COO | 20 May 2004
"The radio industry needs to completely open up, more players should join in and radio stations in the new cities should become operational."
Radio is fighting on far too many fronts, ranging from the license fee issue to low ad revenues and lack of research support. Sumantra Dutta, Chief Operating Officer, Radio City, who has been championing the cause of FM since its inception in India, is emphatic in stating that the issues need immediate attention. At the same time he is truly upbeat about the medium’s growth prospects. In an interview with Shakir Sheikh of exchange4media.com, Dutta talks about the license fee issue, radio’s power as an ad medium, differentiation in content and lots more. Excerpts:
Q. At present, the radio industry is enjoying 2 per cent of the total ad spend, which is estimated at Rs 9,600 crore? Can this share be increased and by what percentage?
Well, when you compare the percentage of ad spend of any particular category from the total ad pie, the first thing that you take into consideration is that is it well represented. Radio currently is not well represented. In the first stage of radio, 110 frequencies were auctioned and only 30 were taken up since, and today, three years after the first radio station was put up by Radio City, there are only 22 FM stations in 12 cities.
For radio to get a larger percentage of the total advertising pie, you will need at least the top 50 cities in the country to have radio so that they are able to service a larger percentage of audience. Advertisers will then target these ears or audiences that radio is delivering. For growth you need enlargement of network, which means that many more cities need radio connectivity.
Secondly, I think radio is going to grow organically also like most of media. This is because India is quite a media-savvy market with a huge explosion of media, be it television or any other medium. Advertisers are using radio for advertising. They are doing so as everybody wants a bigger bang for the buck and radio is the most cost-effective medium available today. More the advertisers use this medium, more they will notice how effective it is to advertise on radio.
Advertisers spending larger budgets are the first ones to come on radio, others see its impact and follow. For instance, if you have one FMCG company advertising on radio, the other companies will automatically follow; if you have one retailer coming in, the others in the same category will follow. It is just a matter of time.
I would say the percentage share of radio is not 2 per cent but getting to 2 per cent and even the figure of Rs 9,600 crore is an estimated figure and my guess is that it is closer to Rs 8,800 crore.
Last, but not the least, I think the institution of syndicated research is necessary; it helps to ascertain how many are listening to radio, what gender they are, what SEC they belong to, what time of day do they listen to radio, so as to figure out the effectiveness of radio vis-à-vis other mediums. When syndicated research data is made available, it will lead to the growth of radio as far as media plans are concerned. Radio will find a much stronger base in media plans on the basis of syndicated research.
Q. When will syndicated research data for radio be available?
In Mumbai, AC Nielsen began research a year ago and have come up with six studies. This has now been taken over by MRUC and they have tried to extend it to Mumbai and Delhi. However, compared to the kind of currency that TAM has for television and ABC for print media, radio has none. Radio is lumbered heavily with license fee charges. Till such time that the license fees are not taken away or rationalised, it will curb radio's ability to invest in research. With the new government coming in, we are hopeful that a decision on the impending rationalisation of licence fees would be taken up shortly. This in all probability could lead to more stations coming up which in turn will lead to lesser burden on the existing radio stations. All the radio stations will understand the importance of investing in syndicated research.
Q. How is the ad spend on radio expected to increase in the next two years?
If rationalisation of license fees does not take place, the same number of stations may or may not be there and also no new players would enter the fray. The radio industry needs to completely open up, more players should join in and radio stations in the new cities should become operational. Once rationalisation takes place and new stations are allowed to operate in the top 40 cities in India, radio will garner a market share in the region of 5 per cent of the total ad spend.
The reason for citing 40 cities is because more than 25 of these have a million-plus population and this is a seriously large number we are talking about. Given the fact that it is private commercial radio and all the players are in for a commercial purpose, I reckon that it will be logical that they go first for the commercially-viable cities, which are also the cities where the licenses were auctioned in the first place. If radio becomes operational in these 40 cities then the golden days for radio will slowly begin to arrive.
Q. What are your views on the revenue-sharing proposition at 4 per cent of gross earnings made by the Amit Mitra committee?
The Task Force recommendations are extremely thought-through and they have made recommendations on a variety of issues and revenue sharing is one of the key issues. We are totally in agreement with the fact that revenue sharing should be at 4 per cent.
The revenue sharing model has been adapted somewhat from the telecom model. However, their shift to the revenue sharing model is a little different from ours because first their service is chargeable to the end-consumers, so for every subscription sold they have monies flowing in. In the case of radio it is different. What we do is to sell on an incremental basis, hence the level of revenue needs to be of a nominal percentage. One of us made a representation of 2.5-3.0 per cent but the Amit Mitra committee felt it was prudent to cap it off at 4 per cent and we are all agreeable to that. The government will be able to maximise its revenues at 4 per cent revenue share of a number of broadcasters rather than a few broadcasters. The reason why the government has not come out with a formal announcement is because when TRAI stepped in it was election time. Once the new government and ministry come into power the decision will be taken. The decision is expected to be taken by end-June, as TRAI has committed that the entire policy on radio will be announced by then.
Q. Should there be any stipulation on the type of content to be carried on each license or the choice should be left to the licensee?
The first killer of private FM radio was the license fee. Stipulations on the type of content will be the next killer. It is similar to running a restaurant in your neighbourhood and someone would come and say that you could run only a Chinese restaurant or a Mughlai or a South Indian. We have a democracy and everybody should be given a choice as we all know the competitiveness and quality that are keenly associated with the private sector.
It should be solely for the licensee to decide which content he or she would like to choose to air as they are doing it for a commercial purpose. We have made it very clear to the Task Force Committee too that there should be no stipulation on content.
Q. What are your views on holding multiple frequencies in the same city?
The Task Force Committee has proposed that committed radio players should have multiple licenses. If Radio City has multiple licenses in any one city, it will not air the same content on both the frequencies. There will be plurality of content, hence there will be different segments of the market being addressed and the consumers will get the type of programming that they want. If they want English, they will get English, if they want Hindi, they will get Hindi, if they want a chat radio, they will get one. It all depends on what is commercially viable and what is the listener’s choice.
Q. Should the restriction on news and current affairs be lifted? If yes, how will it help the industry?
My question is, why should there be restrictions on news and current affairs. There are no restrictions on news and current affair in other mediums. Masses have a right to know, right to access news and information on the move, and if radio has the ability to provide that news and entertainment, it is incumbent on the authorities to allow and lift the restrictions on news and current affairs and provide a level-playing field.
The radio privatisation policy is new and there will always be room to renew and review in the process of liberalisation. Hence I will attribute it that radio is getting liberalised and we are also learning—we, as in government and private FM radio players.
Q. Will more companies joining the business help the segment grow? If yes, any likely entrants?
In the print segment, there are around 5,200 publications in India (give or take 5 per cent), and there are about 180 TV channels. Television or print would not have been perceived the way it is today had there been no competition. Competition helps any market grow multifold.
In the radio segment too there is a need for more radio stations leading to lot more content and variety. We will have a greater number of teams going out and educating the advertisers and the local retail environment about the efficacy of radio advertisement and hence growing the Radio's share of the pie. So, it is imperative that more radio players join in, experience the medium and enable it to grow.
Q. Will radio affect the revenues, reach and impact of other mediums?
Radio complements other mediums extremely well and it is a known fact that when radio is used along with TV or print effectively within the same budget, the advertised brands also get more bang for the buck. This is primarily because radio is popularly known as 'The theatre of the mind'. Sounds or sonic triggers make people visualise pictures, and sometimes these pictures are not even possible to capture in a camera or may be just too expensive to do so. Radio also has the power to recreate images seen on other media and when the same is blasted on radio, the multiplier effect kicks in giving the advertised brand an omnipotent feel.
Q. The differentiation is very low in the current radio stations’ offerings. How do
I do not agree that the differentiation is low. Radio City has contracted with STAR which is Asia's pacesetter in the entertainment media, with wide expertise in the area of programming, marketing and sales. We have brought a huge lot of variety into radio programming because we are the only station that presents hit Hindi music, dramas, sitcoms, serials, etc. There is a huge lot of comedy programming on Radio City coupled with a lot of Bollywood and infotainment-led programmes. So it is totally unfair for anyone to make a comment that there is no differentiation in content.
Yes, there is no differentiation in content amongst the other stations, but Radio City clearly stands apart. That is the reason why research--whether it is syndicated research that AC Nielsen ORG MARG have conducted consistently over wave 5 and wave 6, or commissioned research that AC Nielsen has conducted for us--they clearly indicates that Radio City is the undisputed number one station, which is so solely on the back of the variety in programming that we have.
Q. Going forward, how does the future of radio look like?
Listening to radio is a habit. And as with any other habit, it has got to be formed over a period of time. The answer lies in understanding what listeners want from a radio station and giving it to them. It is a question of positioning your brand to cater to this segment. The introduction of private FM radio has just started in India. For a commercial medium that has flourished in the rest of the world for around 75 years, it is reasonable to expect that it will take a couple of years and not just months for radio to achieve its potential here. Radio is just getting started, and boy, will it rock?