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
good post, harini – your point about content is absolutely right – when i read the article, my first thought was, no does this mean so many more fm channels living off film music and mindless ‘chaat’ shows – apart from content being low cost, even the user /buyer, initial outlay is low – which is why radio is so popular in villages – I was in interior Tamilnadu on work many years ago and I found die-hard BBC Tamil listeners there – and the content was so well adadpted to the listeners’ profile – they had programmes about women -rural – who had opted out of the beaten track and had made success stories for themselves outside the home and so on.
as for the cross-ownership issue, bleep! wrong number – that is where the market has been headed – sure, we need stricter controls, but the economics of owning multiple media vehicles are just too lucrative for the businesses to give up without a fight…
Tnx Charu:)
unless radio channels appeal to specific interest groups – it is going to be very difficult to sustain channels. Now, these channels at the most have a 4-5 year window, because with the rate technology is proliferating, and with the prospect of a under 10k comp – podcasting (or its more evolved form) is going to be taking over. imagine the radio station of your selection where you (the listner) has programmed the content they want!
My problem with media ownership in India istwo fold:
a) that it is an oligopoly behaving like a cartel. On the face of it competing at all levels, perpetually at each other’s throats. But colluding to ensure that nothing that introduces competition or consumer choice or efficiency succeeds. Take the example of CAS. or even DTH or the persistance in putting out non compatible technologies. I would like to see a regulatory authority – modelled on an OFTEL or an OFGAS or a TRAI – that keeps the media houses on their toes. That standardises technologies at the delivery end – so that the consumer doesn’t get tied down. That ensures that collusion doesn’t happen on minimum pricing. (an aside: I am not particularly in favour of a content regulator. )
b) is at the citizen’s interest level. I just don’t think that it is in our interest that multiple media that reach, influence, and impact so many millions be concentrated in the hands of a few. Its a positively scary prospect. What if some with views like Pravin Togadia (or Karat) ended up owning the largest cluster of media vehicles. And knowing the unpublicized views of many who own and run media – it is a very, very real possibility.
You are right when you say the media houses will put up a fight. if the people need any motivation to lobby and figh- they can seek inspiration from the USA. Fox Media – with its radio network, tv stations, newspaper – managed to convince the bulk of the US citizens that 9-11 was carried out by Saddam and that’s why they were going to war:)
Big Media see it in there interest that the large ‘fixed slab license fee’ stay. It just kills the smaller players till we see only the large players in a monopolistic setting.