Wherever possible London Economics uses paper sourced from sustainably managed forests using production processes that meet the EU eco label requirements. Copyright 2010 London Economics. Except for the quotation of short passages for the purposes of criticism or review, no part of this document may be reproduced without permission. About London Economics London Economics is one of Europe's leading specialist economics and policy consultancies and has its head office in London. We also have offices in Brussels, Dublin, Cardiff and Budapest, and associated offices in Paris and Valletta. We advise clients in both the public and private sectors on economic and financial analysis, policy development and evaluation, business strategy, and regulatory and competition policy. Our consultants are highly qualified economists with experience in applying a wide variety of analytical techniques to assist our work, including cost benefit analysis, multi criteria analysis, policy simulation, scenario building, statistical analysis and mathematical modelling. We are also experienced in using a wide range of data collection techniques including literature reviews, survey questionnaires, interviews and focus groups. Head Office: 11 15 Betterton Street, London, WC2H 9BP, United Kingdom. w: www.londecon.co.uk e: [email protected] t: +44 (0)20 7866 8185 f: +44 (0)20 7866 8186
Contents Page London Economics Digital radio switchover: Consumer research to inform the cost benefit analysis i Glossary iv Executive summary v 1 Background and introduction 1 1.1 Background 1 1.2 Aims of the current project 1 1.3 Overview of research methodology 2 2 Consumers radio ownership, listening habits and attitudes towards digital radio 5 2.1 Radio ownership 5 2.2 Listening habits 7 2.3 In car radio listening 11 2.4 Attitudes towards digital radio 13 3 Willingness to pay for attributes of digital radio 20 3.1 What is willingness to pay? 20 3.2 Attributes of digital radio 20 3.3 Average WTP 23 3.4 Willingness to pay among key demographic groups 24 3.5 Observed willingness to pay 26 4 Disposal habits and costs of disposal 27 4.1 Disposal habits and attitudes towards disposal 27 4.2 Disposal cost modelling 28 5 Conclusions 37 6 Further Research 40 6.1 Research dedicated to the impact of the switchover on vulnerable consumers 40 6.2 Refining the parameters in the disposal cost modelling 40 6.3 Complementary face to face survey 40 6.4 Observed willingness to pay 40 References 41 Annex 1 Details of survey samples, methodologies 42 Annex 2 Questionnaires 44 Annex 3 Willingness to pay technical annex 58 Annex 4 Details of disposal cost calculations 60
Tables, Figures & boxes Page ii London Economics Digital radio switchover: Consumer research to inform the cost benefit analysis Table 1: Attribute descriptions used in the choice experiment ix Table 2: WTP for the attributes of digital radio ( ) xi Table 3: Number of radios disposed of through different channels xiii Table 4: Total disposal costs by stakeholder group xiii Table 5: Radio ownership 7 Table 6: How likely people are to buy a digital radio in the next year? 9 Table 7: Listening habits 10 Table 8: In car radio listening 12 Table 9: Consumer perceptions of digital radio (percentage of respondents) 16 Table 10: Consumer perceptions of digital radio by age band 17 Table 11: Likelihood that consumers will get a digital radio in the next year (% of respondents) 18 Table 12: Share who are likely to buy a digital radio in the next year and opinions on digital radio 19 Table 13: Attribute descriptions used in the choice experiment 23 Table 14: WTP for the attributes of digital radio ( ) 24 Table 15: WTP for the attributes of digital radio by age group ( ) 24 Table 16: WTP for the attributes of digital radio by gender ( ) 25 Table 17: WTP for the attributes of digital radio by socio economic group ( ) 25 Table 18: WTP for the attributes of digital radio by type of region ( ) 25 Table 19: WTP for the attributes of digital radio by ethnicity ( ) 26 Table 20: Recycling site visits 28 Table 21: Consumer attitudes towards disposal 28 Table 22: Number of radios disposed of through different channels 29 Table 23: Disposal costs for consumers 32 Table 24: Disposal costs for Local Authorities 33 Table 25: Phase 2 DTS fees for existing members rejoining the scheme 34 Table 26: Disposal costs for retailers 36 Table 27: Disposal costs for producers 36 Table 28: Groups classed as unwilling to swtich to digital radio 39 Table 29: Unweighted online survey sample breakdown against national population statistics 42 Table 30: Online survey sample breakdown (other demographics) 43 Table 32: Attributes included in the chocie experiment 58 Table 33: Parameters used in the model of disposal costs for conumers 61 Table 34: Parameters used in the model of disposal costs for Local Authorities 63 Table 35: Parameters used in the model of disposal costs for retailers 65 Table 36: Parameters used in the model of disposal costs for producers 66 Figure 1: Consumer dispoal habits xii Figure 2: Reasons given for having and not having DAB radios in cars (% of respondents) 13 Figure 3: Factors that prompted people to buy a digital radio (% of respondents) 14 Figure 4: Factors that prevented people from buying a digital radio (% of respondents that listed the factor) 15
Executive summary London Economics Digital radio switchover: Consumer research to inform the cost benefit analysis v Executive summary Background and aims of the project Government launched the Digital Radio Action Plan in July 2010, which set out the process for allowing Ministers to make a well informed decision on a Digital Radio Switchover. Government has stated that a decision on switchover would be triggered once 50% of all radio listening is digital; national DAB coverage is comparable to FM; and local DAB reaches 90% of the population and all major roads. A key element of the Action Plan process is the development of an Impact Assessment of a radio switchover, including a Cost Benefit Analysis. Recent studies1 have identified that before such an assessment is made further evidence is re uired on consumers attitudes and beha iour towards ] } v U ] v ] o U } v u o o ] v P v to pay (WTP) for digital radio. The present study aims to provide the quantitative and qualitative evidence that can be used to inform the Go ernment s cost benefit analysis of the digital radio switchover policy. To that end, the aims of the project are to: " E plore consumers beha iour and attitudes towards radio, since it is essential to the switchover decision process that Government has a clear understanding of consumers radio ownership, listening habits and attitudes towards digital radio. " Measure consumers WTP for the attributes of digital radio in order to address the information gap identified by previous reports, and provide evidence to inform Government on the consumer benefits of digital radio. " Model the costs of disposal of obsolete radios following the switchover, covering the costs to consumers, retailers and producers of radios and Local Authorities, in order to inform the Go ernment s cost benefit analysis. Overview of research methodology Data and information for the study was collected using three different fieldwork techniques: an online consumer survey; focus groups; and face to face interviews. Online consumer survey The online survey was administered by YouGov and included: questions intended to elicit consumers WTP for the attributes of digital radio (via a choice experiment); questions on consumers beha iour and attitudes towards radio; and uestions on consumers attitudes towards the disposal of unwanted radios. The sampling approach used was to apply stratified random sampling to the YouGov research panel of over 315,000 UK adults. The online survey was answered by 5,099 respondents in total. 1 See PricewaterhouseCoopers (2009) Cost Benefit Analysis of Digital Radio Migration", and Consumer E pert Group (2010), Digital Radio Switchover what is in it for consumers "
Executive summary vi London Economics Digital radio switchover: Consumer research to inform the cost benefit analysis Focus groups Two sets of focus groups were undertaken for the study. The first set was undertaken early in the project in order to inform the language and content of the WTP choice experiment. They were run online with eight participants per group and included digital radio owners (in one group) and non digital radio owners (in the other group). The second set comprised of four different focus groups, each involving particular types of participants: " pensioners aged 70 or over; " analogue listeners with strong intention to purchase a digital radio; " analogue listeners without intention to purchase a digital radio; and " rural listeners (including a mix of digital radio converts and non converts). These four focus groups were done face to face and undertaken in order to ensure that the study acquires an in depth understanding of consumer attitudes and behaviour towards radio and to validate findings of the online survey, and to ensure that the views of these important groups are included in the evidence base. Face to face interviews Face to face interviews were undertaken with 100 pensioners covering the same topics as the online survey, with a representative split between single person and joint households. These were conducted specifically to ensure that the views of this particular vulnerable group were fully covered by the fieldwork. In addition, in order to ensure that the views of another particular vulnerable group were captured during the fieldwork, five face to face in depth interviews were undertaken with blind radio listeners. Willingness to pay choice experiment In order to assess consumers WTP for the attributes of digital radio, a consumer choice experiment was conducted. Survey respondents were asked to choose between two bundles of attributes relating to aspects of their radio listening experience. For each choice, one bundle contained a single digital attribute alongside two other analogue attributes, whilst the other bundle contained only the corresponding analogue attributes. Each bundle also carried an associated cost. The answers to these survey questions provide data indicating whether, given the difference in associated prices, consumers would generally choose bundles with a particular digital attribute ahead of bundles with the corresponding analogue attribute. The data was then used to assess consumers WTP by econometrically estimating a binary choice model. Assessment of disposal costs The assessment of the costs of disposing of obsolete radios following the switchover is based on sur ey information regarding consumers disposal habits and data from government and industry. The costs to several different stakeholder groups were modelled, including: consumers, retailers, producers, and Local Authorities.
Executive summary London Economics Digital radio switchover: Consumer research to inform the cost benefit analysis vii Consumers radio ownership, listening habits and attitudes towards digital radio Radio ownership Radio ownership and take up of digital radio are important indicators of how close consumers are to being ready for a digital switchover. According to the online survey results just over half of survey respondents own a digital radio, although this is still well below the share who own an analogue radio (which stands at 79%). However, the extent of digital radio ownership varies between different groups. In particular, those in the working class and lowest grade socio economic groups (i.e. National Readership Survey groups D and E)2 and those under the age of 30 are less likely to own a digital radio. Conversely, over 60% of those in the middle and upper middle class socio economic groups own a digital radio. The fact that the survey was conducted on line may be a factor in the higher than expected percentage of households owning a digital radio set. However, it is consistent with other research which shows that take up of digital radio amongst internet users is higher than average. Listening habits According to the survey data, average radio listening time across all consumers is just over 10 hours per week and, excluding in car listening, consumers most commonly listen using an analogue radio set, followed by a digital radio set and then the internet. Around a quarter of consumers listen to four or more stations (including analogue and digital stations) at least once a month, whereas just under a third listens to stations which are only broadcast on digital. The online survey and the focus group with those over 70 suggest that young listeners are more likely to listen on the internet and less likely to listen using an analogue radio set, whereas older listeners tend to use an analogue radio. Young listeners also tend to listen less in terms of hours, but listen to more digital only stations. The interviews and focus groups found interesting differences between the listening habits of different vulnerable groups: many pensioners listen using an analogue radio, whereas blind consumers were often found to listen to a digital radio. In car radio listening The survey shows that, across all consumers, 67% listen to radio in a car or van, although this share is noticeably higher among those living in rural areas. Fourteen percent of those who have a car have digital radio in their car, and in most cases the digital radio came already installed in the car when they bought it. Of those who don t ha e in car digital radios, in just over 14% of cases this is because they are too expensive. 2 The socio economic groups refer to the National Readership Survey social grades: A (upper middle), B (middle), C1 (lower middle), C2 (skilled working), D (working), E (lowest). These are defined as: A: Higher managerial, administrative or professional. B: Intermediate managerial, administrative or professional. C1: Supervisory or clerical and junior managerial, administrative or professional. C2: Skilled manual workers. D: Semi and unskilled manual workers. E: Casual or lowest grade workers, pensioners and others who depend on the welfare state for their income.
Executive summary viii London Economics Digital radio switchover: Consumer research to inform the cost benefit analysis Why consumers buy digital radios Every strand of fieldwork (including the online survey, interviews and focus groups) found that the most common reason for getting a digital radio was that they have clear and high sound quality. This finding supports the WTP analysis which established through a choice experiment that, of all the attributes of digital radio, clear sound free of interference is the one for which consumers will pay the most (see below). The second most common reason for getting a digital radio was the wide choice of stations, and this finding also supports the WTP analysis which found consumers have a positive WTP for having a greater number of stations and more speciality stations. Conversely, the most common reason for not buying a digital radio was that consumers are happy with the existing analogue service. Both the online survey and focus groups with analogue radio listeners yielded such an observation. Pensioners were especially likely to say that they are happy with their current analogue radio. Attitudes of digital radio owners vs. non digital radio owners Most of those who do not currently own a digital radio are of the view that digital radio provides benefits in terms of more stations of interest, clear sound, ease of tuning, useful functions and reduced energy consumption, but a high proportion of these consumers also believe that digital radio is too expensive at present. Those who do own digital radios also generally agree that they provide a range of benefits, but the major difference is that fewer of these consumers perceive digital radio to be too expensive. Digital radio take up in the future Since take up of digital radio is a key criterion in the switchover decision, it is useful to assess the likelihood that consumers who do not currently have a digital radio will get one in the future: according to the survey around a fifth of survey respondents are likely to get a digital radio in the next 12 months. Those in their 50s and those living in town and fringe areas are most likely to get a digital radio over the next year, and digital radio ownership among consumers not of white British origin could be set to catch up with ownership levels among white British consumers. On the other hand, those in working class socio economic groups are less likely to get a digital radio in the next 12 months. Willingness to pay for attributes of digital radio The WTP analysis focussed on six attributes of digital radio relating to: how the radio is tuned, information which is displayed on the radio, functionality (specifically pause/rewind of broadcasts), the total number of stations available, number of speciality stations available, and sound quality. The attributes of digital radio were identified during the discussions in the initial focus groups, where participants were asked talk about what they see as the characteristics of digital radio and how they would describe these characteristics. The descriptions of the attributes of digital radio