The radio saga

Radio listening has been falling steadily for over three years. So there was hope that the 97 new FM radio stations auctioned in August will bring more variety and, therefore, more listeners. However it doesn’t look like that will happen, at least not for another few years.

The old rules did not allow any company to own more than one station in a city. This meant that all stations were competing for the largest mass of listeners. The largest mass is critical because all of the Rs 1,720 crore that the private FM industry made last year came from advertising. And advertisers only put money in the top two to three stations in a city. That explains why every station in the country plays film music with jockey jabber thrown in.

Most operators say that programming diversity can become real if at least three to four operators have more than two frequencies each in a city. Representation Pic/Thinkstock
Most operators say that programming diversity can become real if at least three to four operators have more than two frequencies each in a city. Representation Pic/Thinkstock

Most of the differentiated offerings — only English songs, a radio station that focussed on women’s issues, talk radio — have not worked. While the ad potential exists for different content, it needs some investment in marketing and content, which was difficult under the old policy. It did not allow operators to own more than one station in a city or to share costs across a network of radio stations.

The policy for this phase of auctions however, allows radio operators to own more than one station in a city. As things stand though, while coverage will go from 243 to 340 stations, it may not necessarily mean more variety.

Over the next 15 years, FM radio operators will spend well over Rs 3,100 crore as licence fees and migration fees to the next phase. For an industry that generates about half that much in revenue, that is a big ask. Especially if you know that the industry sat on accumulated losses of Rs 2,400 crore till 2012, the last year for which this figure is available. The auction methodology and overbidding meant that some players have paid huge amounts for frequencies in 12-15 cities while 38 small towns went abegging. The tendency to stick to the knitting — which is popular film music — in markets where bid costs are high will therefore be strong.

Most operators say that programming diversity can become real if at least 3-4 operators have more than two frequencies each in a city. While some operators have a rich haul in some cities — Radio Mirchi now has three stations in Hyderabad — it is not a story repeated across cities. The next round for 839 frequencies across C and D class towns will help radio cover a larger portion of India. But what can be done to ensure that this one gets operators to bid for a wider variety of towns and not overbid in some cities only?

Increase the supply of spectrum and remove ownership caps, say operators.

Take the first. Almost every radio operator says that the auctions were completely transparent and clean. What they have a problem with is the artificial scarcity that pushed up prices unnecessarily. Most operators dismiss the ‘scarce spectrum’ argument. They reckon that there is a solution to it. The gap between two private FM radio channels is 800 MHz. If that is reduced to 400 MHz it could create additional capacity. This suggestion has been ignored by most governments so far.

Secondly, radio operators cannot own more than 15 per cent of stations across the country (with exceptions such as Jammu and Kashmir and so on). They also cannot own more than 40 per cent in a city. This pushes operators to focus more on cities they are sure of.

If the next round is successful, India could have 1,100 private FM stations. If the focus is on ensuring that there are lots of radio stations in lots of cities, it might just push the cause of variety. That in turn will increase revenues, taxes and employment. For the regulator, that may be a better way to measure the returns from the auctions than simply the licence fees collected.

The writer is a media specialist and author. Follow her on Twitter at http://twitter.com/vanitakohlik

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