Sound Check

A mixed bag for FM players, but industry optimistic about 2010

The year 2009 has been a year of innovations and consolidations, but there were some disappointments, too, for the FM players, who were expecting some important policy reforms, especially the third phase of licensing after the resolution of music royalty issues, which did not happen.

The Indian radio industry is said to be back on the growth curve after the economic slowdown which is said to have affected the radio industry as well however despite all the hiccups radio continues to be one of the fastest growing industry in the Indian media industry. It is also believed that the industry will take couple of more months before they see the kind of growth it witnessed two years back.

With the tightening of marketing budgets, clients increasingly focused on their high value markets to maximize returns. Many saw the economic slowdown as an opportunity for radio which is said to a very cost efficient medium and being local medium is also able to provide high ROI to the clients, even during financial pressure.

Changes galore

The year 2009 saw SFM rebranding as Red FM making it possibly one of the largest of its kind re-branding exercises, where 38 FM stations operating under the SFM brand were rebranded as Red FM. Thus taking the number of FM stations under the Red FM brand to 41 across India.

The year also saw couple of industry honchos moving out, some have even moved out of the radio industry, for instance, Abraham Thomas quitting Red FM as the COO was another big development in the FM industry. Anil Srivatsa quit Meow FM and is now the CEO Kings XI Punjab. Only recently, Big FM announced that it’s entry into a strategic alliance with Radio Dhamaal and Rangila FM. The alliance is aimed towards expanding its network and also providing advertisers deeper penetration into key markets. Big FM with 45 stations of its own across India through this alliance further increased its reach and footprint to 52 cities across India.

Only later this year, United Radio UK launched its India operations wherein the company aims to provide its services to existing operators, investors, the Government and regulatory bodies. Hence it is also said that the Indian radio industry can now look to international expertise to improve their ratings and increase their revenues with London-based international radio consultancy company.

Radio on road to recovery: Industry experts

Apurva Purohit, CEO, Radio City and President, AROI stated, “I strongly believe that the economic slowdown was an opportunity for the radio medium. With a tightening of marketing budgets, clients increasingly focused on their high value markets to maximize returns. Radio as a local medium was ideal to provide high ROI to the clients in days of financial pressure. Contrary to popular belief, radio is far more effective than print for local impact. It not only reaches out to more people than print but it is also far more cost effective with a far-lesser CPT (cost per thousand). Thus radio was increasingly used by new clients and we saw 30 per cent new clients try out the medium this year.”

Prashant Panday, CEO, ENIL, observed, “The radio industry (like other media industries) is now back on a growth trajectory. We are (obviously) growing over last year (low base effect), but I suspect most electronic businesses (TV, Radio) are yet to grow over the 2-year-back numbers. I think newspapers have started growing on a 2-year-back basis and electronic businesses will also grow on a 2-year-back basis in a few more months.”

According to Harrish M Bhatia, COO, My FM (Synergy Media Entertainment Ltd), “Yes, I believe economically we are looking at good growth prospects as advertiser interest in radio has definitely picked up. With the right kind of marketing, radio has been able to sell itself well to the advertisers and they are also beginning to see the benefits of the medium. A large chunk of the major national advertisers like Reliance, Vodafone, Idea, Consumer Durables like LG, FMCG like Dabur, Pepsi, and Coke have been associated extensively with MY FM.”

S Keerthivasan, Business Head, Fever FM said, “Things are now better than what it was earlier however I do not believe the industry is on road to recovery this year. The industry is highly regulated but, I believe one of the most critical factors for this industry is going to be consolidation because there are too many players today and consolidation is the key and for consolidation to happen in the industry there has to be regulatory changes.”

How they dealt with the slowdown

Panday of Radio Mirchi said, “We went back to the basics. We re-focused our energies on the basics of brand building. Radio Mirchi as a brand became much stronger in the last 12 months. Our programming efforts gave us a clear leadership in Mumbai about 8 months back (by RAM numbers. We have always been #1 by IRS numbers). We have also achieved a lot of brand growth in all our network cities.”

“Secondly, we focused on training our teams on how to handle the down-turn. We changed the profile of our advertisers. We explained why it made even more sense to use radio now than before. Alongside our much better listenership performance, we were able to keep revenues stronger than other players. We also cut costs. But we cut costs in a sustainable manner. Not in an ad-hoc way. Most of our cost cuts are sustainable over the next 2-3 year period of time. In many ways, the down-turn has fundamentally changed our approach to running the business. I don’t think we will ever go back to the ways of the past!” said Panday.

One of the strategies that My FM followed from the sales side was to focus on non radio clients and sectors which are relatively recession free like education, telecom, insurance, healthcare, FMCG. This apart, My FM is said to have continued to engage employees in a challenging as well as a rewarding environment.

Bhatia of My FM said, “My FM worked on a three point strategy - people’s initiative, innovation in sales and product leadership. Under the people’s initiatives, as an organization, we believe that we have to be efficient all the time and not only in the time of slowdown. This business model helped us insulate from baseless layoffs. My FM followed constant innovative thinking. We were also able to tap into newer formats of revenue generation with alternative offerings of a plethora of on-ground events and several profitable partnerships. Despite the slowdown, My FM reached out to several national advertisers and media planners due to which we were able to communicate the strength of My FM as a radio brand.”

“My FM’s core policy has been to completely and thoroughly understand its listener and their preference on content, which meant going into market researches at regular intervals. This fundamental principle of marketing really worked in our favour. Apart from the audience research and programming/content development, we also focused clearly on our other resource base - our employees, our advertisers and other business partners,” he added.

Lessons learnt

According to Purohit of Radio City, “This period has been a learning for all of us to concentrate on the essentials of the business, knock off the fluff, get back to the fundamentals and understand that consistency and perseverance are the only two ways to ride the slowdown. While cost management was certainly the need of the hour and at Radio City we did do a lot in managing our costs better and in building variability in our cost structures, we were also careful to guard against taking any short term measures which could harm the quality of the product or allow consumer interaction with the brand to suffer. Thus in consumer research for example or in the training of our people we didn’t allow any compromises.”

The road ahead in 2010

Panday said, “Firstly, the cost structure in the industry has to come down significantly. This means that the music royalty matter has to be resolved immediately. The loot has to stop. Secondly, the Government itself must look at extending the license period from the present 10 years to a minimum of 15 years. The radio industry is bleeding. At this rate, India will be the only country in the world that won’t have a private FM industry left. The most successful government public-private program will become a failure.”

Purohit pointed out, “The radio industry still has to see its full potential of reach and revenue playing out in this country. There are several unexplored markets and unchartered new territories in programming to be exploited. New formats of stations, more non music content, more segmented offerings – all this is still on the horizon. The kind of explosion that was witnessed in reach in television, once networks moved beyond the GEC space is the next leap for radio.”

She further said, “With Phase III policy reforms we will see the radio space expanding in the depth and quality of programming offerings. It is the expectation of the radio industry that the size of the medium will move up to a healthy eight per cent as a result of all the efforts being put in by the industry and the government. We hope to see the announcement of the policy shortly and expect that a more industry friendly policy will give an impetus to the medium to grow and prosper.”

Bhatia said, “We are quite positive about 2010 and are really hopeful that it will see the resolution of the issues that have been plaguing the industry. The Government has expressed its resolve to expedite the third phase and we are keenly looking forward to it. MY FM is also eager to continue its excellent growth streak and show positive results in the coming year as well.”

One of the wishes of the FM radio industry includes the extension of license to fifteen years from the existing ten years term. That the license fee calculation should be on net and not gross revenue and resolution of the music royalty issue be made as soon as possible. This apart the industry also longs for the announcement of Phase III policy with multiple frequencies, increased FDI, permission to air news and current affairs and so on.