Rollout of Phase III is expected to change the game of private FM industry in India. The auction has proposed 839 new licenses across 294 cities, which opens untapped fresh markets for radio broadcasters. While Phase III comes with a number of policies such as e-auction and base price policy might ruin the game, there is also a networking model policy that can help radio broadcasters with some damage control.
With the networking model policies, radio players shall be able to create networking of channels within companies’ entire networks, instead of just in C and D categories of cities. exchange4media takes a look at how networking model of radio stations can lessen the woes of broadcasters post the auctions.
Pros of networking
Networking model shall imply drastically reduced operational and capital expenditure, which is going to be one of the biggest headaches for players who are already indebted with migration fee and license fee.
“The benefits are purely economical. A networked station needs a smaller studio/office space (low rentals), less electricity, less number of people, and less of other connected things. Networking also significantly reduces capital costs (CapEx) since only a small studio/office is set up,” said Prashant Panday, CEO, Radio Mirchi.
According to CII – E&Y report, Poised for growth, radio players shall have major technical and management requirements that project management, business intelligence and ERP system. In spite of the All India Radio (AIR) equipment coming as a major support, broadcasters will have to invest a humongous amount in set-up, which can be reduced significantly in the networking model.
Radio City is currently the only player that follows the networking model in Maharashtra. The chief radio station is based in Ahmednagar and covers cities such as Sangli Jalgaon and Nanded.
“Due to the networking model, the entire Ahmednagar belt became profitable,” said Apurva Purohit, CEO, Radio City. “The Ahmednagar station broke even the investment in two and a half years, whereas all other stations took almost three and a half years – that’s how beneficial the model is,” added Purohit.
The major benefit that networking model shall offer post Phase III is make it possible for players to tap a number of C and D (which comprise most of the stations that shall be made operational in Phase III) category cities that were rendered unviable due to the base price policy. According to the current base price policy, a town such as Saharanpur’s base price will be on the basis of the maximum price for Chandigarh, which is a relatively high revenue generating city. With networking model, a number of these towns become viable as the CapEx goes down considerably.
While radio players can reap benefits from the model, marketers too have something to look forward too. With an entire region coming under one umbrella, marketers can target the entire belt at much lesser prices. Also, brands stand the scope of being able to expand their TG as the spot aired in one city shall be aired across the entire belt.
“Because we have cost advantage, we pass on. CPT for radio ads becomes far low for one region. In our case, advertisers can practically cover whole of Maharashtra through advertising in Ahmednagar and Pune,” added Purohit.
Woes of networking
While there is immense benefit on the economic front, radio broadcasters might have to compromise on the content front. “Compared to a fully local station, a networked station offers lesser local content. But a fully local station would not be financially viable. Hence, the compromise is acceptable; especially if the networking is done with another city which has a similar language/culture profile,” pointed out Panday.
India being a diverse country, the stationality of radio stations differs not across states but from city to city. Thus, networking is highly recommended for closed areas such as various cities of Gujarat or Tamil Nadu where TG across cities can relate to the crux.
Another major concern of the networking model is the technical aspect involved. While the model reduces the CapEx, it also implies that in case of technical failure, there shall be a service breakdown in all the cities of that particular network.
Also, radio players shall have to re-assess their business continuity plans and disaster recovery strategies to align their organisations with their changed operations. There shall be a need of a robust system that would take care of central processing of functions including scheduling, billing, song database and maintenance, which again will transform into expenditure.
Networking model comes with its own set of pros and cons. However, whenever Phase III rolls out, it is not likely there shall be a drastic change in the base price policy or any other economical aspect. Thus, in spite of the high technological demand, content compromise and networking model is more or less a must for players who plan to expand in C and D cities extensively.