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Roller-coaster ride for FM radio in India, but the road ahead high on optimism

Roller-coaster ride for FM radio in India, but the road ahead high on optimism

Author | Robin Thomas | Monday, May 10,2010 8:19 AM

Roller-coaster ride for FM radio in India, but the road ahead high on optimism

The advent of FM radio gave a fresh lease of life to the stagnant radio industry in India. That was in 1999, when the Government of India had decided to allow private players to enter the FM broadcasting sector with a 10-year licensing period. However, it was only after the successful launch of FM Phase II that the industry began to see rapid and robust growth, and even advertisers began to notice the impact of radio on listeners and the cost effectiveness of the medium. Cellular phone services, retailers, television channels, educational institutions, and even election campaigns have been the key advertising categories on radio.

Today, the radio industry still accounts for around 4 per cent of the total ad spends in India. According to a FICCI-KPMG report, radio is expected to grow at a CAGR of 16 per cent over 2010-14 and reach a size of Rs 16.4 billion by 2014.

With the rise of the digital medium, the radio industry is beginning to ride the digital wave across the country. For instance, Big FM had entered into a partnership with VAS provider OnMobile Global Ltd. to launch the radio experience on the mobile platform. Much earlier, Radio City had launched a music portal, Planet This apart, Bharti Airtel in partnership with Radio Mirchi launched Mirchi Mobile, wherein Airtel mobile customers can choose to follow their Mirchi radio station from anywhere in India.

The slowdown and after

The second half of 2008 perhaps was the toughest for the radio industry, as the private FM radio industry, too, was affected by the economic slowdown. The ad rates were hit in the second half of 2008 and the industry faced a decline in growth. However, the slowdown also encouraged certain brands to advertise on radio as it proved to be a cost effective medium. It was only in September 2009 onwards that the industry began picking up in terms of growth.

Now, the industry is eagerly waiting for the FM Phase III rollout. However, the industry is divided on this, as some want the music royalty issue to be resolved first and extension of license term from 10 years to 15 years. FM Phase III is likely to see additional 700 FM stations being launched in the country. There is also possibility of the Government allowing news and current affairs on radio and multiple frequencies, which is poised to take radio to a different league altogether.

exchange4media spoke to some industry players to find out their views on FM radio’s journey so far, the challenges and the road ahead.

What they say

According to Ashish Pherwani, Associate Director, Media and Entertainment Practice, Ernst & Young, “The FM industry in India has grown like a Bonsai plant: growing to the best of its potential while hindered by low FDI levels, content restrictions, multiple-license restrictions, music royalty issues, etc. In the absence of sound and widespread measurement mechanisms, there would always be a need for radio evangelists to be able to demonstrate its power and capabilities. Advertisers are beginning to use radio more effectively as a tactical communication tool to support their TV and print spends.”

Their Journey

Apurva Purohit, CEO, Radio City, explained, “On July 6, 1999, the Government of India decided to allow private players in the FM broadcasting sector with a 10-year licensing period. The radio industry took its first tentative steps into a semi-de-licensed environment. In these years, it became increasingly clear that radio had the ability to impact millions of Indians due to its wide coverage and personal connect. Recognising this, the Government announced a very progressive Phase II policy, resulting in the growth of the medium to 90 cities, 280 operating frequencies and a reach of 60 million people.”

She further explained, “Radio has certainly seen robust growth as a medium for marketing and advertising. Advertising on radio is cost-effective, easily modifiable and impacts a larger audience. But just as there are hurdles in every growth path, this medium has also witnessed several obstacles and has been impacted by certain regulations, competition and the slowdown. To overcome these hurdles, there have been certain regulations and licensing parameters that will hopefully be released in the Phase III policy that will give a fillip to this medium.”

Prashant Panday, CEO, Radio Mirchi, observed, “We’ve had our share of failures and successes. Overall, I think we’ve been a successful business and an even more successful brand. We’ve become a core part of the society and that’s a big achievement. Being voted the #1 media brand by IMRB is no mean achievement (we were voted ahead of The Times of India and Star Plus in October 2008). We made a lot of losses in our first five years – fortunately, we have turned around in the last five years.”

According to Soumen Ghosh Choudhury, Business Head, Big FM, “The journey this far has been phenomenal. For Big FM, right from its launch, where we had the mammoth task of launching 45 stations across the country in 18 months, to being the first players to have a brand ambassador – earlier Abhishek Bachchan and now Sonu Niigaam – to programming formats that have never been experienced before, it has been an enriching experience. Within a short span of time, we have been well accepted and are reckoned as the leading player in the market.”

“Private FM in India has made significant strides over the last few years, specifically – post Phase II. Growth of networks, increased acceptance by advertisers, RAM measurement system, formation of AROI, leadership in Bangalore and Kolkata within two years of being operational, and good reach in Mumbai in highly competitive 9 to 11 broadcasters city and being leader in 27 market across India, etc., are all important achievements in the development of the category and with Big FM,” he added.

The challenges

Panday of Radio Mirchi noted, “For most broadcasters, it is profitability. For Mirchi, it’s been positioning Mirchi as a ‘brand’ in a space where there are a lot of ‘products’. Our success is proof that we have succeeded.”

Purohit of Radio City highlighted, “We face challenges such as not being allowed to own multiple frequencies or broadcast news and current affairs. There is no parity in the FDI allowed when compared with other media, and back breaking music royalty payments which we have to make. However, it is imperative that all constituents and partners of the radio industry – the Government, the policy makers, and the music industry – realise that the current unrealistic royalty rates are going to be the single cause for the industry to go through severe crisis if timely action is not taken.”

Big FM’s Choudhury added here, “These challenges have been spoken about for the longest time and range from music royalties to multiple frequencies to news and current affairs, networking opening on radio and more.”

The road ahead - two years from now

Prashant Panday believes that two years from now the radio industry will be much bigger and profitable.

According to Apurva Purohit, “Radio industry is still at a nascent stage in India; we still have to see its full potential. We believe that for the medium to expand, it needs a lot more experimentation, willingness to try new formats, different types of music, and more content innovation. The newer trends of distribution for the medium, whether it is through the mobile phone or Internet, will fuel the penetration of FM in the country. There are several un-chartered new territories in programming to be exploited. We could have multiple genres in FM channels such as news, entertainment, sports, business and so on. With the expansion to more than 500 cities, the footprint is only going to get bigger and better.”

Soumen Ghosh Choudhury pointed out, “The radio industry, while at a nascent stage, has demonstrated tremendous scope for growth and huge business potential. The category will see consolidation of players, with smaller/ single stations possible merging with the larger networks. Phase III will allow the footprint of FM to increase even more dramatically, giving the medium the next impetus of growth and will make radio a must in the marketing plan of every advertiser with the huge reach across India. There will certainly be challenges in the years ahead – sorting out music royalty issues, building advertiser base in smaller stations, training of more professionals for the industry, etc.”

While FM radio is still at a nascent stage, the FM Phase III rollout will decide how far this industry will go. Although FM radio has come a long way since 2001, some of the biggest challenges for the industry remain resolving the contentious music royalty issue, increasing the license period from the current 10 years to 15 years, and reduction in Prasar Bharti rentals, which need to be resolved to ensure the viability of the radio industry.

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