AROI president and BAG Films & Media chairperson Anurradha Prasad

2012 for radio:

The year 2012 has been a tough one with an expected revenue growth of 10-12 per cent, which was much below the Compound Annual Growth Rate (CAGR) of over 16 per cent achieved over the last four to five years. If we talk about the past year regarding listenership, FM has almost achieved 80-90 per cent penetration in the larger metros in the country, as per Radio Audience Measurement (RAM) data. For other cities, there is authentic data available to comment on listenership growths and penetration.

If we talk about the future, I feel the growth in 2013 will be much more in smaller metros and towns. With the FM Phase III auctions also slated to be held within this year, it will add over 240 more towns to FM, so we can all expect a big bang there. In the longer run, once the number of stations in larger metros is doubled, the growth will be led by the larger metros themselves.

Measures taken by AROI:

This was a mixed year for AROI as the implementation of the FM Phase III policy has taken more time than envisaged. On the other hand, the legislative amendments in copyright act regarding statutory licensing will in one stroke, make FM a feasible business opportunity. Some of the key new initiatives we undertook the past year were:

a. Formation of a content regulation committee which will lay down the self regulation code as well as define systems for complaint redressal. This is being led by Radio City CEO Apurva Purohit.

b. Designing a system for advertising outstanding and control. This initiative is being led by Radio Mirchi CEO Prashant Panday.

c. Strengthening of listenership measurement systems, the initiative is being led by Big FM CEO Tarun Katial.

d. Focusing on new initiatives to bring radio at the top-of-mind for advertisers. This initiative is being led by My FM CEO Harrish Bhatia and HT Media radio and entertainment business head Harshad Jain.

The results of these initiatives will reflect during 2013.

Focus point of 2013:

2013 will be focused on results and consolidation of the above initiatives. Moreover the auction of 800 new stations will definitely be the key focus too. We already have strong formal and informal mechanisms for the active involvement of all industry players in the working of AROI.

FM stations that fared well in 2012:

Radio Mirchi continues to do well as does My FM. Most of the other stations are slowly reaching operating break even. Also radio stations in tier II cities or most of the smaller city stations are reaching operating break even. Their growth however, has been generally lower than last year.

In terms of listenership, there is no authentic data available. However, our experience is that FM has emerged as the most powerful media of reach in the cities where it exists.

Unfortunately lack of data has become a hindrance in the translation of this reach into a reasonable share of the advertising pie. The emerging auctions will further help in clearly identifying the new players in the radio industry.

The year that was for Radio Dhamaal24:

The year was good for Radio Dhamaal24. Our radio station covers seven states and accordingly we had planned our programs to focus on regional flavour combined with regional music. Through our programming, we have tried to bring to the fore socio-cultural issues of the region. For example, we celebrated and did a lot of programming around the Chatth puja in Bihar on a big scale and got a positive response from the listeners and our retail clients. By focusing on regions, we have gained our clients’ trust which in turn was demonstrated in improved retail sales. Our corporate sales also improved and several big brands wanted to improve their share in these regions by associating with our radio stations.

Strategy ahead:

We are planning to concentrate more on local content now. By focusing on cultural activities of the seven states where we are present region by region, we plan to increase our listener base. Going along with our tagline ‘Har Khushi Hai Jahan’, we also plan to add more to our already popular characters like ‘Shehri Lal Khabar Waale’. We have consciously chosen a ratio of 40 per cent national flavour content and 60 per cent localized flavour, keeping our listeners in mind. We also plan to improve sales by producing and tailoring our programming based on clients and their product requirement.

Share in advertising pie:

Currently the private radio industry in India is worth 1300 crores which is about four per cent of the total advertisement market in India. On the other hand, AIR's share was about Rs 250 crores approximately. This is far less than print and TV which command a share of 47 per cent and 43 per cent respectively.

Opportunities:

The opening up of 240 new towns to FM, in my opinion, presents a wonderful opportunity to small players to enter and expand their footprint in the market. We need to see how effectively they can capitalize on it.

Major challenges:

Unfortunately, private radio is generally at the bottom of the mind for both, the government and the advertisers. The short, medium and long term challenges I foresee for the industry are as follows:

1. Existing operators have not got a license period extension and the government may decide to overcharge basis Phase III bidding.

2. Open bidding through an e-auction may again create a situation of Phase I where 80 per cent of the stations remained unoperationalized.

3. Content freedom limitation is also a roadblock for the industry. A level playing field is still to be created. Under Phase III, content freedom is still severely restricted. Only AIR provided news capsules can be broadcast.

Current affairs, and even sports are restricted while there is no such restriction on print/TV and internet.

4. The advertising rates of DAVP for radio are much below TV and print, on a per audience basis. This needs to be resolved. Government advertisement rates need to be equal across all media. Currently they are heavily skewed against FM. For example, local newspapers are given a rate of Rs 159 per column cm per lakh reach, while for FM it is over 10 times less even for a

10 second spot.

Way forward:

More content freedom, specially news, will definitely raise the importance for the government.

Government’s case is that a central monitoring system needs to be put in place before news on FM is freely allowed. With the process on, an early lifting of restrictions (even in Nepal, news on FM is freely allowed) should be expected. At the AROI, we have already anticipated this and taken necessary steps. Formation of a content regulation committee which will lay down the self regulation code as well as define systems for complaint redressal is being led by Apurva Purohit.

On the advertising front, measurement of listenership and proper communciation thereof will help in more interest amongst advertisers.

Strengthening of the listenership measurement systems initiative is being led by Tarun Katial.

Future with FM phase III:

Well some of the issues that come to my mind in this regard are as follows:

Under Phase II, licenses were issued for 10 years, while under Phase III, they will be issued for 15 years. Media business has a relative long term gestation period, cumulative break even taking over 10 – 15 years due to high investment in initial periods to win over readership/listenership or viewership. A license period of 10/15 years, with absolute darkness or renewal parameters, discourage investors and bankers. Even now, Phase II players have no idea on what or when will be the license extension criterion, making it extremely difficult for them to raise funds for even Phase III bidding.

Secondly, in my opinion open bidding through an e-auction may again create a situation of Phase I where 80 per cent of stations remained unoperationalized.

Thirdly, the migration GOPA for existing operators is yet to be signed.

Until it is signed, Phase III benefits will not reach existing operators.

Finally, as compared to earlier, a single operator can now operate upto 40 per cent of frequencies in a city (rounded to nearest whole number) subject of a minimum of three operators per city. With lock in period of existing operators over or getting over, a lot of M&A can be foreseen.