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2011 - A year of growth for radio?

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2011 - A year of growth for radio?

I wish I could say that it was a year of growth, but unfortunately that is not the case. The first half of the year was decent enough with most major radio players growing between 8 per cent and 15 per cent over a year ago. But there has been a weakness seen in the third quarter and more is expected as we wait for revenue numbers to be announced by radio players.

This is due to the drop in advertising spends, which is now more apparent. The ad industry slowdown has affected not just radio broadcasters, but all of media. Media senses such economic movements sooner than even the IIP (Index of Industrial Production). We felt the slowdown hit in September-October 2011 and the IIP has now confirmed it.

The ad industry behaviour in 2011 was skewed by developments peculiar to each media type. For example, English newspapers have been in trouble this year, even those newspapers which have launched new editions in big cities have seen faster growth on these editions. Regional newspapers appear to have done better, but most of the growth is led by a slew of new editions that have been launched in the last five years.

In the case of TV channels, the results are generally expected to be bad, only those channels that have improved GRPs are doing well. Overall, radio has been on par with other media, if not slightly better than them. The only medium that has done better than radio is the Internet and I expect that trend to continue for many more years.

Individual players within the radio space have fared better or worse, depending on their sales efforts and listenership performance. There has been a change in the pecking order of radio broadcasters with one of the biggest networks slipping, in our estimation, to the 4th position.

Another network, though smaller in comparison, has done well in listenership and has gained traction in revenues to perhaps emerge at the number three position.

The top two players have held their own. Mirchi continues to have a 35 per cent share of the private FM business.

Profitability of radio business has been affected as costs have increased, while revenues have been slow to grow. There was some respite in the form of lower music royalty costs as the radio industry won some reprieve from the Bombay High Court. However, profitability remains a concern for most broadcasters. Though some players have hit EBITDA (Earnings before interest, taxes, depreciation and amortisation) break-evens in 2011, they are still far away from hitting PAT break-even. With more than half of the license period already over, it will be impossible for them to deliver any returns to their shareholders in the overall 10-year period.

The high point of 2011 for the radio industry was the announcement (finally!) by the Government of the Phase III policy. We now expect auctions to take place sometime next year (April-June 2012). Give it another year for actual roll-outs and by the middle of 2013, we should see a lot of action in radio. We should remember that since 2006 there have been no additions to the number of radio stations. In the same period of time, there has been a huge surge in TV channels, newspaper editions and websites. By mid 2013, radio growth should surge again.

I believe that there is a lot of growth left in radio, even after Phase III is completed. The biggest need of the hour is to double or triple the number of channels in the major cities than what we have at present. Why can’t Mumbai, Delhi and Bangalore have 25-30 radio stations when smaller global cities have as many as 45 stations? For this, I am happy that TRAI has initiated a process of evaluating the possibility of reducing the channel separation between two adjoining FM channels from the present 800 Khz to 400 Khz – a worldwide practice. Doing this will immediately double the number of channels in each city. With most listenership now happening on mobile phones, reducing the separation won’t affect the quality of listenership either.

In my view, radio will continue to grow faster than newspapers and TV in 2012, and then will surge to much higher levels from 2013 onwards. I think radio has a lot of steam left; the next five or seven years will continue to remain years of great growth for this very exciting and sexy medium.

(Prashant Panday is the CEO of Radio Mirchi)

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