BY SIMRAN SABHERWAL
Landmark - that was the word used by Apurva Purohit at Radio City’s townhall meeting, as Music Broadcast Private Limited (MBPL), which runs the FM radio station Radio City, bid adieu to its investor India Value Fund Advisors Ltd (IVFA) and welcomed its new parent, Jagran Prakashan Limited (JPL). With the Ministry of Information & Broadcasting giving its nod to the acquisition, JPL has once again shown that it can take the acquisition route to grow. Radio City, which operated as an independent media unit so far, now gets to leverage the opportunities that come with being part of a large media house.
For JPL, Radio City was an attractive proposition at several levels. A decade ago, IVFA, a private equity investment fund to mid-market companies, acquired a 55% majority stake in MBPL, Radio City’s parent company. Post this investment, Radio City, which had four licenses, acquired 16 additional licenses in the Phase II radio auctions, to become one of the biggest Radio networks in the country with a presence in 14 of the 16 largest advertising revenuegenerating markets.
While it was an open secret that IVFA was looking to sell its stake in MBPL for a while, the fact that JPL finally dialled in did not come as much of a surprise, as the company had chosen the inorganic acquisition route earlier too when it acquired Mid-Day Multimedia Limited (MML), in 2010. With JPL acquiring MBPL’s holding company and fellow subsidiary that provides activations, various media reports indicate that the all-cash deal could be in the range of Rs 475-500 crore.
MAKING MUSIC TOGETHER
For starters, this move will consolidate JPL as one of India’s largest media companies, as proclaimed by Mahendra Mohan Gupta, CMD of JPL in a media statement. “The Radio business will complement our Print, Outdoor, Activation and Digital businesses and enable deeper inroads with advertisers both at the national and local level,” Gupta had said. Commenting on the opportunities Jagran saw in Radio City, Shailesh Gupta, Whole-time Director, JPL, says, “We wanted to get into Radio, but at the right time and at the right price. When we had bid for Radio earlier, we did not go all out. We bid for 15 stations, but we only got eight because we wanted to buy at the right price. It is the right way to do business. After hose eight frequencies, we wanted to expand further… so instead of bidding, we were on the lookout for the perfect fit and Radio City was an obvious choice.”
On the other hand, Purohit, CEO of Radio City 91.1 FM, admits that there are pros and cons of being an independent media unit. On working with a private equity firm and learnings from it, she says, “The last 10 years were fabulous for me and my senior team, who are largely from the media industry, because we got to see a highly systematic governance and way of operating because we were equity-funded and that is one of the fundamental reasons why Radio City has done so well.” They adopted the ‘balanced scorecard’ system, putting processes in place and linking them to the KRAs of every individual in the organization. “We are a completely debt-free company, cash positive and have paid back all our loans. Today, our PAT is what our revenues were 10 years ago. All this has come through this whole systematic approach and a lot of credit for this, I would give to IVFA,” Purohit says.
She explains that in the media environment today, viability of independent media units is a question. “The worry was that there would come a time with our 20 stations (and let’s say we’d get 10-15 new stations through the auctions) when we’d reach a plateau and where would the growth come from? I have always said that all media need to be part of a larger network because then there are huge synergies in every function.”
HITTING THE RIGHT NOTES
The first and most obvious synergy that could emerge out of the JPL-Radio City deal is in the marketing and ad-sales space. Before this deal, JPL was primarily present in Tier II and Tier III towns, with virtually no presence and visibility in the metros. This impacted the brand, as media planners tend to neglect brands which they don’t interact with on a daily basis. It is estimated that about 75-80% of the Radio industry is based in the top eight cities, and this is where JPL will benefit most. JPL will now be able to offer advertisers a metro presence which it couldn’t earlier. For instance, Radio City has a very strong bouquet of offerings in Maharashtra and if JPL were to look at this State in future, Radio City’s Maharashtra bouquet will prove helpful for Print expansion. While Print + Radio is already a powerful offering, JPL will now be able to offer advertisers a 360-degree solution in Maharashtra. Says Purohit, “If you have a 360-degree solution to offer the client, the likelihood of getting a larger pie within the Group is higher, which is how Jagran is looking at us. Though Radio Mantra is part of the group, it is smaller, and thus you could say that Radio City is the missing piece in their puzzle.”
Radio City, on its part, gains eight stations courtesy Radio Mantra, ahead of Phase III auctions, and in simple terms, it does not have to bid for these frequencies. Looking ahead, if Radio City were to build an HSM A (Hindi-speaking market SEC A) bouquet, it would already have a presence in eight stations and it can now concentrate on acquiring the rest of the cities in the upcoming Phase III auctions.
RETAINING BRAND RADIO CITY
When asked whether the core identity of Radio City will change now that it’s part of a group, the identity of which reflects small town India, Purohit says, “We are very clear that JPL bought the business because they wanted a metro brand and we don’t see that equation changing at all for several reasons. It is a synergy they require and Radio City as a brand has been developed around what the needs and desires of the listeners of each city are.”
Meanwhile, Radio City’s ad-sales partnership with Friends FM in Kolkata and Suno Lemon FM in Gwalior will continue. It will also be business as usual as far as the daily operations of Radio City and Radio Mantra are concerned, as they will continue to operate as independent business units and brands. According to Purohit, “Mantra has its own equity in its own markets. One of the fundamental things we chase in Radio listenership is brand recall, and once you establish a strong brand recall, ideally you should not change it. We are very happy to have both brands running to their own tunes.” But, the synergies in marketing and sales would be leveraged to the full. Radio City’s activation division will also benefit from a cost perspective when offering a 360-degree solution. In addition, Radio City’s branded properties such as Galli Premier League, Radio City Super Singer, also now have the potential to be executed on a much larger scale.
THE PHASE III STRATEGY
With Radio Mantra not putting in any bids for the Phase III auctions, MBPL will bid for new licences and new stations will be launched under the Radio City brand. On funding for Phase III, Radio City has always maintained that it had been in talks with banks and its finances were in place. “We have already got money in the bank for us to participate in the auctions,” states Purohit, adding that money will come from JPL too.
MOVING TO MATURITY
Consolidation can be seen as a sign that the industry is moving to maturity and in this case the deal between MBPL and JPL could be a harbinger of things to come in the Indian Radio space. According to Ashish Pherwani, Head, Advisory Services - Media & Entertainment, EY, “Consolidation is a natural outcome for anyone who wants inorganic growth. There has been a continuous delay in Phase III auctions and if you want to grow in size and scale, you will have to acquire. That is the fastest way to grow your topline.”
Consolidation is also required as the Indian Radio industry is very fragmented and Radio players will have to come together to remain relevant. Pherwani adds that Radio players will need to create advertiser-focused bouquets as Radio is still not an effective alternative to Print. For example, if an advertiser is looking at a national launch, he looks at the top 10-15 cities of the country.
Similarly, for a regional/State launch, while Radio can offer five to six stations, Print can possibly offer 25 editions. However, Post Phase III, it is expected that Radio players could look to build a network of stations in a State and become a viable alternative to Print. Radio can also be a feasible alternative to Print and Television in media-dark markets and low literacy areas because of increased mobile penetration. “These models have evolved recently, based on advertiser requirements. To be relevant, you are going to see consolidation in this direction,” sums up Pherwani.
Considering this scenario, what happens to the smaller players with just a few Radio stations in their kitty? Consolidation with a larger network could be the way ahead, so that they could reap the benefit of network selling, Pherwani says. “With limited stations, you can’t survive. You will have to offer bouquets – national, regional, State, HSM, etc. To be of any relevance for advertisers, this has to happen and smaller players will have no choice,” he explains.
Even regional players will have to consolidate at the State or regional level and create relevant bouquets. “You will also see consolidation in the marketing space, where three to four players in a particular State or region could market themselves together. We will now see a lot of State-level consolidation where it will be a win-win for all,” says Pherwani.
Feedback: simran.sabherwal@exchange4media.com
