Slow growth of FM likely to affect frequency auction

Even as the government puts up 97 FM radio frequencies for auction, the pre-qualification bids for which have to be submitted by July 23, India's Rs 480 crore FM radio industry is stumbling.

The growth rates for listeners in the metros have declined and the operating costs, especially, content, marketing and HR, have gone up.

According to the Media Research Users Council's (MRUC's) latest listenership study, despite new radio stations launched under the revenue share scheme, Mumbai added barely 300,000 listeners to its 5 million, while Delhi fared a little better and added 450,000 new listeners to its existing 6.2 million. In Kolkata, listenership grew by a mere 1.14 per cent.

Says Entertainment Network India Ltd.'s deputy CEO Prashant Panday: "The market did not expand as much as expected when competition arrived. Mumbai's FM radio grew barely at 6 per cent." Adds radio consultant Sunil Kumar: "Growth has been slow primarily because FM radio has a disconnect with the audiences. There's no content differentiation among rival channels."

Operators claim that viability of the business is also a concern, especially, with escalating cost of music royalty, marketing and salaries.With cut-throat competition in the metros, radio stations are spending big time on outdoor and print. To push audiences to tune in, a Mumbai station is said to have spent Rs 1.5 crore on Outdoor in Mumbai recently. Manpower shortage has pushed up HR costs by 70 per cent.

However, the biggest hitch in the radio story is the steep music royalty cost. Currently, the radio industry pays approximately Rs 660 per needle hour to PPL (Phonographic Performance Limited) and the same amount to the Indian Performing Rights Society (IPRS). But since some major music publishers such as T-Series and Yash Raj Music are not part of PPL, the radio operators pay them separately for their music.

Radio company executives claim that in developed markets, music companies charge a royalty of between 1 to 4 per cent of a radio station's revenues.

"Here we pay nearly 20 per cent share of our revenue which is making the business unviable," says Sajjad Chunawala, Mumbai station head of Hindustan Times' Fever 104. Radio operators say that PPL also charges the same rate from stations in the metros which have a higher earning capacity as well as the stations in class C and D towns like Hisar and Karnal.

"Without differential pricing smaller stations will never make money," says Rahul Gupta, director Shri Puran Multimedia (part of Dainik Jagran group) that runs Radio Mantra in six cities.

Such complains do not faze PPL CEO Vipul Pradhan. "Music is the main raw material for the radio industry. Isn't content the highest cost component of the television industry too? In the entertainment industry, content cost is between 50 and 80 per cent of the total cost of operations, and that's known."

His contention is that the operators knew the cost of music rights when they bid for stations. "These are just tactics to pressure us for discounts," he adds.

Radio operators say that the new frequencies being auctioned may find few takers if music continues to stay expensive and news and current affairs is not allowed on private radio. High music royalty is affecting the feasibility of radio stations in smaller towns.

If the issue remains unresolved, the response to the auction could be poor. Only ten frequencies of the 97 are in A or A+ towns with the rest being in small towns, says Radio Mantra's Rahul Gupta.