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Country roads for radio

At a time when everyone believed radio was as good as dead, it revived by riding on the FM phenomenon that brought music listening back into fashion. Rachit Vats reports.

india Updated: Apr 11, 2011 00:58 IST
Rachit Vats

At a time when everyone believed radio was as good as dead, it revived by riding on the FM phenomenon that brought music listening back into fashion. In the mid-1990s, when private FM broadcasts took off for the first time, India experienced a radio revival in metros and big-city India.

FM phase II saw the government left with some unallotted frequencies, though radio expanded into more cities. Now, on the threshold of phase III, the radio industry is looking forward to expanding into small town India, though it hopes for some policy changes.

Already, the industry says, despite restricted liberalisation, radio’s average consumption time in India is 145-150 minutes per day as compared to television’s 140 minutes.

“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.

Now, 800 new radio stations are expected to start in 300 towns with the phase III of FM radio, tapping into the booming economy of the smaller towns.

Will radio networks, like TV, gain salience with the small town India expansion? And will radio gain as a smaller market ad opportunity as brands push for impact in small town India that’s delivering bigger growth than the more saturated big cities?

“With phase III, radio will become larger than any other medium. Advertisers will be forced to look at it with a new vigour,” said Vineet Singh Hukmani, managing director, RadioOne.

“The kind of explosion that happened in TV reach once networks moved beyond the general entertainment (GEC) space, is the next leap for radio. There are large advertisers who increasingly understand its power. And local advertisers see its benefit as a cost efficient local medium, and how well it works in isolation when you want to do just local promotions as compared to print in high potential markets. Radio has an edge over other media in fulfilling client requirements,” said Apurva Purohit, CEO, RadioCity.

In the larger markets, radio’s resurgence has primarily ridden on music. News wasn’t allowed on FM channels. The industry expects that phase III will allow for broadcasting of news and current affairs. This will automatically spur penetration.

“Hopefully, phase III will energise differentiation in radio. When we started Meow FM (a radio station targeted at women), there were apprehensions but advertiser acceptance grew over time,” said Anil Srivatsa, ex-CEO, Meow FM.

Srivatsa is moving back into the radio space with a subscription-based service, after resigning as CEO of Kings XI Punjab, the IPL franchise team. He is setting up a broadband-delivered audio DTH platform, 'Radiowalla' — a Worldspace-like platform — making the content available to any device that connects to the cloud. Radiowalla will carry about 30 full radio channels covering original and packaged programming.

“We are seriously considering bidding for FM licenses in phase III as part of this new venture, which is gaining interest among the investment community,” said Srivatsa.

The radio industry is hoping the government will effect some policy changes before the phase III auctions. “We are excited about phase III provided the royalty issue is solved, the license extension for existing players is relaxed to 15 years, and more spectrum is allowed in metros before the auctions,” said Hukmani of RadioOne. The biggest risk for the government is loss to the exchequer if phase III does not work out well. According to industry sources, during FM phase II, the government could not sell all the frequencies it offered.

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.

With phase III, the greatest opportunity will be the reach and the greatest challenge return on capital, say industry experts. The industry has already been talking to the government about the need for a 15-year license, up from the current 10 years.

So, with all the hurdles taken care of, will the second coming of radio realise its full potential finally? “Radio’s share in the total advertising pie is just a little above 4% and is expected to reach 9% in four years’ time. If the phase III bidding is not handled well, costs could spiral out of control and advertisers may not pay higher ad rates,” cautioned Anand Chakravarthy, senior marketing VP, BIG FM, Reliance Broadcast.

"Following phase III, 90% of the stations will be opening in new places and initially, there will be a cautious approach and not much diversity of content. Only players who have broken even should venture carefully into small towns as expanding without the promise of return could see implosion," said Shirshendu Banerjee, ex-CEO, Essel Radio (a venture which eventually did not take off), who is now setting up a content mapping service, Sound Board. He was earlier with All India Radio FM and with Red FM as its station head in Delhi.

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.