Renewal of the Independent National Radio licences
- Start: 27 May 2016
- Status: Closed
- End: 24 June 2016
Determination: Review of the financial terms payable by Talk Sport (11 December 2017)
In February 2017 we determined financial terms for Classic FM and Absolute Radio, setting a cash bid of £10,000 and a 0% PQR. We have now reviewed the financial terms for talkSPORT based on financial and other evidence from the licensee and other sources.
Our review indicated that talkSPORT continues and will likely continue to generate profits for the incumbent licence holder, although the profits derived from analogue transmission will continue to reduce over time as analogue listening as a proportion of total listening falls.
A new entrant, however, would incur significant entry costs before it was able to generate analogue profits similar to the incumbent. These entry costs would include, for example, launch marketing costs, other start-up costs (such as dry running costs and capital expenditure) and reductions in revenue in the early years (compared to those generated by the incumbent) as audiences take time to build up.
Our review has concluded that for a hypothetical new entrant these entry costs would outweigh the potential profits available from broadcasting nationally on analogue in the five-year duration of the renewed licence.
Therefore, our conclusion for the licence under review is that a hypothetical new entrant would not be prepared to make financial payments in return for the right to broadcast nationally on analogue for the period under consideration. As a result, the incumbent licence holder could retain its licence in a hypothetical auction for a nominal amount. Consequently, we have decided to keep the financial terms at nominal amount of £10,000 per annum for talkSPORT (with a nil PQR). This is what we consider a reasonable view of the approach the incumbent licensee would take to making nominal bids, looking at nominal cash bids made by bidders and those set by Ofcom in (real and hypothetical) auctions for television and other INR licences.