Round 3 for radio
Even as the announcement of a much delayed FM phase III policy brought some cheer for the radio industry, which is gearing up for the next phase of expansion, there is wariness on some issues that seem unclear or have been left unresolved. Rachit Vats writes. Salient features of the Phase-III radio policy | High frequency, right pitchbusiness Updated: Jul 10, 2011 21:38 IST
Even as the announcement of a much delayed FM phase III policy brought some cheer for the radio industry, which is gearing up for the next phase of expansion, there is wariness on some issues that seem unclear or have been left unresolved.
The good news is that 839 new radio stations will start in 227 new cities and towns, once the implementation of the phase III of FM radio happens, making the private radio industry one of the largest growing media in the country.
The Rs 1,200 crore industry - private FM is Rs 850 crore; AIR is Rs 350 crore - expects to double its turnover by 2015. Already, says the radio industry, despite restricted liberalisation, radio's average consumption time in India is 145-150 minutes per day, as compared to television's 140 minutes per day.
The Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) limit has been increased from 20% to 26%.
While FM phase II saw India experience a radio revival in metros and big-cities and the government was left with some unallotted frequencies, phase III will take radio to small town India, cutting across a large swathe of tier II and III towns. However, the hopes for many more policy changes that were expected have been left unaddressed, the industry says.
"There is a buoyant mood but more clarity is required on a number of issues. While we are positive about the policy announcement, our expansion plans largely depend on more clarity around the license extension to 15 years (from the current 10 years; there is no mention of this in the new policy), transparency in the e-auction model, and the royalty issue," said Vineet Singh Hukmani, MD, RadioOne.
"This means we will have to invest more and unless we recover our current costs, that is going to be difficult. License extension will ease up things," Hukmani added.
"The government is overprotective about AIR and is treading with caution. However, the policy does bring about some revitalisation and it is a step-by-step change. A clearer roadmap, however, will be much appreciated," said Apurva Purohit, CEO, RadioCity.
While the policy is out, the timeline to when exactly it will be implemented has not been announced. "The e-auction model follows the 3G model and the fears are that it may push prices up," said Purohit.
The industry is afraid that unless more clarity on the auction process is provided, it will be tough to prevent the bidding from going out of control.
"The e-auction route will take the license fee to a high, especially for frequencies in metros such as Delhi and Mumbai," said S Keerthivasan, business head, Fever 104 FM. The e-auction will help the government generate revenues to the tune of Rs 1,733 crore from the auction of licences for services in 227 cities.
Post the phase III implementation, FM radio will cover 85% of the entire country, making it a huge opportunity for advertisers in addition to the fact that it will be the largest media-growth industry at 22-25% CAGR.
"There is room for more FDI to be opened up. A jump from 20% to 26% is not much. The FDI norms in radio should be at par with the other electronic media," said Asheesh Chatterjee, CFO, Reliance Broadcast Network Limited (RBNL).
"It's a no-starter. Any foreign players putting in more money in India will like to have a higher stake," grumbled Hukmani.
"The irony with the radio industry is that it has been the last one to get liberalised. Even then, we are extremely excited about the next phase. It will be a huge advertising opportunity as smaller towns and cities will power it," said Anurradha Prasad, president, Association of Radio Operators for India.
In a country of 1.2 billion people, radio's share of the overall advertising pie of Rs 30,000-odd crore is a little over 4%. Globally, radio's ad share is 10-12%.
FM radio reaches out to 40 million listeners in the four metros and 350 million in 91 cities and towns.
Phase III will allow for more programming innovation, automatically spurring penetration.
The radio industry's hopes that the royalty issue will be resolved have not met any conclusion. Currently, radio stations each shell out over Rs 600 per hour - for the music they play - to the Indian Performing Rights Society (IPRS) and Phonographic Performance. Overall, a station may end up paying 12-15% of its revenues as royalty. Globally, royalty payments are lower.
"If the issue is not resolved, then radio stations will have to pay the royalty and with more stations, the costs are bound to go up," said Hukamani.
Despite the hurdles, the radio industry is excited about the next phase of expansion, as it sets about planning and calculating future growth that will ride on small town India's aspirations.