Ambition makes for strange bedfellows and the Indian radio sector
stands testimony to this fact. The Information and Broadcasting
Ministry's dogma and the private players' sky rocketing ambitions have
found it hard to get along, but still, it is appreciable that the
players have still managed to conjure up an industry that is worth Rs
620 crore and is touching lives of people across 245 cities in India.
The
onus of the next wave of expansion lies in the much talked about third
phase of licensing, which is said to arrive soon. But given the
present, stringent stand of the I&B Ministry in regard to the
regulatory issues, this phase might just prove to be a total washout.
As
Rajesh Sawhney, CEO, Big Entertainment, puts it, "In India, we need
many more radio channels than the 250 stations we have. We need as many
as 10,000 radio stations. For that to happen, the government needs to
change the regulations, which is one of the biggest challenges for the
industry."
Issues like single frequency to every player in one
market, news and current affairs being prohibited, high content costs
and simultaneous emergence of competitive media would restrict radio's
growth in coming years.
Nikhil Vora, managing director, IDFC
SSKI Securities, exclaims, "Radio as a medium has been highly under
penetrated in India – attributable to lack of reforms and irrational
regulatory policies. This, we believe, would restrict the share of
Indian radio in the total ad pie to a peak level of 5 per cent as
against the global average of 8.5 per cent."
Globally, radio has
grown on the back of niche and local advertising. However, the trend is
not reflected in the Indian radio industry, as channels lack content
differentiation due to government regulation of allowing single
frequency to any radio station in each market.
As regulations
don't allow multiple frequencies to a single station, private players
are not experimenting; instead they are playing a safe bet by operating
in the mass segment. The case in point is that a radio channel, after
paying about Rs 35 crore to get a radio frequency in Mumbai (which is
roughly a Rs 80-100 crore on advertising market), will not take the
risk to operate a niche channel.
For instance, 92.5 Go FM,
which use to play only English music in Mumbai, repositioned itself in
2006 to the mass market. Harrish M. Bhatia, COO, MY FM, suggests,
"Multiple frequencies will enable FM players to focus on niche markets
without compromising on listenership."
Given the platform of
multiple licenses, there is a lot of creativity and experimentation
possible with marginal incremental investments. Multiple licenses will
lead to the creation of genre-based music stations (as in the west),
which will not only segment the listener market but also pull in
non-traditional listeners and advertisers.
For instance, in
US, a radio player named Clear Channel operates more than 1,200
stations across 29 formats with as many as seven stations in 1 market,
playing a range of categories like classic, Americana, rock, et al.
Within music, there are over 15 niches and 30 sub-niches.
Puja
Sharma, finance and HR head, Fever FM points outs, "A city like Bangkok
has over 40 radio stations, while Delhi has a mere nine, given the
current policy structure."
"The government is cautious to
prevent monopoly in the sector. That's why it adheres strictly to the
issue of not allowing multiple frequencies to private players in a
single market," reasons Sunil Kumar, managing director, Big River Radio
India.
But in the days when everyone is encouraging
liberalisation and free competition, the argument of monopoly
prevention sounds inappropriate. Even in television, media houses offer
a bouquet of channels, which helps them to have a wide offering and tap
more consumers as well as advertisers.
After a point, general
entertainment channels tend to lose market share to niche channels. In
the last few years, we have witnessed a series of niche channels being
launched – E-24, NDTV Imagine Showbiz, Awaaz, Pogo, Travel and Living,
Zoom, VH1, et al. To grow at a faster pace, the Indian radio industry
should also witness similar niche launches, which will be possible only
if current regulations are relaxed.
Limitations on
broadcasting of news and current affairs are a critical stumbling
block. Globally, radio stations offer channels across genres like news,
sports, talk shows, fashion, religion, et al. In US, radio listeners
spend almost 50 per cent of their radio listening time on news or talk
channels. News & current affairs will help radio gain wider
acceptance.
The government however, has flatly denied TRAI's
recommendation to allow news content on radio, as of now. The argument
given is that news reaches to the mass market and can be dangerous if
misused.
Prem Kumar, station head, Chennai Live FM, says,
"Radio has a deep reach. It's not possible to monitor every radio
station in every city and if left free, there can be misuse."
Well
the argument sounds strong yet there should be ways worked out of it
instead of banning it. Like the government can make an arrangement
where radio players should be allowed to air news content in
partnership with traditional media.
With music being the only
content, royalty becomes a major cost for Indian radio players. With
per needle hour charges of Rs 667, radio operators end up paying Rs 5
million annually per station on an average, irrespective of the city of
operations. This royalty structure that makes a similar content cost
across markets is unjustified, and sends the whole business model for a
toss.
The cost may not look very high in metros with revenues
of over Rs 35-40 crore per player, but may overshoot 15-20 per cent of
the revenues in smaller towns, thus squeezing margins.
Prashant
Panday, CEO, Radio Mirchi, feels, "Paying Rs 40-50 crore as music
royalty for any station irrespective of its population is obviously
ridiculous. Unless, there is a logical royalty fee structure,
profitability of radio, especially in small cities, will be doubtful.
In that case we will surely not expand our network just for the sake of
building big network."
Another very important issue concerning
profitability of radio in smaller cities is that networking of cities
is not allowed. Networking of cities should be allowed as it will make
the costs of operations go down.
Setting up a station is
equally costly in metros and small cities, but revenue return prospects
in small cities are not that high. So, most players are not willing to
expand in these areas, given the cost constraint. Allowing networking
and content syndication will help players to reach out to these
audiences without much ado.
Besides, there are issues like
allowing sale of stake and releasing more frequency in every market.
These will make the business environment better. Unless these concerns
are dealt with, the Phase III of licensing will not work.
As
Radio Mirchi's Prashant candidly says, "Given current regulatory
policies, it isn't possible to make operations viable in tier 2 and
tier 3 cities; that's why our interest in Phase III will be limited. We
can bid for 4-5 stations but not more, unless policies are changed."
Nikhil
from SSKI concludes from his analysis, "Given the lacunas in the
business, we see hardly any money to be made in the industry, unless
there're major changes on the policy front. As the competitive
landscape sets in, we expect the industry to at best have a money
making potential of Rs.1.4 billion and a share of 5 per cent in the ad
pie against 8.5 per cent globally."
Moreover, instead of
utilising the services of an external body like TRAI, the government
should let the sector be self-monitored by bodies like Association of
Radio operators for India (AROI).
"When given that sooner or
later the radio industry has to get into a society and self-monitor
them, why not now ?" quizzes Anita Nayyar, CEO, Havas Media.
Given
that the radio sector has grown so phenomenally in the past few years
under these constraints, it will be quite unfortunate if its further
growth is constrained by regulatory bottlenecks. Phase III seems headed
for failure under the current scenario, where players may not find it
very lucrative to add too many new channels in their bouquet.
http://www.televisionpoint.com/news2009/newsfullstory.php?id=1233837692
________________________
Jaisakthivel, Chennai, India
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