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  1. A new rhythm for radio

A new rhythm for radio

After a long wait, the government has given its go-ahead for the Phase 3 auction of radio channels. The industry is jubilant. Will radio finally find its groove?

By: | Updated: February 4, 2015 3:44 PM
radio, radio channels, radio channels auction, radio channels Phase 3 auction, radio channels industry, auction, auction radio channels

Will radio finally find its groove?

After a long wait, the government has given its go-ahead for the Phase 3 auction of radio channels. The industry is jubilant. Will radio finally find its groove?

IT is difficult to plan expansion when your existence itself is in doubt. It is this truth that the Indian radio industry has been battling for the last few years. So when last month, the government gave the green signal for partial auction of radio frequencies and migration of private FM radio licenses from Phase 2 to Phase 3 in 69 cities for 135 channels, there was jubilation all around. Radio operators came out strongly in support heralding it as a new dawn for the industry. Share prices of seven listed radio operators —Entertainment Network (India) which operates the Radio Mirchi brand with 32 stations, Sun TV Network which has the 93.5 Red FM brand with 50 stations, Next Reliance Mediaworks which has the 92.7 Big FM with 45 stations, Living Media Group which has Oye! 104.8 FM with six stations, HT Media which has Fever 104 FM with four stations, BAG Films which has Radio Dhamaal with 10 stations and DB Corp which has My FM with 17 stations — rose by 0.65% to 17.12% immediately after the Union Cabinet made the announcement.

So what were the hallelujahs all about? Says Apurva Purohit, CEO of Radio City: “Phase 3 is expected to change the contour of the medium. In terms of geographic spread currently private FM is available in only 40% of the country. With the completion of Phase 3, the medium will be available in 75% of the country. It will provide private radio the much needed reach in order to be national players.”

With the operating licences of some of the existing radio operators, including Red FM, Radio Mirchi, Radio City and Radio One, set to start expiring by March 31, 2015, the private FM industry had been on tenterhooks for the last few months. If the auctions were to be delayed further, these operators would find themselves unable to function. Now with the go-ahead, the auctions are expected to be held by the beginning of February to ensure that operators can migrate before the March 31 deadline.

At present, there are 243 private FM radio channels across 86 cities in India. First, 135 frequencies in 69 existing cities left over from the Phase 2 auctions will go under the hammer. The Phase 3 auction of 839 channels across 294 cities will take place later. The bidding for Phase 3 is likely to be very aggressive due to limited frequencies being available – for instance, Delhi has only one frequency while Mumbai has two frequencies to be auctioned. This is crucial as the formula recommended by Telecom Regulatory Authority of India (Trai) takes into account the market price of these frequencies to come out with the new migration fee for a city. Industry observers expect the entire process to bring R2100 crore to the national exchequer. While the government is expected to earn R1500 crore from the renewal and migration of licenses, R550 crore will accrue from the auction of new licences.

Radio-Industry

“It’s a win-win situation for all. While the government gets to earn its share of revenue, the new policy allows us to migrate from the old licence which is due to expire by March 2015. Moreover, the new licences are for a period of 15 years, which reduces vulnerability to economic slowdowns,” said Vineet Singh Hukmani, MD, Radio One.

The year 2006 too saw similar euphoria when the Phase 2 auctions were announced, but since then the radio industry hasn’t seen much evolution. Restrictive guidelines for the industry haven’t allowed radio to realise its full potential, say experts. For instance, operators cannot operate multiple channels in a city. This in turn made it difficult for private players to create differential programming targeting different sets of consumers. Agrees Prashant Pandey, managing director, Entertainment Network India (ENIL), who says almost everyone is riding on music when it comes to content. “It is true that radio lacks in differentiated content. While each station has its own positioning, the medium is still largely dependent on music for its content. But with Phase 3 allowing operators to own more than one frequency in a city this will change. Going forward, broadcasters will be seen experimenting with non-music content as well,” he said.

Tuning-in

At present, only a few smaller stations such as Radio Choklate in Odisha and Tomato FM in Kolhapur, Maharashtra air radio plays and other non-Bollywood, non- music contents. For instance, besides playing Oriya music, Radio Choklate airs opera or plays called ‘Choklate Rangamancha’.

According to CVL Srinivas, CEO, GroupM South Asia, the lack of differentiated content is the prime reason behind private radio operators not being able to monetise the medium. “Private FM operators will be able to command a high advertising rate only when they stand apart from each other,” said Srinivas.

FM-radio

Again, inability to share feed between stations of the same operators increases cost of operations. “Private FM operators are not allowed to broadcast live from one big station to smaller station. For instance, when an actor comes to promote a film in Delhi on one of our shows, we are not allowed to share the feed and so cannot broadcast the show live to smaller stations. Networking of small cities with big ones will not only help in saving operating costs, we would also be able to play with content,” said Nisha Narayanan, COO, Red FM.

The long wait for the go-ahead has meant that digital media has come up as a strong competitor to radio. According to the Ficci-KPMG 2014 report on the media and entertainment industry, digital ad spends accounted for 8.3% of the total ad spends of R91,800 crore in 2013, standing at R3,010 crore. Digital media advertising in India grew by 38.7% in 2013, faster than any other ad category. The ad spend on digital media is expected to reach R5,510 crore in 2015. In contrast, ad spends for the radio industry stood at R1,460 crore in 2013. The ad spends for radio is expected to grow at a rate of 15% to reach R1,900 crore in 2015.

“Radio’s role a medium has evolved in the last two years. Not only are brands using radio to reach out to consumers it is also being used extensively for political advertising. Yes, it is true that digital has grown faster than radio but with Phase 3 this too can change,” said Pandey.

Lack of a good radio measurement system has also acted as a deterrent to its growth. According to Narayanan of Red FM, while most operators have unsubscribed from the Radio Audience Measurement tool due to discrepancies in data, the Indian Readership Survey comes with its own set of issues. This has left every one claiming to be the number one station. “One cannot use either of the data for any purpose including increase in advertising rates. There are not only discrepancies but the information shared is wrong too,” she added.

Digital radio is another area where the industry is struggling. Even as players such as Radio City, Radio Mirchi and Big FM have tried their hands at internet radio through online stream, podcasts and platforms such as YouTube and Sound Cloud to expand their reach and enhance consumer engagement, not much headway has been made in the direction. “The fact that we cannot stream live due to royalty issues and are forced to stream customised content has left us handicapped on the digital platform,” said Hukmani.

The Phase 3 policy is expected to change all this. For one, private FM radio channels will be allowed to carry news from All India Radio (AIR). Broadcast pertaining to sporting events, traffic, weather, cultural events, career counselling, employment opportunities will also be allowed.

However, the terms of payment to AIR for this is still not clear. Having news, however, will give the radio channels some content differentiation, and help them in raising their ad revenues. “Private players can take news from AIR and package it in their style and air it. Moreover, as multiplicity of channels will see private FM players launching niche channels,” said Hukmani.

Come Phase 3 and each player is expected to play its own game. Jehil Thakkar, head, media and entertainment sector, KPMG in India, a management consulting firm, says that the auction will attract two kinds of players. “The first set of bidders will comprise existing networks such as Radio Mirchi, Red FM, Big FM and the Dainik Jagran Group which recently acquired Radio City, who would bid for a pan India presence. These networks would look at expanding their presence. The second set of bidders would include existing regional print players who would bid to consolidate their regional presence. Moreover, new players, mostly regional print companies, are also expected to join the bandwagon,” he added.

To be sure, players such as Radio One which airs English content will continue to focus on the metros and will be seen expanding its footprint from seven large cities to 10, apart from adding one or two frequencies in cities such as Bangalore. Large networks such as Reliance Broadcast Network Ltd will concentrate on building even a bigger network. “We have always lived by the motto of being the largest network and will continue to do so even during the Phase 3 auction,” said Tarun Katial, chief executive officer, Reliance Broadcast Network.

Radio City’s strategy all along has been to target the SEC A and B listeners and it can be expected to double its number of stations to 35-40 to ensure that it retains its 50% share of this market. “We have done a stellar job as as a stand-alone player in the radio business. We have build a strong metro focussed brand and will continue with the same strategy,” said Radio City’s Purohit.

For MY FM, the strategy will be to strengthen its presence in regions which will create shareholder value and be viable for the business, said Harrish M Bhatia, CEO, 94.3 MY FM.

Radio Mirchi’s Pandey says it all depends on the brand’s long term goals. “One may acquire a small player who fits in with what the brand essentially stands for in order to have a second frequency in a city rather than buying a new one. Or one may simply bid for spectrum. At Mirchi, while we would focus on expanding the brand’s presence across the country, we will not enter smaller cities just for the sake of it,” he added.

The fact that the new policy may allow a broadcaster to sell off its stake in the radio company after three years instead of five, will certainly have a bearing on the radio operators’ strategies. Citing the example of Dainik Jagran Group’s recent acquisition of Radio City, Purohit says that consolidation is on the cards. “Many ideas are being considered right from bidding for fresh spectrum or acquiring a niche player who is doing well,” she said. The industry now awaits the bugle call for its rejuvenation.

* Currently private FM is available in only 40% of the country. With the completion of Phase 3, the medium will be available in 75% of the country.” Apurva Purohit, CEO, Radio City

* While we would focus on expanding radio mirchi’s presence across the country, we will not enter smaller cities just for the sake of it.”
Prashant Pandey Managing director, Entertainment Network India

* AT RBNL, WE have always lived by the motto of being the largest network and will continue to do so even during the Phase 3 auction.”
Tarun Katial, Chief executive officer, Reliance Broadcast Network

* Private FM operators are not allowed to broadcast live from one big station to A smaller ONE, THUS RAISING OUR OPERATING COSTS.”
Nisha Narayanan Chief operating officer, Red FM

* Private FM operators are not allowed to broadcast live from one big station to A smaller ONE, THUS RAISING OUR OPERATING COSTS.”
Nisha Narayanan, Chief operating officer, Red FM

 

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  1. Prakhar Gupta
    Feb 18, 2015 at 12:27 am
    One Of the finest articles written Ms. hree. Clic example of Refined journalism. i congratulate you on your effort. well written and thoroughly researched.
    Reply
    1. Prakhar Gupta
      Feb 18, 2015 at 12:27 am
      One Of the finest articles written Ms. hree. Clic example of Refined journalism. i congratulate you on your effort. well written and thoroughly researched.
      Reply

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