Trai's latest recommendations likely to help FM radio find lost signal

Can the Telecom Regulatory Authority of India’s (Trai’s) latest recommendations help revive FM radio? Or is it too late?

India’s Rs 2,100 crore radio business has been severely impacted by the pandemic, the rise of streaming, and a host of structural issues.

Even as listenership and advertising (ad) volumes rose, its share of ad revenues dropped from 3.5 per cent (Rs 3,100 crore) of ad spends in 2019 to 2 per cent in 2020 and stayed there.

“Radio is not seen as a strategic medium for frequency or reach by clients,” says Shrikant Shenoy, associate vice-president at Lodestar UM, a media buying agency.

Most operators have turned to organising events and creating programming, which contribute 20–40 per cent of their top line.

On September 5, Trai released a list of four recommendations it is making to the Ministry of Information and Broadcasting (I&B). These recommendations include allowing news on FM channels, rationalising the licence regime, and mandating FM receivers on mobile phones.

If implemented, these changes could help reduce costs, increase reach and monetisation, and bring more programming variety to radio.

Not surprisingly, they have created “a wow kind of feeling”, says Rahul Namjoshi, chief executive officer (CEO), MYFM India, the radio arm of DB Group, which operates 30 radio stations across India.

DB Group owns Dainik Bhaskar, among other newspapers, and has an editorial staff of 3,500. Therefore, doing 10 minutes of news every hour for its radio arm should be a cakewalk.

This is true for Sun Network, one of India’s largest broadcasters, which owns 69 stations under Red FM and Magic FM.

“News will bring in a whole category of advertisers who don’t consider radio,” says Nisha Narayanan, director and chief operating officer of Red FM and Magic FM.

However, what really excites almost every major radio operator is the “licence fee being decoupled from the one-time entry fee and (the mandating of FM receivers on) smartphones”, says Yatish Mehrishi, CEO of Entertainment Network India, which operates 73 FM stations under the Mirchi brand.
 

Cutting costs, improving reach

In 2015, during Phase 3 of licensing FM radio operators, they paid over Rs 3,100 crore as licence and migration fees.

For an industry that had generated Rs 1,720 crore in ad revenues in 2014, this was excessive. The guidelines pegged licence fees at 4 per cent of gross revenues (which has to include goods and services tax), or 2.5 per cent of the one-time entry fee for a city, whichever is higher.

For example, in Delhi, the highest bid was Rs 169 crore. So the licence fee would be about Rs 4.2 crore, even if the station is not earning anything. This applied even to companies that had migrated from Phase 2 to Phase 3.

According to Trai’s analysis, 182 stations paid a licence fee of over 4 per cent of revenues, and 34 stations paid a licence fee that was 30 per cent of revenues.

“Most stations were bleeding,” says Ashit Kukian, CEO of Music Broadcast, which operates 39 FM stations under the Radio City name.

If the licence fee is rationalised, it will help push costs down by anywhere between 10 and 40 per cent, depending on the stations and cities an operator is in.

This dovetails nicely with the bid to mandate radio on smartphones.

“Most mobile sets have receivers. Some operators disable them to promote their own music streaming service or applications,” says Kukian.

This has meant stagnating reach.

“As an industry, we have taken a strong stance on FM tuners. We reached out to the telecommunication companies and asked them why they were not enabling them. They said people don’t want radio; they want streaming. But data is paid; radio is free,” points out Namjoshi.

You could ask why operators did not turn to internet radio to increase reach.

“The licence is for terrestrial radio,” points out Mehrishi.

What he doesn’t say is that audio streaming platforms offer much better revenue share terms to music labels than the 2-3 per cent that radio does.

There is, however, a greater goal here.

“During a disaster, the only communication medium that works is radio,” says Mehrishi.

In April of this year, the Ministry of Electronics and Information Technology released an advisory to mobile manufacturers’ associations, emphasising this.

Assuming manufacturers comply, FM radio has the potential to reach over a billion mobile users. Analysts estimate that the current listenership of approximately 262 million could easily double.

That brings us to the trouble spots Trai cannot help with. Even if listenership grows, there is no way to prove it. The last readership survey was in 2019.

“There is RAM (from Tam Media Research), but it covers only the four metros,” says Shenoy.

India has 867 commercial radio stations, including the state-controlled All India Radio. The medium’s strength is its phenomenal reach and its efficiency as a hyperlocal medium.

Most operators get anywhere from 50-70 per cent from local retailers. Yet there is no decent metric, nor have operators worked on building one. How then will they capture the benefits of rising reach?

Note that ad rates that fell by 35–50 per cent during the pandemic never bounced back, although ad volumes have grown by 25 per cent in 2022 over 2021.

“With these recommendations, the currency issue should be sorted,” thinks Narayanan.

“Planners will take a fresh look at radio if these recommendations happen,” says Shenoy.

That is the big IF.

Will the ministry accept these, and will they become policy?

“It is critical that the I&B ministry accept it, especially if we are talking about new frequencies being auctioned. These recommendations will help determine the call on bidding in the future,” says Narayanan.

RADIO GA GA

Key recommendations on FM radio by Trai

- Licence fee be delinked from non-refundable one-time entry fee and calculated as 4% of gross revenue, not including GST (which was included earlier)

- Centre should take appropriate measures to provide relief to operators hit by the pandemic

- Operators will be allowed to broadcast news and current affairs for 10 minutes per clock hour

- Functions or features pertaining to FM radio should remain enabled and activated on all mobile handsets with the necessary hardware

- A standing committee to monitor compliance by phone manufacturers and importers