Unless radio is allowed to offer more diversified fare, and each group allowed to own more than one channel, the new auction for 800 frequencies could come a cropper.
Apurva Purohit
CEO, Radio City 91.1 FM
‘In places like Mumbai, radio has thrice print’s reach and at the same cost. Barring some TV channels, we get better ad rates. It still is a great business’
Which medium provides non-stop entertainment 24/7 for a one-time investment of Rs 100? Or provides information about traffic at the next junction? Which medium covers 98 per cent of India’s geographical spread, and has been doing so for the last 50 years?
It was through this medium — radio — that Indians first heard about their tryst with destiny in 1947 and it has been part of our lives ever since.
Radio gets woven so seamlessly into the fabric of our lives that we end up discounting the significant impact it has on listeners and the power of its reach and coverage.
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Today, radio is the second-highest consumed medium after TV and is one of the fastest-growing media in India. So if the listenership of radio is so high, can advertisers be far behind? Where else will they get such a wide coverage at such a low cost? In Mumbai, for example, FM radio has three times the reach of print at the same cost. After Phase II, advertising money started pouring in, and radio grew from a Rs 400-crore medium in 2005 to a likely Rs 1,000-crore this year.
Once the revenue-sharing regime came into place in 2005 (FM players pay four per cent of their gross revenue as annual license fee to the government), it was an overnight shift from deep red to a very decent black for players from the earlier Phase-I era. With EBITDA margins of 20-30 per cent, radio immediately became a very interesting business model for media-owners.
Has the story changed today? Given the slowdown and the pressure on rates, there’s been a short-term impact on radio operators. The margins are squeezed. However, radio will fundamentally always have a strong business model. Its widespread reach, local impact and cost efficiency are strengths no advertiser, whether national or local, can afford to ignore.
The medium is yet to be fully exploited by the local advertisers. Given that it commands 4-5 per cent share of the advertising pie (compared to 8-12 per cent internationally), the potential of the medium is there for anyone to see. Even today, on a pan-India basis, radio commands rates which are higher than most TV channels barring the general entertainment channels (GECs) because of better reach.
Today most radio stations are reeling under the impact of steep music royalties being paid to the music labels. At 15-20 per cent of revenues, on an overall industry basis, and up to 70-100 per cent of the revenue in the smaller cities, music royalties must be rationalised if we are serious about allowing the cheapest form of entertainment to flourish in the country.
Certainly a more rationalised royalty fee structure will create a viable business model for FM players, — a relevant growth opportunity for media owners and a successful medium which reaches every nook and cranny of the country in a cost-effective manner.
Finally, if radio is a product which entertains, has millions of daily consumers, enjoys a sustainable cost structure, is supported by a secular government and run by experts, can it be anything but a good business to be in?
The author is also the President of the Association of Radio Operators of India (AROI)
Sunil Kumar
Founder, Big River Radio
‘Radio is surrounded by as many uncertainties in its expenses as it is in its revenues. In the last phase, at least 97 stations did not get picked up’
The government is planning to begin auctioning Phase III of FM radio bids. The bids need to be held as India has only 250 radio stations — too few for a large and diverse country. Since radio is a local medium, the more segmented it is, the better sense it would make. For instance, Mumbai has a mixed population — there is a Marathi-speaking majority as well as a huge Gujarati-speaking populace. But Mumbai does not have a single Marathi or a Gujarati radio station.
There are two aspects of radio privatisation: One is the public interest and the other is the business interest. Interestingly, at present, neither its public interest nor the business interest is being fulfilled. Why it does not make sense to be in the radio business is simple: So far, no private operator has made money out of the radio business. People have only lost money — whether they are small or large players — even though the advertisers’ response has been good.
The trouble is that the existing licensing model is defective. I do not blame the government for this. The bidders bid on the basis of what they ‘perceived’ the market to be. So most of the licences went to players who, though most ignorant about the market, bid the highest amounts. And so, those who understood the market lost out. For instance, Dainik Jagran, which publishes in Kanpur and Lucknow, did not win the stations in these cities. Why? Because it knew the market well and bid realistically. Clearly, the bidding prices are not linked to the ground realities of viability.
Secondly, though the advertisers are enthused by the medium, they like to buy commercial air time very cheap. For a start, there is no measurement system that can measure stations across the length and breadth of the country. The measurement systems focus on the top six or seven towns. So how do you expect a radio station in a small town in Andhra Pradesh to make money? That is not all. Media-buying has got concentrated in a few hands and that’s working against the industry. You could say that about five companies are buying 80 per cent of the commercial time. And they have the power to quote very low rates. So as long as there is ‘science’ to radio-buying, it does not make sense to get into the business.
Today, a radio operator also works under many restrictions. Broadcast of news and current-affairs programmes is not permitted on radio. So even if I want to do a chat show, am I allowed to discuss Hillary Clinton’s visit, or, a recent Supreme Court judgment? Content restriction makes it a bad business model for me and I end up playing only music. And clearly, the music industry bodies exploit that. The music royalty issue is still not resolved. As much as 30-40 per cent of my input cost is music and I am dependent on the whims and fancies of the music companies and copyright bodies for that.
Clearly, the radio business is surrounded by uncertainties in expenses as well as of revenues. Let me also remind you that in the last phase at least 97 stations did not get picked up. The Zee group, too, surrendered all its licences.
(As told to Shuchi Bansal)