Prashant Panday: ‘Coz radio is sexy!

26 Oct,2011

By Prashant Panday

It’s indeed great to be in the radio business! Provided you are the leader and have managed your costs well! Provided you are a listenership leader and your listenership helps you command a good enough pricing in the market! Provided your work culture is so much fun that you are able to retain the top talent and top management both! Provided you have managed your business so well that you are well prepared to take on future challenges and opportunities! In short, provided you are a Radio Mirchi!

 

For the rest, radio has been an uphill challenge right from the time the auctions for Phase-2 ended in Jan-Feb 2006. Right from then, losses have only mounted for most broadcasters. When things started to get a little better, they got a lot worse when the economic slowdown hit in 2008-9. When things got a little better again last year, and many of the larger broadcasters achieved EBITDA breakeven, almost half the license period had ended. In the radio business, if you hit EBITDA breakeven at the mid-point of your license period, you have no hopes of delivering returns to your shareholders. That indeed is the story of most radio broadcasters.

 

However, the future does look brighter than the past has been. Provided again, if broadcaster handle their businesses sensibly in the future; provided they bid reasonably and sensibly in Phase-3 auctions. Those who chase network size at any cost will continue to be in trouble for the next 15 or even 25 years. Those who bid smartly – even losing a few important stations in the process – will be able to make the radio business profitable.

One has to remember this – radio is not TV – here costs are paramount. This realization is more important than anything else. In radio, one has to keep one’s head down; focus on brand building; not get too flashy or ambitious; and keep plodding away at the key drivers of the business. That and that alone matters in the radio business!

For such broadcasters who bid sensibly, the road ahead is indeed exciting. The radio industry has scaled only the 5 percent peak – 5 percent as a share of the total advertising industry. The 8 and percent peaks are set to be scaled in the next few years.

As the number of cities increases, the importance of radio is bound to increase. First there is Phase-3 to provide the impetus – taking the penetration of radio to more than 300 towns. Then there is bound to be the next phase – Phase IV – in which the government is sure to add more frequencies in the major metros. That should give radio another big impetus. In fact, the government can launch both phases 3 and 4 simultaneously.

The radio industry has given an easy formula for the government to offer more spectrums to radio broadcasters, thus more than doubling the number of channels in the major metros. Simply reduce the gap or separation between two adjoining FM channels from 800 Khz to 400 Khz and the number of frequencies will double! Everyone will gain – most so the government which can rake in much higher license fees. Equally so…..the listeners at large…..who will get much more programming variety to choose from. This will help broadcasters also who will get to operate different formats – after all, in which other media segment is there such a shortage of formats? There are more than 750 TV channels, thousands of newspaper titles and tens of thousands of outdoor sites and websites. Why then are there so few radio stations?

To end, radio has always been a sexy medium. It’s the medium in which advertisers can truly dive and get the best out – at a regional and local level. Advertisers who predominantly use TV can use radio to give a local flavour to their campaigns. Advertisers who primarily use newspapers can use radio to give a “smart personality” to their brands. Radio is poised at that interesting cusp – when people who work in good radio companies can grow their careers much faster than they can in comparison to TV and print companies. Radio is truly a sexy medium!

Prashant Panday is CEO, Radio Mirchi

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