With addition of more frequencies post e-auctions, Radio networks cover new geographies in India, open up additional bandwidth
By Simran Sabherwal
After a decade-long wait, the Radio industry in India saw the completion of e-auctions, when the first batch of private FM Phase III Radio channels for 135 frequencies in 69 existing cities of Phase II went under the hammer recently. Even though 38 frequencies remained unsold, the addition of more frequencies means the Radio industry, which has remained stagnant for the last 10 years, is now poised for growth. A glance at the Pitch Madison Advertising Outlook, 2015, shows that Radio’s share in the overall advertising pie is 3.5%. With the additional frequencies, analysts expect Radio’s share to double once the new stations are operational.
Radio operators played safe and focussed on filling the gaps in their network and building bouquets of networks in important markets (keeping in mind the 15% national cap barring any operator from holding more than 15% of all channels allotted) and creating geographical domination in certain geographies. The strategy of Print players was to follow their Print markets with Radio. This will enable them to offer advertisers both the launch ads on Print as well as the reminder/follow-up ads on Radio. This should also prove good from a revenue growth perspective, and help in cross-promoting local events and activations as well. Commenting on the growth expected, Ashish Pherwani, Partner and Leader – Advisory, Media and Entertainment, EY India, says, “I expect growth to be 20-25% within a year of all the stations being operational.” According to Prashant Panday, MD & CEO, ENIL, the FM industry would grow at a CAGR of 16-18% (up from 13-14%) for the next five years, with Radio’s share of advertising set to increase to around 8%.
Rational or Irrational Bidding
While the main talking point was Delhi’s winning bid of above Rs 169 crore, the two frequencies of Mumbai went for Rs 122.81 crore and Bangalore’s single frequency went for Rs 109 crore. Questions were raised whether the bid value for Delhi, Mumbai and Bangalore was justified. Apurva Purohit, CEO – Radio City, 91.1 FM, says that bidding was irrational especially in the metros and adds, “Operating in a situation of artificially created scarcity... that cannot be used as an excuse for irrationality. Players who have bid and taken these stations at those humungous prices have not thought through the business plans nor realized that Radio is not about the grandiose and the large, but about the small and the beautiful. To build a brand as the nth one in a cluttered market is going to be very difficult indeed.” Concurring with Purohit, Panday says, “The bidding was extremely irrational in the top metros and absent in the bottom 38 cities and very muted in the towns in-between. The reason for the irrationality in the metros was clearly the scarcity created by the government. There was no option for broadcasters starved for spectrum for the last 9.5 years but to bid irrationally. Those who have bid recklessly will bleed for several years now. This irrationality will harm the Radio industry’s profitability. It will almost certainly trigger a consolidation in the industry, which is a good side-effect.”
On his part, Pherwani says that some stations appear to have been bid for at several times their current annual revenue-generating capacity, adding, “However, the revenue of just the one station should not be looked at in isolation, but its impact on the bouquet of channels offered by the Radio company should be considered.”
The high price also prompted Radio One to sit out the auctions. Vineet Singh Hukmani, MD of Radio One says, "We opted out as prices are inflated and we do not want to compromise present profits for speculative growth. The market is growing at 6% and break even at these auction prices is next to impossible. The pressure on employees of networks that have paid huge, unviable prices for auctions will be unimaginable as they have to deliver on listenership and revenue numbers; a pressure they have never witnessed before."
However, the man at the centre of the fever pitch, Harshad Jain, CEO, Fever FM says, “If Bangalore was sold for Rs 109 crore, then Delhi at Rs 169 crore and Mumbai at Rs 122.81 crore are a steal. We are market leaders in Delhi and run very successful Radio and Print businesses, and can build business by leveraging our strength. For the next three years, there is no possibility of entry for us in these cities as acquisitions are not allowed under the MIB rules. So, we had to make the investment right now. Had we missed out on licenses in Delhi and Mumbai, we could have been locked out for the next three years and we wanted to strengthen our footprint in Delhi and Mumbai. Our strategy was to invest in metro markets, and we are now present in the six metros, and get a presence in the largest state in India, Uttar Pradesh where we run the widest read newspaper in the state (Hindustan).”
Another player that had a good haul was Rajasthan Patrika. With only three frequencies in Rajasthan, Rajasthan Patrika picked up 14 frequencies across North India. Says Saurabh Bhandari, National Head, Marketing, The Patrika Group, “With the recent additions, we plan to penetrate new territories, and expand our reach. Radio plays a strategic role in Patrika’s portfolio as a 360-degree media connect. The core strategy was to boost the Radio sector with the aim to reach out to many smaller cities and towns and also by providing quality information and entertainment (also called the edu-entertainment format) to the masses.”
While majority of the frequencies were bid for, 38 did not attract any interest as the reserve price was too high. For example, cities like Tirupati, Vijayawada and nine others garnered no interest at all, even though some national broadcasters may have shown interest in them. In addition, the 15% national cap restricted the Radio operators’ ability to bid. Commenting on the 15% ad cap, Tarun Katial, Chief Executive Officer, Reliance Broadcast Network Limited said, “It is restrictive and in today’s age of digital media, such caps are irrelevant.” With the 15% cap, Reliance Broadcast Network limited (RBNL) which runs Big FM, chose to add mini metros and strengthen geographic gaps instead of picking up second frequencies.
In addition, the minimum annual license fee payable – at 2.5% of the highest bid – could now hurt players, existing and new. This could seriously dent the profitability of even currently profitable networks. Harrish M Bhatia, CEO, MY FM says, “It will hurt certain players in certain markets. We may get hurt in Ahmedabad and Jaipur.”
The Second Frequency opportunity
While Phase II did not permit any Radio operator to have a second frequency, Phase III permits operators to own up to 40% of channels in a city, subject to three different operators being in the city. While Fever FM picked up a second frequency in Delhi and Mumbai, Red FM picked up an additional frequency in Mumbai. However, the jack-in-the-box turned out to be Radio Mirchi which picked up second frequencies in Bangalore, Hyderabad (two frequencies in addition to the frequency held earlier), Ahmedabad, Pune, Kanpur, Lucknow, Jaipur, Nagpur and Surat. With this, Radio Mirchi now has a second frequency in 75% of the Indian Radio market. A complaint against the Indian Radio industry has been the lack of differentiation in content and it will be interesting to see how operators utilize the second frequencies that they have picked up. Will Indian listeners get to hear varied content or will operators be forced to again go down the route of popular film songs to recoup the high investments made in these markets? Talking about what we can expect from Radio Mirchi, Panday says, “In the major metros, we will now be able to offer a different programming format, and hence attract a different set of listeners. Advertisers will surely value this.”
As for increased frequencies in a metro or even a mini-metro, it is expected that a greater degree of content differentiation will be seen. This will enable a more focussed creation of listener groups and will be of benefit to advertisers who can sharpen their ad targeting to specific audiences. With the Radio operators deepening their presence, more regional and local content will play out. RBNL in Maharashtra will have a huge focus on Marathi content. Big FM will also focus on regional content in the North and leverage its TV experience with Big Magic Ganga.
The Power of Networking
Building viable networks in a particular geographical region has been the key objective of all players. A strategy that Mirchi adopted was to strengthen its presence in North India and target towns and States where Radio growth is high. Radio City won 11 new frequencies and following in the footsteps of its strong Maharashtra network, it now has State networks in Rajasthan and Uttar Pradesh. On RBNL’s network, Katial says, “We have been able to create geographical domination in Maharashtra, Uttar Pradesh, Bihar, Jharkhand and the North-east. In Uttar Pradesh, Bihar and Jharkhand, we will be a dominant media player and we now have all Radio stations available and 100% coverage in this region.”
“Wherever we have picked up frequencies, we now cover the entire State. We have strengthened our network in the north in Punjab, Rajasthan and Gujarat. We have picked up nine frequencies in Maharashtra and with our existing station in Nagpur, we now offer a complete bouquet in Maharashtra,” says Bhatia.
The increased penetration is what makes Radio now an attractive proposition to advertisers and even a viable alternative to Print. Says Pherwani, “Radio will now become a more feasible alternative to Print for many advertisers, at a state and region level. Earlier, deep coverage in a State could only be achieved through newspapers with their multiple editions and reach to the smallest towns. Now, with the addition of more FM cities, Radio will be in a position to provide deeper reach to advertisers in certain States and regions. The next round of FM auctions will better the reach further. Radio players would also be able to negotiate a better rate with advertisers.” This will be determined by the levels to which effective rates can be increased by the industry, the incremental rate potential on account of providing more targeted audiences, and the ability to bundle different stations to advertisers to provide incremental reach for them on Radio. The extent to which these factors are appreciated by advertisers will result in overall revenue growth for the Radio company.
Prashant Panday
MD & CEO, ENIL
We have acquired a second frequency in most of the major metros – Bangalore, Hyderabad (two frequencies), Ahmedabad, Pune, Kanpur, Lucknow, Jaipur, Nagpur and Surat. No one has such a widespread second frequency network. We also hope to get Delhi, Kolkata and Mumbai via our Oye acquisition. With this, we will have a second frequency in 75% of the Indian radio market
Apurva Purohit
CEO – Radio City, 91.1 FM
We had earmarked about Rs 65 crore for the auctions and we ended up within that budget and also getting the mix of stations we wanted, which enhances our current and very successful strategy of concentrating on high potential markets, thus delivering the maximum impact for our clients. In fact, our network delivers possibly the best CPT in the SEC AB audience across all networks
Harrish M Bhatia
CEO, MY FM
We have acquired 14 new markets, which extends our presence to 31 cities. Our focus has always been Tier II & III markets and with addition of these stations, we will continue to deliver good returns to our shareholders, employees, customers and associates. We have been able to strengthen our network further in the States we are present in, and also consolidated our presence in Maharashtra
Tarun Katial
CEO, Reliance Broadcast Network Limited
The biggest addition is that we have got some very big mini metros in our kitty and have been able to create some very big geographical domination. We bring a width of 59 stations to the advertisers, which includes some of the media dark markets of Uttar Pradesh, Bihar & Jharkhand, a strong regional presence in Maharashtra and we bring in the new market in the North-east.
Harshad Jain
CEO, Fever FM
There was a clear strategy behind our investments in Radio. On one hand, we wanted to have a very strong focus on metros and on the other hand we wanted to get a presence in the largest State in India, which is Uttar Pradesh. We run the widest-read newspaper in the State (Hindustan), so it makes sense for us. For the next three years, there is no possibility of entry for us in these cities as acquisitions are not allowed under the MIB rules. So, we had to make the investment right now.
Feedback: simran.sabherwal@exchange4media.com
