Executive Director & CEO | 28 Oct 2013
There is nothing wrong in radio being a reminder medium and I am very happy with that. Let me put it very differently, somebody had once said, “Radio is like vodka, you can mix it with any drink”. So, you can mix radio with print, television, outdoor, digital, and events. The best part is that you can have this vodka while driving, which makes radio the most flexible of all mediums.
While most media organisations worry about advertisers cutting back due to the prevailing economic conditions, Prashant Panday, Executive Director and CEO, ENIL says that radio has actually benefitted from the slowdown.
In conversation with exchange4media’s Simran Sabherwal, Panday also says that he is hopeful that the long delayed Phase 3 auctions will completed by March next year.
Q. How has the current economic slowdown impacted the radio industry?
Positively, because whenever the economy slows down, what do advertisers do? They turn to tactical advertising in the form of promotions, offers. In this context, radio is the best medium because it is relatively effective in pricing. Newspaper, combined with radio, becomes the best combination in any economic slowdown, and radio has been benefitting a lot. In the last two years, radio has grown faster than print, television and out-of-home.
Q. Looking ahead, how do you see things panning out for the radio industry in the next quarter or two?
We will as a medium do better than television, print and outdoor, but how strong the growth will be will be difficult to predict. That’s because a lot of this is led by sentiments and depends on what happens. Sometimes the sentiment appears to be improving and then suddenly something happens and the sentiment again plummets. Corporates are under a lot of pressure to increase revenues and are keen to spend money, but they are also worried if consumer spending will drop because of sentiment. So, it is a very difficult balance and it is very difficult to predict right now what will happen, but what I do know is that radio will grow faster than other mediums.
Q. So, what makes radio a better bet?
It is the last medium consumed and you can connect with the person before he enters the shop while travelling. More importantly, the beauty about radio for corporate brands is that you can really let your brand have a field day and can do things that you cannot do on television. You can take risks, be really innovative as radio is a fun medium. Radio is regional, so city to city, you can change the language and you can change the promotion that you are talking about. You can also change the brand integration and make your brand come alive much more strongly on radio than you can on any other medium.
Q. So, is radio to be seen only as a reminder medium?
There is nothing wrong in radio being a reminder medium and I am very happy with that. Let me put it very differently, somebody had once said, “Radio is like vodka, you can mix it with any drink”. So, you can mix radio with print, television, outdoor, digital, and events. The best part is that you can have this vodka while driving, which makes radio the most flexible of all mediums. So, if it is a reminder medium, I am very happy and I have no complaints with it. Today, radio gets almost 60-70 per cent of advertising from retail and not from the big corporates, but there are loads of corporate brands which use radio very effectively.
Q. The I&B Minister has said that the long awaited Phase 3 auctions will happen soon. What are your views and do you think the upcoming elections could delay it?
I am told the process will start and it could take another month, but you never know they could rush things up. Clearly, the Minister mentioned that it has nothing to do with the elections as it is a pre-announced policy, which is in execution mode now, so it is not dependant on the elections. But what is important is that somebody should take decisions that can get impacted by the elections. Key decisions need political intervention, and if the Minister is not free, then it will get delayed. I think that they are serious this time and I am hoping that they will finish it by March.
Q. Radio operators have raised a lot of concerns over Phase 3 auctions. Have any of the grey areas been addressed?
They have not agreed to any changes. The way the Government works today, they don’t want to take any chances, so the Ministry and bureaucrats are not interested in changing any decision. The problem that the industry has is with the reserve fee, which is bizarre. I think it will go the way the 2G auctions went – it failed and then TRAI reduced the rate.
Q. Which cities will attract bidding and which will not? Will you be bidding for a second licence in the metros?
In the metros, auctions will be successful and we will be bidding for a second license in metros. However, I don’t think there will be any irrational bidding, because most players have learnt that if you bid irrationally, you get a momentary joy but you suffer for a long time because every quarter you report losses. Also, promoters are going to be demanding this time and focussed on the returns that will they make. Radio Mirchi is the most profitable radio company, but at the end of 10 full years of operation, we will make 11- 11.5 per cent return on equity, which is completely inadequate. All others are making between 1 per cent and 3 per cent and many are negative, so how will the promoters bid irrationally.
In the smaller towns, I think more than half will fail because the reserve fee is too high in many markets, and therefore, as a result the auctions will fail in the smaller towns.
Q. TRAI has recommended that the channel separation in FM radio be reduced from 800 to 400 KHz. Will this happen in time for the Phase 3 auctions?
The Ministry has accepted the TRAI recommendations, but they have created the little hook, saying we need to test it technically, which means they will now delay it. It will probably happen two to three years down the line, else if the Government doesn’t do it, it will be accused of wasting scarce resources.
Q. Do you see any new players entering the radio industry, especially from the non-media space?
We have scanned the market and it is very difficult. It is not a very profitable industry, but a couple of players might come in. It’s unlikely that non-media players would enter the space as radio is a very high investment medium with relatively low returns and there isn’t any glamour attached to the medium.
Q. What are the challenges faced by the radio industry?
One is the regulatory challenge because we are now six quarters away from the expiry of our major markets and there is an election coming, so there is uncertainty and there is a bad policy. Hopefully, it will get cleared in the next three months, but that is one big challenge. The reserve fee policy and the Phase 3 policy are very harsh policies, but whenever the policy is harsh, it benefits the number one broadcaster. The policy makes bidding expensive, plus you have to pay everything upfront. We have the money and are the most profitable, so we can turn it into a profitable operation. So, we are happy with it, but it is not good for the overall radio industry.
Apart from that, I would normally say the economic environment is a challenge in the long run. Consumers are not looking at premium and big ticket items, but are looking at smaller ticket items. Retail shops are full of customers and there is a lot of consumer demand at that point and radio is benefitting from that. It is not a challenge in the short run, but in the long run if this continues, then ultimately all demand will come down. And that will have a negative impact on all media, but I don’t expect that to happen in the next one or two years.