FM radio: Waiting in the wings for how long?
By Ritu Midha
Television and print continue to be the mainstay of any media plan. The buzz around launch of new channels and publications (largely newspapers) is difficult to ignore. Digital media, too, has become a medium of ‘now’. Meanwhile, radio continues to struggle, with cost to operate being quite high while profitability is still an issue. Is it time, then, to ring the alarm bells? Is radio getting lost even before it has acquired a national footprint?
Prashant Panday, CEO, ENIL, emphasises: “There is no evidence of that yet, though if Phase III expansion gets delayed, this is bound to happen. The Indian media scenario has new brand launches happening all the time. Newspaper reports say that since August this year, the Ministry of I&B has given permission for 745 new TV channels – about half of which are news channels. Likewise, if you look at newspapers, there are editions opening across the country almost every month. It’s the same with outdoor sites and internet portals. In a scenario like this, if there is no addition in the number of radio channels, then the sector will get affected. That is one reason we are waiting for the 800 odd new radio licenses to be issued under Phase III. At present though, radio continues to grow, and its share continues to be just under 5 percent of total advertising spends.”
Media planning and buying fraternity, in turn believes that radio as a medium is gaining popularity, and that is largely because of its content which touches a cord with the local consumers. Mohit Joshi, Managing Partner, MPG India, explains, “While there is not as much buzz about radio, I don’t think it is losing out. It has developed a unique role in the communication mix, which straddles ATL and BTL. Advertising support on the medium has been growing at 11 percent over the years.”
Increase in FDI Limits: Low impact
Media owners are of the view that increase in FDI in radio would not really impact the sector, unlike retail where the proposal for FDI in multi-brand retail has raised a storm. The common belief is that not many foreign players would be interested in the medium because of low profitability.
Mr Panday says, “Remember, FDI only enters sectors where there is profitability and where the regulatory regime is favourable and stable. Today, most radio broadcasters are barely hitting EBITDA break-evens. This, after half the license period of ten years, is already over. I personally feel that the higher FDI/FII limit will help increase trading in listed radio stocks like ENIL and RBN, but apart from that, the impact might not be that high.
Ashit Kukian, COO and President, Radio City, agrees, “The increase in FDI in radio sector from 20 to 26 percent is not really going to make any dramatic impact on the industry.”
Slowdown: Whither goes Radio?
While FM in India continues to struggle, impact of the slowdown, interestingly, on radio, as per the expert opinions might be the least, courtesy its local content. As per Mr Panday, with a slowdown in ad spends, the overall ad industry is unlikely to grow at more than 5-8 percent. His belief is that radio may grow slightly higher at 10-12 percent. “Almost all sectors are seeing a slowdown. We attributed the slowdown in the 1st quarter to the higher spends in the preceding 4th quarter on account of the cricket. However, the 2nd quarter also has been weak,” he says.
Vinish Joshi, GM, Mediacom, too believes that radio might see a higher percentage growth than other media – largely due to its reach and content. He says, “Increasingly FM-enabled mobile phones are driving radio growth in India and phase III is expected to extend radio’s reach to 294 towns and 839 stations. If any medium stands to gain from this slowdown, it is radio, as during the periods of slowdown, marketing activities get more focused. The concern remains on accountability, as marketing will also be more accountable during this period and comprehensive measurement tool for Radio industry will be critical.”
Measurement currency: A catch-22
Indeed, the tighter times lead to a lot more stress on RoI, and measurement currency becomes very important. The radio players feel that there is need for a more robust radio measurement system. Mr Panday says: “The present system is a diary system which has many flaws. What we need is an electronic measurement system which accurately captures listenership. We also need more sample sizes to better capture the heterogeneous habits of our cities.”
This sentiment of the media players is shared by media planning and buying fraternity. While, they agree that attempts being made to capture a larger listener base are commendable, they believe that it needs to broaden further.
Mohit Joshi says, “Effort is already on for increasing the coverage of the network of the current Radio Measurement systems. Today, when we have radio stations across most of the key cities, the coverage also needs to mirror that growth. The better the data, the easier it would be to establish the role of Radio.”
It would be interesting to find out how much is the fraternity ready to invest in improving the measurement system and currency. It is a known fact that research and measurement is cost-intensive. With RoI being an issue, most of them might find it difficult to make a major investment in anything.
FM stations: Same, same – no different
Radio, at the moment is suffering from me-too syndrome – which to a large extent can be attributed to investment constraints. There is definitely a need for differentiation – enter localised communication.
Mr Kukian says, “Radio as a medium has the ability to create customized communication for pocketed audiences and impact millions of Indians due to its wide coverage and personal connect. This coupled with the medium’s innovation quotient gives it one up over other media in terms of fulfilling advertisers’ requirements.”
Vinish Joshi shares a similar opinion, but he qualifies, “Inserting rapid-fire weather forecasts and traffic reports is just providing minimum local content. Local radio, by my definition, is the real interaction of radio personalities, announcers, the people on the air, with listeners both on and off the air. As long as radio maintains its local presence, something that other syndicated forms cannot provide, there will always be a need for its services.”
Unfortunately local content on radio, largely restricted to traffic reports and contests, seems to be similar on all the stations. The reason for this, yet again, is operating costs and limited number of stations. The game might change once there are more radio stations post Phase III.
Mr Panday states, “Very little content differentiation will happen unless more frequencies are released. Let’s take an example. Suppose only 10 TV channels were allowed by law. Which channels would exist then? My guess is that the 4-5 GECs would still exist, there would be 1-2 news channels and 2-3 other channels. The reason for so much content differentiation in TV is that there are so many channels. The second reason is that broadcasters are allowed to own and broadcast several channels, so that the cost of operating smaller format channels is reduced.”
He continues, “In radio however, we suffer from restrictions on both the above mentioned requirements. There are only 7-8 channels in the major markets and broadcasters are allowed to operate only one channel per market. The Phase-III regulations are going to relax the second condition, but till the number of channels increases significantly, we cannot expect much content differentiation. And if the auctions happen the way they are planned – e-auctions for one frequency in Delhi and two in Mumbai – then the license fees will shoot up and niche formats will become unviable. The government needs to release more spectrum BEFORE auctions are conducted. We have even given them a formula to do this – just reduce the “separation” between two adjoining radio channels from the 800 kHz at present to 400 kHz.”
If the separation between two adjoining channels is helved, the number of channels would double – broadcasters will be able to compete better with TV and print, the government will get more license fees through auctions. And it just might help in increasing FDI investments in the sector by raising the bar and the competition.