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Are second networks the way to go for FM radio?

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Are second networks the way to go for FM radio?

Phase III of radio has brought in a number of new regulations that will help radio operators explore new content and programming opportunities.

The likes of Big FM, Radio Mirchi, Fever FM and have Red FM have all picked up multiple frequencies in lucrative metros like Delhi, Bangalore, Mumbai and Hyderabad. With Phase III rules allowing multiple frequencies in the same city as well as allowing networking of stations, it is going to give a shot in the arm to the radio sector as operators will now have more options in terms of differentiated content.

The importance of the second frequency

“What we could see is radio operators create secondary networks and challenge other, established brands within the same genre of music,” mused the head of one radio station who did not wish to be named.

This so-called second network will become even more important as ad inventory will need to be rationed. As we mentioned in an earlier article, many industry sources feel the best way to recoup massive investments made in Phase III would be to have strong, content-oriented networks, which can provide advertisers with more choices and targeted ads.

For example, Tarun Katial, CEO of Reliance Broadcast Network, when asked about their content strategy, said that the network programming strategy adopted by Big FM in the past has been successful for the company and is something that would continue in the future.

Rate hikes not a long-term solution for radio

Prashant Panday, CEO of Radio Mirchi also agreed that networks differentiated on the basis of content is something that the company is looking at. Taking the example of their three frequencies in Hyderabad, Panday said that multiple frequencies allowed them to try “interesting” things. “In our new cities – 11 in all including Oye’s 4 smaller cities – we will launch the core Mirchi brand with its contemporary music format. In the second frequency towns, we will launch something interesting but we have not yet finalized what. It will likely be something at a local/regional level,” he said.

On the topic of multiple frequencies and the importance of networking, Vineet Singh Hukmani, MD of Radio One opines, “Networking will save cost for operators. By creating regional networking hubs ad revenue will come in from both the hub and the local cities but there will be hardly any cost involved for the non-hubs. One big challenge for the second network, however, is going to be how they are priced.”

Have operators overbid?

However, there has been some talk that in their zeal to get the best frequencies, we might have seen a lot of overbidding take place. Smita Jha, Executive Director & Leader (Entertainment & Media Practice) at PwC, agrees that some frequencies, especially in the metros were overbid.

Other doubts that have been expressed are about whether additional frequencies in cities like Hyderabad, Gorakpur, Ahmedabad, etc. are financially viable. For example, a radio executive expressed his thoughts on Radio Mirchi, which now has 3 frequencies in Hyderabad. “Hyderabad is a big market but I think they (Mirchi) might have over-rated its potential. It is not a market for 3-4 frequencies as there is not enough market gap, like in Bangalore, to accommodate so many stations. I think it will be a bit of a struggle,” the executive shared.

However, as Jha says, it is understandable considering that no one knows when the next frequency will be available. What remains to be seen is how operators look to monetize these frequencies and whether audience demand is high enough to justify advertiser interest.

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