KERI JONES has a confession to make. He has visited the Welsh town of Llanelli only six times in his life.

This is more often than most people. However, Jones is not just another reluctant tourist. For two years, he presented a marathon, seven-hour breakfast show for Scarlet FM, Llanelli’s commercial radio station. But instead of sitting in a studio in the town centre, or at least in an industrial park on its outskirts, Jones was holed up 50 miles away on the border with Carmarthenshire.

For what is described as local radio, it seems a little remote. Yet with advertising under pressure and consolidation crackling across the airwaves, it could be a template for the future of commercial radio.

“People get really hung up on the notion of localness,” said Jones, who is now broadcasting in the Isles of Scilly.

He kept tabs on comings and goings in Llanelli by employing a local resident to be his eyes and ears. So, if a building had just been painted blue in the town centre, Jones could talk about it knowledgeably on air the next morning, once his mole had filed her report.

“I would rather link a show together from 1,000 miles away and have somebody in-market providing unique local content,” Jones said. “That is better than having a bunch of DJs just sitting in the town reading stuff out of the national newspapers that has no relevance whatsoever.” His set-up worked well. Until 2006, Jones simultaneously broadcast three breakfast shows, on Scarlet, Radio Pembrokeshire and Radio Carmarthenshire. The three, now part of Town & Country Broadcasting, are run on tiny budgets yet enjoy some of the biggest audience shares in Britain.

Scarlet FM is not the only station that has gone walkabout. The Local Radio Company, which owns Spire FM in Salisbury, has received clearance from the regulator Ofcom to move four of its smaller stations out of their transmission area to save money.

Despite the cheery on-air banter of the DJs, these are tough times for commercial radio. Ofcom research last year found that stations covering a population of fewer than 100,000 people each make an average annual loss of £14,000.

Income is also falling in real terms, going from £579m in 2004 to £589m in 2007, according to Nielsen Media Research, as advertising money flows online.

Ofcom has responded to radio’s predicament by loosening licence rules. Stations with coverage reaching fewer than 250,000 people can share studios and programming with their neighbours.

The real savings for the larger players come from networking shows from a central hub. Now, local radio stations have to produce only 10 hours of locally made shows per day, down from 24 hours in some cases.

Change is already afoot, and radio groups are lobbying for more. Global Radio may still be waiting for Office of Fair Trading clearance before it can merge outright with GCap Media, bought for £375m last month, but that hasn’t stopped it cutting costs.

Last week it announced that Philippa Collins, one of GCap’s DJs in London, will broadcast a three-hour, mid-morning show nationally across 42 of its local stations, from Essex FM in Chelmsford to Plymouth Sound.

If the model is expanded across the schedule and across the industry, hundreds of local DJs could be out of a job.

GCap believes it can develop a network of hybrid, national-local stations that broadcast key slots such as breakfast time, drivetime and perhaps lunchtime locally, with networked content the rest of the time.

In addition, dozens of station names are expected to be sacrificed and replaced by a national brand, probably Heart, when GCap’s merger with Global goes through.

Cutting back and centralising is nothing new. Radio groups have long carried group-wide playlists of songs. Many overnight shows and chart rundowns are produced centrally.

Emap, now Bauer Radio, has been broadcasting In Demand, an evening music show, across eight stations in north England since last year. It costs 10% less than the programmes it replaced, but a bigger audience means it can secure bigger showbiz guests.

“We believed we could make a better programme. We did not do it because we were trying to have fewer presenters,” said Travis Baxter, managing director of Bauer’s Big City stations.

Commercial radio is up against the deep pockets of BBC radio, which spends £129m a year on local and regional stations in England alone.

However, because its local stations primarily cater for the over-fifties, the commercial sector feels that Radios One and Two are a bigger threat. Armed with big-earning DJs such as Chris Moyles, they both pursue younger listeners whom advertisers are keen to reach.

That is why Global wants to sign its own big names and broadcast them nationally, using a brand that is recognisable to listeners across the country, while retaining a localness that Radios One and Two cannot match.

It sounds too good to be true, and maybe it is.

The “hub and spoke” model was created by Clear Channel in America after the 1996 Telecommunications Act. It bought up hundreds of radio stations, homogenising playlists from its Texas base.

However, even consolidation on a grand scale could not make it a palatable stock-market bet: it has just been sold to private-equity groups Bain Capital and Thomas H Lee for £9 billion, with a pledge that they will revive its sluggish radio operations.

“Commercial radio has taken a battering over the past few years and the outlook for all advertising-based companies is very uncertain,” said David Mansfield, a former boss of GCap and present chairman of the audience-measurement body Rajar.

“The trend towards networking shows seems sensible, delivering higher quality ‘national’ presentation than each station could achieve on a stand-alone basis, while cutting the cost of paying many local presenters.

“On paper it looks good and should work. However, some would argue this is the road to ruin pioneered by Clear Channel in that the whole point of local radio is that it is local. Listeners neither expect nor want national celebrities on their local station. They can get those elsewhere.”

There is no evidence that the consolidation of Britain’s commercial radio stations to date has stimulated better programming, higher listening figures or struck back at the BBC.

When GWR merged with Capital Radio to create GCap in 2005, £35m in cost savings was squeezed out. Today commercial radio’s audience share is plumbing 15-year lows, with a little below 42% of the market.

Listeners are also less loyal, tuning in for 8% less time than they did nine years ago.

“Consolidation alone will do nothing to improve the industry’s performance in ratings or revenues in the long run,” said Grant Goddard at Enders Analysis. “What commercial radio still desperately requires is a forward-looking strategy.”

It doesn’t help that commercial radio must stomach the dual cost of transmitting in analogue and digital. The Department for Culture, Media and Sport is still mulling how to save digital radio.

Listeners should stay tuned for developments – no matter how far away their DJ is sitting.

TUNING OUT

VIKING FM, owned by Bauer, formerly Emap Radio, highlights the challenges facing regional commercial stations.

From Hull, its catchment area of 1.1m people extends across Humberside and into Lincolnshire. In five years, its weekly audience has fallen 25% to 229,000 and total listener hours are down 31% to 1.9m – so even the listeners it has retained are not tuning in for as long as they used to. Operating margins for a station of this size have fallen from an average of 35% to 20%-25%.

Accordingly, Viking has been cutting back. Industry estimates suggest that the station’s budget, excluding central group costs, has fallen from £3.5m to close to £2.7m, with its employee headcount, including freelances, declining from 50 to roughly 35 people.

It is difficult to tell whether the cuts have caused the listening decline or if Viking has been responding sensibly to a nationwide trend. The station has actually become less efficient, with cost per listener hour rising from 1.28p to 1.43p over the five years.

The next stage of savings could be co-location – housing Viking at a shared studio in a city like Wakefield, 55 miles away, with its closest fellow-Bauer stations Hallam FM, which serves Sheffield, and Radio Aire of Leeds.

Bauer said it had no plans to co-locate and did not verify our estimates.

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