Last year we did a spot of consultancy for one of the top 5 consulants. The area of consultancy was the business of media.

One of the areas that was most striking in its dichotomy was FM radio. 1999 was the year that saw the granting of licenses to private parties for setting up FM radio channels.

Remember 1999 was also the year that the dot com madness was at its peak. Terms like ICE, ICT, etal were floating around as though they were going out of fashion. Everything started at a few crores - the running joke was do they know how much a crore is!This was the year that multiple private players bid for radio. Zee TV bid some obscene amount. So did Star. So did the ToI group. The Government - like all governments - saw the colour of money and said ok bacha log, go set up your radio channels, just give me my license fee every year. Doesn’t matter if the license fee makes your business unviable. Just pay up or shut down.

The nature of the bids was such that FM radio in India probably has one of the steepest barriers to entry. It also has one of the lowest barriers of exit.

Radio per se doesnt’ cost much to produce and transmit. FM radio costs even less. What kills the business is two things:
a) is the above mentioned license fee
b) is the monolithic and monopolistic nature of the companies that own it

Because of the nature of ownership - they are either owned by large newspapers or large TV channels - the focus on the business is slightly diluted. Afterall, am i going to chase 4 crores of profit or 400 crores.
Also, impeding the development of radio was the staffing of the chanels. especially in the areas of sales and marketing.

FM radio is a local medium. Serving a local population. Over reliance on FMCG or Space selling professionals from national TV or print - means that the radio station is not maximising its profitability. Today, FM radio in India has one of the lowest shares of the advertising pie. Around 2%.

Most of this revenue is part of a larger deal with the mother brand. (I will spend 50 crores of advertising on your channels. x on TV, y on print, z on radio). Network sales that has worked so well for the ToI to maximise its ad revenues, has played havoc with the business of FM radio.

One of the prime reasons why the business of radio is inefficient is that top managment has a national mindset, when it should have a local one. It should be targetting local events and local businesses, in addition to what ever it gets from national brands. Instead of living off crumbs it should be targetting the bakery. Unfortunately, the localisation of content and advertising on radio is still a long way away. All channels are me too clones. With RJ’s who speak as though they picked up an accent while passing by the airport. With music that is much the same.

It was therefore with interest that I read this mornings report in the ET on 300 private radio stations to be launched.
I do believe that there is a tremendous scope for radio -especially because the medium is so very interactive. The cost of content is so very low, and its impact so very great. And then there is the added advantage that most of the audience is captive to radio - either hearing them close up in their ear or while locked in a car or in the background when they are working.

Two factors that will help the survival of radio channels that will come in:
a) the scrapping of a fixed slab license fee and looking at a revenue share model
b) localisation
Finally, i would also like to see stricter rules on monopoly and restrictrictive practices in the media, especially in the area of cross ownership of media vehicles. I guess like all monopolies this one too leads to inefficiency in thought, processes and business