

One main reason for scepticism within the radio industry is a lack of DAB-capable car radios, and no number of so-called 'adapters' can disguise this problem. And with enthusiasm for DAB rapidly waning elsewhere, this issue won't be quickly resolved until a form of digital radio becomes popular abroad and 'multiformat' car radios are sold.

Combine the car radio issue with a softening advertising market plus a requirement for general profitability and radio executives are becoming increasingly nervous. Only Channel 4's long term plans for its new services seem to make any sense at present, but Channel 4 Radio's launch postponement was another setback for DAB radio.

What makes matters worse is that the two remaining GCap stations now scheduled for closure - Planet Rock and theJazz - had a reasonable number of listeners and (at least in Planet Rock's case) were making a profit, so being modestly profitable is no longer a guarantee of security for digital-only radio stations.

Even niche stations.

Despite all these setbacks, can DAB digital radio still turn the corner and confound the critics? Well prior to today you could be forgiven for believing that DAB still had a reasonably bright future, but GCap's announcement is a major psychological blow for an industry that may or may not be on the verge of some form of turning point.

The recent introduction of BFBS as a "temporary measure" to fill a gap caused by two recent station closures can be viewed purely as a political measure in order to keep DAB afloat, but GCap's withdrawal from DAB digital radio cannot be disguised and politicians must now be feeling even more nervous than radio industry executives.

And although the Betamax video tape format failed in the marketplace against the VHS onslaught, it had previously been the market leader in Indonesia. After this new announcement it's now looking more and more likely that the UK will become the next Indonesia.