Radios decadal shift

Written by Sudipta Datta | Updated: Jul 20 2011, 08:47am hrs
The announcement of FM phase III and auctions this month, though long overdue, have come as a perfect anniversary gift in the tenth year of private FM radio. While the opening of private FM radio a decade ago in the four metros breathed life into a dead medium, phase II and now phase III will lead to further expansion in the country to tier-II and tier-III towns.

There are challenges too, from content fatigue to lack of profitability, tardy expansion to high overhead costs, but the three big playersReliance Broadcast Network, Radio City and ENIL, the company that runs Radio Mirchihave all welcomed phase III and say they are committed to participate in the auctions.

Says Tarun Katial, CEO, Reliance Broadcast Network, Today, BIG 92.7 FM is Indias largest FM network with 45 stations and is reaching over 3.57 crore Indians each week. Putting an exact number might be difficult; however, we will want to grow our network significantly and strengthen our reach in key cities where we are currently not present. The private radio FM industrys annual turnover is currently pegged at R1,500 crore, says Katial, adding, With phase III reforms, the doors to this growth have now been opened and we will see an era of 30% year-on-year growth for the radio industry.

Ashesh Jani, partner, Deloitte Haskins & Sells, says the FM III rollout will result in the country having 839 channels of private FM. With the potential revenue that the government is looking at earning from radio auctions around R1,733 crore, a lot will depend on whether top FM players are enthusiastic about it.

Prashant Pandey, CEO, ENIL, says the company will bid quite aggressively in phase III. We would like to double our network if possible at reasonable bid terms, he adds, including a caveat, If the bids go too high, we would be happy to sit out. Radio Mirchi is present in 32 markets,

For Apurva Purohit, CEO, Radio City, the FM III announcement will give an impetus to the medium and help deliver on FMs true potential. We see the medium getting 8-10 % of the advertising pie on the back of this policy. The expansion of the medium to 300 cities will make it a truly pan-Indian medium, she adds.

But there have been crippling problems in its debut decade, not least because of rising costs, especially because of high music royalties. Pandey says in the first five years, Radio Mirchi suffered losses of R100 crore because of faulty licensing policy and faulty music royalty rates. Though the radio industry still suffers losses, the Copyright Boards ruling in August last year, reducing the rates it had to pay the music industry, came as a huge relief.

For Katial of BIG, the radio business is stable now and the opportunity to grow the business lies in innovation in content, as well as product offerings. One of the key focus areas is offering integrated multimedia properties to clients, as well as creating our own IPs that will become a key part of the radio operating plan, he points out. Katial also rues the fact that radio as a category has been undervalued by the market. A recent RAM baseline study shows a 50% jump in listenership across the four metros, he says. This means that advertisers are increasingly seeing the value, and radio should get the price it deserves given its high reach and high engagement, adds Katial.

Ask Radio Citys Purohit to appraise the decade and she says one of the good things that happened was phase II of FM radio, when some more stations could be opened beyond metros, and realisation by the government that the medium would flourish only by following a revenue share model in licence fees. The royalty resolution again has been a landmark decision, ensuring that the radio industry grows and the music industry participates in this growth through revenue sharing. The third thing would be recognition by almost all national and local advertisers that radio is integral to the success of their 360-degree consumer engagement plans, she points out. But Purohit also admits that the delay in launch of phase III has been a dampener. The fact that news is still not allowed in an independent format and the lack of parity vis-a-vis other media (FDI limits for example) in many matters are some issues still shackling the industry, she adds. The government has said it will increase FDI limit in radio from 20% to 26%, but most players point out that it is too little to make an impact.

Pandey of Radio Mirchi says now that FM III has ticked in, the challenge would be to expand rapidly. The industry has to offer more channels and programming variety to listeners. We have to make the industry profitable, he adds. Pandey says the medium has come a long way since private FM was launched a decade ago in the four major metros, bringing a dead medium back to life. The growth of radio from almost nil share of advertising to nearly 5% now, at R1,200 crore, is one of the positives for the industry, he says.

Purohit feels FMs growth today is happening in a highly digital environment and she sees both media working closely together, whether it is in terms of marketing, content sharing or both being used parallel as distribution vehicles. All the players agree that the reach of the medium has expanded greatly.

So the next time you are caught in traffic, don't complain. For, at least one sector is cashing in on the growing congestion on roadsradio. As Pandey puts it: Clearly, with growing congestion on the roads, the listenership of radio is booming. Most urban 'busy' professionals in big towns are spending more time on radio (in cars, in offices...) than on TV. Also, the digital opportunity (mobile radio) is very exciting.