Although 2012 had some hiccups for private FM radio with the delayed launch of FM Phase III, the year is ending on a brighter note with most broadcasters registering a good growth across markets. While the biggest challenge was to create innovative programming using music as the base, FM Radio in India has come along with many unique initiatives in programming and activations.

Radioandmusic.com takes you to the year that was, starting with Radio One, a joint venture of Next Media Works and BBC worldwide, that experimented with changes which resulted profitable for the company. It switched to bollywood in Pune and Bangalore (three years ago), international format in the metros of Mumbai and Delhi, later moving to retro in Kolkata and Ahmedabad and a complete request station in Chennai.

Radio One managing director and chief executive officer Vineet Singh Hukmani highlights the journey of the network in 2012 and how the industry has finally begun its evolution into differentiation.

2012 for radio industry & Radio One:

It has been a fabulous year for our network, as our operating profit is growing exponentially due to our premium pricing and lowest cost model. For us, it’s been about profit and not just revenue growth.

We have around nine million listeners for our international format in Mumbai and Delhi. Moreover, we have over three million listeners who are loyal to our Hindi retro format in Kolkata and Ahmedabad, three million listeners loyal to our 100 per cent bollywood station in Bangalore and Pune. In Chennai, we are the only 100 per cent request station where the music is decided by the listeners. Our biggest growth has come from demand for our on-air new age product as opposed to the industry peddling off-air activations free to get more on-air revenue.

Besides us, we feel that Radio City has really threatened the market share of the market leader. None of the other network stations are growing as much. At the mid size level, Hello FM is doing really well in Tamil Nadu.

From a revenue perspective, radio is still the fastest growing medium and would register a double digit growth rate. However, the market leader is witnessing a saturation and increased threat to its market share from the other players. All the players have wanted the Grant to Permission Agreement (GOPA) to be signed quickly to commence the much-awaited phase III auctions.

Key Challenges:

Firstly, the Ministry of Information and Broadcasting (I&B) must allow the quick signing of GOPA. The industry should also move to a value pricing model from a volume pricing model. Programming people in radio stations should be allowed to drive differentiated content and create unique formats. Radio needs to replace print as a ‘medium of choice for the local retailer’. An effort to improve the net return on capital of the industry needs focus and the Ministry of I&B also needs to ensure low reserve price and phase II auction methodology to allow this.

The medium witnessed some major changes this year with the clients beginning to invest more into format led radio that allows better profiling of audiences. They are also paying a premium versus the generic radio, which is treated like a commodity and with downward pressure of pricing.

Advertising spends:

We have a healthy base of existing and new clients who have adopted our stations. Our Delhi, Mumbai combo of international format is unique and not replicated by any other player. At a local retail level, our clients see the distance our format has from the rest of the players and it feels great to be treated special by clients. Most of our retail rates are the highest now in every market.

With ad pricing overall, the very large players have commoditized radio inventory and offer too many costly off-air value ads, thereby reducing the true value of on-air inventory.  Therefore, clients have started to look at those players as ground promotion agencies and have little or no respect for their on-air product. These players must get out of this commoditized way of thinking and increase on-air yield so that the industry can gain back it’s deserved pricing and value.

Radio is still three per cent of the advertising pie. Phase III will correct this. However even now, retail advertisers in every city have decided on radio as a medium of first choice especially the real estate, education, automotive, hospitality and luxury retail sectors.

Content & Programming:

All radio stations sound the same. The mass radio stations try to cater to everyone and as a result engage no one. Listeners are sick of the lack lustre conversations about bollywood and new songs being repeated 14 to 15 times a day. Most radio stations are fueled by bollywood content only. We have created a unique and powerful conversation with our audience and given them a unique music format which helps build loyalty. We filled the need gap well with the changes that we made to our format.

Our format is doing great; we have five-hour time bands and our weekend shows are a huge hit with listeners. When you are differentiated in the manner that we are, people love the station as a whole. Our hosts are the most mature of the lot and yet entertaining in the most intelligent and involving manner.

Internet radio:

Alternate sources of broadcast are being explored by players everyday. Internet radio can only grow if the content is unique and music royalty is affordable. Just streaming music is not the answer.  Once the GOPA is signed, radio players can freely use the internet to increase their footprint. But this will kill the stand alone internet radio stations and also streaming apps that only work as poor substitutes for an MP3 player.

Way Forward:

We see Radio One’s operating profit growing and confidently bidding for a few more metro markets like Hyderabad, Chandigarh, Cochin, Patna and Allahabad.

With RAM (Radio Audience Measurement) being the non preferred mode of measurement, IRS (Indian Readership Survey) is the only option we see as of now. We stopped subscription to RAM in all four cities in April 2012 and are waiting for the industry verdict on the same.

We hope there will be a higher share of advertising revenues, level playing field on news and sports with TV and print, zero migration fees for phase II players to phase III and an improvement in net return on capital by minimizing the accumulated losses of the industry. This can only happen if license pricing in phase III is done with proper care and music royalty issues are sorted.

Success only comes from true differentiation that a listener can feel in five seconds, and not ‘perceived differentiation’ which is only in the radio players head.