The private FM radio industry, comprising 40-odd radio firms, has raised a red flag against the third phase of FM radio expansion envisaged by the government, threatening the FM-III rollout. The FM-III policy envisages around 800 new FM stations across 220 towns over and above the 250 stations that are already operational. However, radio operators say the business has become non-viable due to high costs of running FM stations and heavy outgo to the music industry, coupled with the 4% annual revenue sharing arrangement with the government. The radio sector has been waving its profit-loss statements (mostly losses) to drive home the point. It is also threatening to stay away from the bidding stage in FM-III.
But it seems the government is not fully convinced and it has its own reasons for FM-III. From less than Rs 200 crore of annual earnings in the first half of the decade spread between half-a-dozen radio firms, the sector is now four times the size (in value) spread between 40-odd radio companies. The recently released Ficci-KPMG report says radio is poised to grow at a CAGR of 16% over the next four years to reach a size of Rs 1,640 crore.
Therefore, the government wants FM-III policy to come out soon and hopes for greater participation by the players. In principle, even large radio operators support the policy for some key takeaways like provisions for a 26% FDI cap for the sector, as opposed to 20% currently. Also, there could be a nod for multiple ownership of radio licences within a city, something not allowed so far. But the radio sector wants more. It wants a five-year extension of the radio licences of existing players so that they get higher valuations for their business from investors, as the losses get spread out over 15 years instead of 10 currently that ends in the next four years. Radio firms also want a low standardised rate for music royalty, which is currently as high as 40-45% of their annual revenue. But the information and broadcasting ministry says both these issues are almost beyond its limits.
Still, in order to ensure wider participation in FM-III, the government can dangle some carrots to the radio industry. It can insert certain riders in the FM-III policy like waiving the 4% annual revenue-sharing for next five years for those firms that bid and win a certain minimum number of stations. It could solve the standoff of radio firms with the music industry by forging an alliance of the vast music library of All India Radio with private FM operators under a small revenue-sharing formula. FM-III can become a success story if the government can catch the bull by the horn and make it dance to its tune.
ashish.sinha@expressindia.com