AUGUST
THE NEW ZEALAND GAZETTE
3345

he station is a well targeted one and did not tend to stray beyond
its target audience. It would have difficulty reaching its projected
20 percent of the potential audience 15–30 but would have a
better chance than most stations of achieving its target because
the younger age groups accept more readily the change in
listening habits involved in the use of the FM band on their
receivers.

Canterbury FM Ltd. proposed an 18–39 target age group. It
claimed its programmes would be an alternative to AM
programmes even if, as we commented in Northland, the music
played was not substantially different. It emphasised consistency
and familiarity in music selection.

The combination of ZM-FM programmes and the Radio Avon
programming would provide little audience cross-over between
the 2 FM stations which would limit the real choice of most
listeners to 1 FM station. That argument centres on the
desirability of two new FM stations each having a
complementary programme but with some overlapping of
audience so that many listeners have a second choice. It tends
to strengthen the popularity of the FM band.

Fainland’s preferred solution was to receive a warrant with Radio
Avon as the other FM warrant holder provided Radio Avon did
not continue its AM service.

He was opposed to a ZM-FM grant since 3ZM did not propose
to change its programming enough to suit the FM mode. It did
not “hold the promise of vitality and enrichment and personal
programming content. . .”

He target audience for Mainland FM, the 15–35 age group, would
make it a directly competitive station with ZM-FM.

The Mainland FM application was criticised as being ill-prepared
and the service likely to be carried on at a distance. The
applicant’s case was certainly less convincing than the ZM-FM
case to serve a similar audience.

Music 90 proposed to introduce an audience described variously as
30 plus and 25–44.

After listening to the evidence we are satisfied that this audience
would be principally a 30 plus audience and, while the service
may be desirable in that it would attempt to tackle the higher
end of the audience demographic served by FM stations in
New Zealand, the difficulty of attracting an adequate audience
casts doubts on the viability of the proposition.

Promoted on the air by Radio Avon AM, Music 90 FM would
certainly provide a new service for an audience which would
not be served adequately by ZM-FM or Mainland FM. Part
of the audience would be served by Canterbury FM.

Radio Avon has an established commitment to news and the new
station would provide a more substantial news service than
most FM stations. However we concluded that it could probably
survive in the first few years only with the cross promotion
available from Radio Avon AM.

The grant of 2 warrants would extend a FM music service to a
wide range of audience. The ZM-FM and Music 90 FM would
provide the widest range. The narrowest range would be served
by ZM-FM and Mainland FM. A combination of ZM-FM and
Canterbury FM would serve an under 40 audience with a
considerable number having a good second choice FM station.
We found this combination convincing and viable.

The Music 90 FM application seems to the Tribunal to have the
potential for a stultifying effect on the growth of radio in
Canterbury. Its proposal to maintain Radio Avon’s AM
operation beyond the 4 years contemplated by the regulations
smacks of undue caution. A foot in both camps reflected a lack
of commitment to switch Avon to FM, perhaps a reluctance
to give up what it has successfully run for 10 years.

Radio Avon Ltd. had been confident of the need for a continued
AM operation at the end, of say 4 years, it could have accepted
a supplementary warrant for Radio Avon AM for a limited term
and applied later for a new AM warrant. It was not prepared
to do so.

Assuming Radio Avon AM continues along with 3ZB there is a
fair competitive choice for the public in the AM mode. Likewise
with 3ZM and Canterbury FM in the FM mode.

The Tribunal believes the public interest is likely to be best served
by having choices between commercial stations on both FM
and AM frequencies. After fully considering all the evidence
and proposals of the various applicants it concludes the most
desirable combination would be best achieved (albeit with some
financial stresses) by 3ZM-FM and Canterbury FM Ltd.

(b) The economic effect which the establishment of the station to
which the application relates is likely to have in respect of
broadcasting stations already in operation

The grant of the Corporation’s application would not adversely
affect any other station.

We accepted Mr Egerton’s evidence, for Canterbury FM that there
was some room for increased revenue to be drawn from the
market. Radio Avon predicted a real increase on the introduction
of FM of about $300,000. The extent of it is in doubt for the
reasons given by the Corporation’s witness, M. J. P. Dunlop.

His evidence for the Corporation was based on shares of the
commercial audience: 3ZM—32 percent, 3ZB—45 percent, and
Radio Avon—22 percent.

Mr Dunlop argued that an additional commercial station would
impact adversely on existing operators. In Auckland there were
currently 95 900 people per commercial station; 89 267 in
Wellington and only 80 867 in Christchurch. A fourth warrant
would reduce this to 60 650. He said that Christchurch retailers
existed on a lower turnover per capita than both Auckland and
Wellington and the Christchurch population had been declining
since 1976. Christchurch radio currently extracted 17.5 percent
more advertising revenue per capita than Auckland.

Mr Dunlop’s calculation of the effect on each of the existing
stations of the grant of an additional warrant was as follows:
If Music 90 FM were granted a warrant and gained a 9 percent
share of the audience, the effect on 3ZB would be $134,542
loss of revenue. The impact of 3ZM would be $142,611. (The
total effect on Radio New Zealand would therefore be $277,153),
the effect on Radio Avon AM would be $228,829. (There was
some evidence that suggested the effect on Radio Avon AM
would be greater than that).

His estimates were based on Music 90 FM achieving half of its
proposed revenue, i.e. $505,982 instead of $1,070,000. It would
cause the least impact on the Corporation stations.

The grant of the Mainland FM application with a 15 percent
audience share and an estimated income of $656,680 (which
was close to their projected $692,000) would have an effect of
$427,000 on 3ZM and $228,000 on Radio Avon. There would
be no effect on 3ZB.

The Canterbury FM application achieving a 13 percent share
would generate income of $689,227 which is close to their
estimate of $600,000. The effect on 3ZB would be $134,542,
on 3ZM, $249,576. The total impact on the Corporation would
be $384,118. It would however cause a loss of $305,109 revenue
to Radio Avon.

A grant to Canterbury FM would have the greatest effect on Radio
Avon ($305,000)

Mr Dunlop’s figures cannot be a precise prediction in dollar terms
but they do indicate a relative effect on each station of each
scenario.

We are not certain that the audience shares predicted by Mr
Dunlop would be sustained in the event. We accept some
evidence which predicted a lower audience cross-over to 3ZM—
which would help Avon AM. And we do not expect Canterbury
FM will attain 13 percent audience share for some time. The
effect on existing stations will therefore be less than he predicted.

We believe Radio Avon has the potential to improve its present
share of audience anyway. After FM starts up, with proper fine
tuning, Avon AM could secure its profitable niche in the market
with an AM format appealing to a younger demographic than
3ZB and with an appropriate music/news/information mix. We
expect in that case it should gain audience from 3ZM and 3ZB
(audience it used to hold) and reduce the financial impact of
the new FM station.

The effect of a Canterbury FM warrant on 3ZB and 3ZM, by Mr
Dunlop’s calculations, is only $107,000 more than the effect of
a Music 90 FM warrant on the Radio New Zealand stations.

Although Mainland FM would not affect 3ZB, in Mr Dunlop’s
analysis, it would have the greatest effect on 3ZM ($427,000),
the biggest effect on the Corporation ($427,000) and the second
greatest overall effect on existing stations ($655,000).

The ultimate extent and distribution of the advertising dollar will
depend on programme performance and appeal and cannot be
accurately assessed, although there is no doubt that existing
stations will lose some revenue when 4 commercial stations
are competing instead of the present three.