Renewal of the Independent National Radio licences

  • Start: 27 May 2016
  • Status: Closed
  • End: 24 June 2016

There are three Independent National Radio (INR) licences issued by Ofcom under the Broadcasting Act 1990 (“the 1990 Act”). They are the licences for Classic FM (held by Classic FM Ltd), Talk Sport (held by talkSPORT Ltd) and Absolute Radio (held by Absolute Radio Ltd).

All three licences are due to expire in 2018. However, under the Broadcasting Act 1990 (as amended), all three licences qualify for a further five-year renewal. This means that each licensee can apply to extend their licence, rather than having to re-apply for their licence in an open competition.

The licences were originally awarded by an auction process, and the licensees are required to make annual financial payments to the Treasury. These financial payments consist of a cash bid amount, and a specified proportion of the revenue obtained by the licensee. This latter payment is known as the percentage of qualifying revenue, or ‘PQR’.

As the licence renewal process means there is no actual auction of the licences (and therefore no cash bids), Ofcom is required to set new financial terms for each licence. These financial terms consist of an amount which, in our opinion, would have been the cash bid of the licence holder if the licence had been auctioned for the renewal period, together with a PQR.

When the financial terms for these licences were last determined by Ofcom in 2011, they were set at a nominal amount of £10,000 per annum for each of Classic FM, Absolute Radio and Talk Sport (with a nil PQR).

Reviews of the financial terms payable by Classic FM and Absolute Radio – determination 03 February 2017 - Statement PDF, 170.9 KB

The UK’s three national analogue (FM and AM) commercial radio licences (currently held by Classic FM, Talksport and Absolute Radio) are all due to expire in 2018. Under the Broadcasting Act 1990 (as amended), all three licences qualify for a further five-year renewal. This means that each licensee can apply to extend their licence, rather than having to re-apply for their licence in an open competition.

The licences were originally awarded by an auction process, and the licensees are required to make annual financial payments to the Treasury. These financial payments consist of a cash bid amount, and a specified proportion of the revenue obtained by the licensee. This latter payment is known as the percentage of qualifying revenue, or PQR.

As the licence renewal process means there is no actual auction of the licences (and therefore no cash bids), Ofcom is required to set new financial terms for each licence. These financial terms consist of an amount which, in our opinion, would have been the cash bid of the licence holder if the licence had been auctioned for the renewal period, together with a PQR.

In May, we consulted on the timetable and methodology we propose to follow in order to set these financial terms. We received three responses to the consultation. This statement sets out Ofcom’s methodology having carefully considered the responses received.

We propose that the methodology previously used by Ofcom in 2010 for setting the financial terms of the three licences remains broadly appropriate, taking account of developments and making certain modifications in response to the consultation, as set out in this document.

Following applications for renewal from the three licence holders we will determine financial terms using the methodology set out in this statement. These determinations will be published on our website.

Renewal of the Independent National Radio licences - Methodology for review of financial terms, Statement published 17|08|2016 PDF, 363.8 KB

The UK’s three national analogue (FM and AM) commercial radio licences (currently held by Classic FM, TalkSport and Absolute Radio) are all due to expire in 2018. Under the Broadcasting Act 1990 (as amended), all three licences qualify for a further five year renewal. This means that each licensee can apply to extend their licence, rather than having to re-apply for their licence in an open competition.

The licences were originally awarded by an auction process, and the licensees are required to make financial payments to the Treasury. These financial payments consist of a cash bid amount, and a specified proportion of the revenue obtained by the licensee. This latter payment is known as the percentage of qualifying revenue, or PQR. When the licences were first auctioned in the early 1990s, the applicants were required to bid a cash sum. This amount then became payable by the successful bidder as an annual fee. The PQR for each licence was determined by the then regulator, the Radio Authority.

As the licence renewal process means there is no actual auction of the licences (and therefore no cash bids), Ofcom is required to set new financial terms for each licence. These financial terms consist of an amount which, in our opinion, would have been the cash bid of the licence holder if the licence had been auctioned for the renewal period, together with a PQR. This consultation is primarily concerned with the timetable and methodology we propose to follow in order to set these financial terms.

We propose that the methodology used by Ofcom in 2010 for setting the financial terms of the three licences remains broadly appropriate, and will enable us to determine financial terms that are fair and reasonable within the context of the current market environment.

In order to appropriately reflect the uncertainties we face when trying to value the licences, we propose to take account of various information sources, but we are seeking views through this consultation on whether there are alternative ways to deal with the uncertainties.

We are seeking the views of stakeholders by 24 June 2016 and plan to issue a statement towards the end of July.


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Responder name Type
TalkSport.pdf (PDF, 13.7 KB) Individual
Peterborough_Tribune.pdf (PDF, 9.6 KB) Individual