Guess which the most profitable private frequency modulation (FM) radio station in Mumbai is? Millenium Broadcast's Win 94.6, because it shut operations in April 2004. The joke doing the rounds in Mumbai's FM radio circles is not lost on the company's promoter Gautam Radia who takes it in his stride.
During the two-year Win operation, Millenium lost approximately Rs 30 crore. Unable to pay Rs 13 crore as the third year's licence fee for the Mumbai station, Radia eventually closed shop.
Other FM radio companies fear that they may soon follow Win 94.6's example.
Says Entertainment Network India Ltd's (ENIL) chief executive officer AP Parigi: "We are running out of cash. Something needs to be done fast." ENIL, he claims, has lost Rs 92 crore in running seven FM radio stations.
Tariq Ansari, promoter of Radio Mid-Day, which operates Go in Mumbai, expresses a similar sentiment: "We have submitted a conditional notice of termination (of service) to the government." The reason: the station does not expect to break even or make money in the present licence regime. For the last few months, the company has been paying its annual licence fee on a month-to-month basis.
Clearly, India's private FM radio industry is not playing a happy melody. Radio operators, big and small, claim to be on the verge of closing, saying that they're unprofitable.
"They are either closing or fighting the government in the courts," says a radio station promoter who does not wish to be named. Indeed, even media houses such as The Times of India group and the India Today group approached the Telecom Disputes Settlement Appellate Tribunal three months ago to get relief from paying the over Rs 7 crore each has to fork out as the second year's fee for their Delhi stations.
The situation in Chennai is no different. Sun Network's chairman and managing director Kalanithi Maran has not paid the FM radio licence fee either, having obtained a stay order from the high court. Maran runs four FM radio stations in south India, including Suryan in Chennai.
Says Maran: "We're waiting for the TRAI's recommendations on FM radio reforms. If we pay before the new norms are announced, it will be impossible to recover the money from the government."
But that's not the end of the radio story. Private operators, having bid hefty sums for radio licences, are most unwilling to fulfil their contractual obligations and deposit fees.
They unanimously blame the government for delays in sorting out the issues relating to radio privatisation (the rationalisation of the exorbitant annual licence fee, news on radio, foreign equity in radio stations).
To be fair to the government, it appointed an independent committee headed by Federation of Indian Chambers of Commerce & Industry secretary general Amit Mitra to suggest reforms for FM radio.
The committee submitted its proposals some months ago and suggested a one-time entry fee, a four per cent revenue sharing arrangement with the government and 26 per cent foreign equity in the radio business "� none is currently allowed. The report also suggested that these recommendations be implemented restrospectively. The government referred the report to TRAI.
Though TRAI's interim recommendations were more or less in line with the Amit Mitra committee report's recommendations, the government was soon in election mode and decisions on all policy matters were deferred. The radio operators claim that the government has been dragging its feet on the matter ever since.
Information and broadcasting ministry bureaucrats, however, say that the ministry is not responsible for the delay. "We had to follow the election code of conduct and now we are waiting for the TRAI recommendations," says one official.
However, insiders point out that the ministry may not be in a hurry to take a view even if TRAI submits its proposals. That's because officials are quite miffed with the way some large media houses behaved, applying tremendous pressure to get a waiver on the annual licence fee just before the elections.
Ministry officials apparently blocked the move, though the radio companies did manage to drag the issue to TDSAT, which asked them to deposit the fees for four months.
Says a source in the ministry: "If the business houses had behaved better, there would have been more sympathy for them. We are not against radio reforms, after all."
However, the apprehensions of the radio barons also stem from information and broadcasting minister Jaipal Reddy's statements on setting up a broadcasting industry regulator.
"If the process of resolving the FM radio problems starts all over again, God help us," wails the head of a radio channel. Maran says that the loosely formed radio group has already met the minister and expressed concern over further delays.
Radio City's chief operating officer Sumantra Datta says that "FM radio does not seem to be on the priority list of the government." And its inaction on the issue is affecting the business adversely. It is estimated that in Mumbai alone radio stations spend nearly Rs 86 crore a year on running their channels, including the licence fee that totals up to Rs 52 crore.
"Mumbai's radio advertising market is definitely not as big and there's no way we can recover our costs from this," says Datta. Mid-Day's Ansari puts the size of Mumbai's radio advertising market at roughly Rs 35 crore.
The licence fee is said to account for almost 70 per cent of the total cost of operations of a radio station and escalates by 15 per cent a year.
Also, Maran points out that though radio advertising is growing, it is still dominated by the small, local advertiser. "The big buck players like Hindustan Lever and P&G are still not looking at the medium. It will take a long time to evolve," he says.
Parigi is worried that with stations closing, the advertiser may lose faith in FM radio. "Television is a mature market. If a TV channel shuts, advertisers don't turn away. If they see FM radio channels closing down, it will send wrong signals," he says.
Besides, the unresolved licence fee issue affects programming too. "The current economic model limits the choice offered to listeners. Economics forces everybody to follow the mass programming format," says Nishchint Chawla, who heads the India Today group's Red FM.
It is also delaying phase two of radio privatisation which in turn would have meant more stations, he adds. However, under the circumstances, phase two seems to be a distant possibility as the true value of a licence in any city is not known.
Phase two auctions and resolution of the phase one issues also seem like a distant dream considering the sheer number of court cases that private operators have filed against the government.
At last count, the private operators were fighting 26 court cases in different courts. Music Broadcast Private Ltd (MBPL), which operates Radio City, is one of those in court.
The government believes that Radio City is funded by Star India even though no foreign equity is allowed in FM radio.
Apparently, when the government first raised the issue with the company some months ago, it got a stay from the Mumbai high court preventing the government from taking further action. The information and broadcasting minister has now moved a court application to get the stay vacated.
Radio City's Datta, of course, says that Star is only a "marketing concessionnaire" for the channel. "How do the private operators expect us to resolve any issue when they are constantly dragging us to court," asks an information and broadcasting ministry official.
Besides, now the private radio operators allege that the government is not moving on FM radio as it is happy to pocket the huge licence fee. "In the original tender document FM radio had a social objective. Now its objective seems to be revenue generation for the government," says Datta.
Counters an I&B ministry official: "First, we are not pocketing the money ourselves. It goes into the Consolidated Fund of India."
Besides, he says that the ministry has to be very careful in what it decides to do. "Say, if FM radio generates Rs 140 crore today and suddenly the revenue drops to Rs 10-12 crore, we can be taken to task for causing a loss to the government. It is a criminal offense. We will have the Comptroller & Auditor General and other agencies on our back," says an official.
Clearly, such comments and the absence of any sign of the TRAI report are not infusing any confidence among radio operators. "The impression we get is that they want us to die, so that they could start again," says a radio channel head. Asks another irate operator: "We just need to know what will it take for the government to act. Will our shutting operations help?"
Radio Mirchi's Parigi says that the FM radio issue has gone through analysis to paralysis. "I hope the government sees the rational school of thought," he says. Till then, Parigi and his ilk are keeping their fingers crossed in the hope that they won't be joining the Win 94.6 ranks.
