 "Apurva Purohit")
Have things just got tougher for Indian FM radio operators? Recently, when the first batch of auctions in the third phase of FM Radio privatisation happened, there was happiness all around. The auctions were happening after almost a decade of delays, and the sluice gates opened for 97 new stations.
These were part of the frequencies left over from the second phase of auctions in 2006. The auctioning for the third phase — with 839 frequencies in C and D category towns — is yet to begin. These auctions were “essential not just for growth but also continuity since the migration (to the next phase for existing licensees) had to be taken care of,” says Uday Chawla, secretary general, Association of Radio Operators for India.
As the dust settles, some of that euphoria may have died down. The radio operators need to pay over Rs3,100 crore in licence and migration fees over 15 years — over Rs200 crore a year. This is a serious burden for the Rs1,720-crore industry. Only four of a dozen odd radio companies make an operating profit and they too haven’t wiped out their accumulated losses. In 2012, the last year for which such information is available, the industry had accumulated losses of Rs2,400 crore.
Will there be any capital available to fund the next round, considering how consistently radio has delivered below expectations? Worse, radio listenership has been falling consistently — from about 160 million in 2012 to 99 million in 2014.
“The listenership is falling because we have not been allowed to make changes. There is tremendous opportunity in radio. For instance, why is there not a single Marathi station in Mumbai when there is a ready audience of 5 million for such a station? Or a Punjabi one in Delhi?” says Prashant Panday, CEO, ENIL (Radio Mirchi).
New Opportunities
Also the market has got segmented. “Three players — Mirchi, Big FM and Red FM (Sun TV) — now have 55 plus stations and are serious national players. Two players — My FM (DB Corp) and Radio City — have 30-40 stations and are strong in regional markets. And two — HT Media (Fever) and Rajasthan Patrika (FM Tadka) — have 10-15 stations and are serious players in a few markets,” says Panday.
With the stations auctioned last month, the number of private FM stations in the country could go up to 340. This means more coverage. “Operators can now offer state-level bouquets to advertisers,” says Ashish Pherwani, partner, advisory services, EY. “Currently, FM radio covers 30 per cent of urban India and forms 4 per cent of national ad spends. With this round, its coverage should go to 70 per cent, this in turn will push its share of ad spend to 7-10 per cent,” adds Purohit. Going by that, the radio market in India should become over Rs5,700 crore in size in 2019.
More coverage, more stations per city and therefore an expanded share of ad pie may be possible. The stock market seems to think so too. ENIL, the only standalone listed radio firm, saw its stock rise 13.5 per cent in the days following the announcement of the bidding results.
More than bargained for?
But many may have bid way beyond the potential for growth. For example, HT Media’s bid of Rs169 crore for one station in Delhi has most analysts startled. Delhi already has over 10 large stations jostling for the Rs300-crore ad market. How much can it grow? (HT Media’s Harshad Jain did not revert to an email request for interview).
“I don’t see advertisers substantially shifting their money to radio as it goes pan-India. Radio is more useful as a medium for local mom and pop shops at low cost,” says Sam Balsara, chairman, Madison World.
Typically the larger operators get 50-70 per cent of their ad revenues from retail advertising. Which is why, say analysts, the market expansion theory will probably hold good in the smaller cities where media firms have bought into more radio to augment the reach of their TV or print brands — a la Rajasthan Patrika or DB Corp (MyFM) which owns Dainik Bhaskar, one of the largest selling Hindi papers in India, and has just expanded from 17 to 31 stations.
“The idea (behind the bidding) was to have a footprint in the states that we are present in: Haryana, Rajasthan, Gujarat and Maharashtra. It is going to strengthen our retail advertising business. Radio is a retail medium, that is why we have not bid for metros,” says Harrish M Bhatia, CEO, DB Corp (Radio division).
He claims that MyFM’s revenues have shown 20 per cent compounded annual growth over the last six years. This is the clearest indication that growth is in small town India, he reckons. “We want to break even (on the 14 new stations) in three years and be profitable in five,” says Bhatia.
It is a sentiment that Reliance’s Big FM echoes. “We have a big presence in UP, Bihar and Jharkhand because of Ganga (its TV channel), and therefore radio fits well,” says Tarun Katial, CEO, Reliance Broadcast Network. He points out that operating cost for these stations would be lower because of shared offices and staff. “We will break even on the (14) new stations in one year,” says Katial.
Expanding to new cities is the goal for Rajasthan Patrika too. “Our main aim is to extend our reach through radio,” says Director HP Tiwari.
Analysts reckon that everyone will make losses for some time even if they did not bid — because the migration fees for the older stations at Rs1,965 crore will ensure a squeeze on the bottom-line for some years to come. In the short to medium term then, say 3-5 years, things could become harder for Indian radio operators. However, if auctions for the third phase, which could take the total number of stations to over 1100, happen quickly, the market could expand faster.
