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Standalone FM operators ride the wave of expansion with Phase III auctions

Standalone FM operators ride the wave of expansion with Phase III auctions

Author | Abhinn Shreshtha | Thursday, Dec 04,2014 7:51 AM

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Standalone FM operators ride the wave of expansion with Phase III auctions

The large, national level  radio operators  are gearing up for the much awaited Phase III auctions. The third phase of FM expansion is looking to expand the scope of the airwaves to more than 800 stations and nearly 300 cities. Interesting, for the first time since the launch of FM in India, most of the cities up for grabs will be mainly Tier III. The atmosphere has not been the most conducive for the growth and development of FM radio in India. High operating costs, license fees and a policy paralysis that has plagued the sector for ages have taken their toll with a number of standalone FM stations having closed down over the years.

However, as Phase III moves to the Indian hinterland, the smaller FM operators are feeling cautiously optimistic of the future. “We know the pulse of the local advertisers as well as the audience. Even on the programming side, this gives us the edge as the bigger operators play the same music, whether in Siliguri or Mumbai,” claims Dilip Dugar, VP at Siliguri-based Radio Misty 94.3 FM, which operates in Siliguri (West Bengal) and Gangtok (Sikkim). Even though heavyweight Red FM is present in Gangtok, Dugar maintains that increasing competition is no threat, “We understand these (Tier III or IV) markets better than the large operators since it is our bread and butter.”

This is a thought echoed by Radio Indigo, a FM operator that has bracketed itself in the niche international music genre. The station, a part of the Jupiter Capital group, has operations in Bangalore and Goa.

Suresh Sanyasi, National Sales Director of Radio Indigo said, “There is definitely going to be competition but the differentiating factors will be the target audience and the merit of the channel. For example, we have seen internet companies emerge as big advertisers because we can provide them the audience that fits their requirement. With Phase III we are looking to consolidate our diversified interests in events and music. This will provide the advertiser more options and a diverse audience.”

And they are not only content to remain in their current bastions. Like their larger counterparts, they all have their own expansion plans for Phase III and the type of markets on offer could be right down their alley.  As Dugar put it, “Standalone stations will not survive. We will all be in expansion mode come Phase III.”

Monica Nayyar Patnaik, MD of Eastern Media, which runs Orissa’s Radio Choklate is among those gearing up for expansion in the state where it is currently present in two cities. This is something they have been looking forward to for a long time, she says. As she puts it, “It does not make sense to just be present in two cities. We are definitely going to take part in the bidding.” When asked about Radio Choklate’s plans, Patnaik said that they were planning on expanding to at least 5 more cities in the state. “When we started off operations in Bhubhaneshwar, we used to get enquiry calls from other cities so the opportunities are definitely present,” she said.

Anup Ostwal, Head (Business Development) at ReleaseMyAd, an online radio ad booking provider, agrees, though he inserts a note of caution. “I don’t think it is guaranteed that the larger stations will be profitable even after spending so much money in these Tier III cities. What we could see is them partnering with smaller local stations and entering the market region through them. Just buying out spectrum unless it is strategic or has a really high revenue potential will not make sense this time,” he opined.

There is a precedent for the kind of partnerships that Ostwal talks about. For example, Radio City has an indirect presence in Kolkata through its sales partnership with Friends FM and in Gwalior through Suno Lemon FM. This could turn out to be important, especially considering that profitability and sustainability are the main concerns for the smaller operators.

Similarly, Sanyasi also suggested that the auctions will have to be dealt with some caution to avoid the mistakes of Phase I and II, where frequencies were bought, many times at exorbitant prices, only for the markets to never quite take off.

Even the fact that we could see multiple frequencies auctioned in the same city is being welcomed by the smaller operators as something that will bring more diversity to FM radio. When asked whether multiple licenses in the same city was a worrying prospect, Prem Kumar, COO of Chennai Live 104.8 FM denied that this was the case. “It will bring more listeners to radio. We want more channels in the city (Chennai),” he said. He admitted that there were no current plans for expansion for Chennai Live as the focus is on breaking even (in terms of capital) and profitability, something, he says, is of paramount importance to smaller stations. “We could acquire stations later on if there is a need,” he added.

Is FM too expensive for standalone operators?

Operators, we spoke to, mentioned the high costs associated with licenses, etc. as being a danger to smaller stations. “The industry seems skewed towards the large media houses and smaller operators are being affected by the high costs. Maybe we could have separate policy for large networks and operators bidding for just one or two stations,” opined Kumar, adding that the government should not make the auctions prohibitive for standalone stations.

Patnaik agreed that the high license and renewal fees will make things difficult for smaller stations, especially with concerns over how commercially viable the cities on auction might turn out to be. “We can always pump in money to get a frequency but with high operating costs, what are the chances of survival for standalone stations?” she mused.

On a more optimistic note, Dugar maintained hope that the government would come out with alternatives. “The last six months things have changed in the radio sector. Our PM is focussed on radio as a medium and so we are hopeful that the present government will look into it,” he said.

Sanyasi, however, felt that the playing field is more level this time around. “It is not about who is bigger or smaller, it is about whether you can develop the market and figure out if the market can support you. Funding is not a problem if you have a good product; bid carefully and do your homework,” he said.

It might not have been the best of times for standalone and smaller FM operators but their enthusiasm for the auctions suggests that they feel the winds are beginning to turn in their favour. One thing is certain, for the entire FM industry, the Phase III auctions will perhaps be the most strategic so far. With sentiment suggesting that the expansion could cause radio ad spends to double, the prize has never been so lucrative.
 

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