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Help Higher bidding prices in Phase III can mar the profitability of the FM radio sector
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MUMBAI: Private FM radio broadcasters are readying for Phase III that would expand the revenue market for them, while hoping that bidding prices would stay sane to make the sector profitable.

The industry has turned stable with a revenue of Rs 10 billion and most of the operators have turned operationally profitable as the reach has expanded and the consumption time of radio has surpassed that of television for the first time.

“Radio consumption is at 145-150 minutes per day while TV is close to 140 minutes,” said Tam Media CEO LV Krishnan.

There are many positives entering into the next round of FM radio expansion. The sector will see 800 new radio stations across 300 tier II and tier III cities, providing it an advantage over the other media vehicles like television and print for tapping into retail advertising. Radio operators can have multiple frequencies, paving the path for differentiated content and segmentation of target groups. Licences will be awarded for 15 years instead of 10, allowing entrepreneurs to have a longer vision.

News will also be allowed and although the sole supplier will be Prasar Bharati, some radio companies see it as a gamechanger. "The medium will gain a certain seriousness as people start listening to radio for news. It is a positive first step. In future, government may have the confidence that FM radio operators can handle their own news with a certain degree of responsibility," said My FM CEO Harrish Bhatia.

The penetration of radio has gone up tremendously. Almost 80-90 per cent of mobile users have radio accessibility. With mobile, the reach of the medium has increased.

“There are 40 million radio users in the four metros and over 250-300 million audiences across 80 towns. As compared to a 95 per cent reach of TV, radio also reaches out to 90-95 per cent. It is even more than print which has a reach of 70-80 per cent,” Krishnan said.

The recession has, in fact, turned out to be a blessing in disguise for the radio operators. "Everyone discovered the potential of the medium and the revenues are going up. There is huge pressure on inventories and everyone is running double ads,” said Reliance Broadcast Network CEO Tarun Katial.

Radio has still a long way to go. “The cost per thousand and cost per reach of radio is significantly better than television. The platform as a delivery system is also very effective. But advertisers are not accepting it yet. They must start paying us for our sheer reach,” Katial said.

During Phase II, the industry had shifted its focus towards profitability. “Investors have underestimated the medium but now as Phase III opens up, there will be huge opportunities. It will get help from local advertising,” said Enam Securities executive director of investment banking Salil Pitale.

The scope for tapping small town retail advertising is enormous. “World over, it is the retail market that drives the advertising in radio. It accounts to over 65-70 per cent of the total advertising revenue,” Bhatia said.

Radio Mantra (Jagran Group) director Rahul Gupta was apprehensive about bidding prices going up if the government went for the e-auction model. "This may dry up funds and make the sector's profitability unviable," he said.

Radio Mirchi CEO and Ficci Radio Forum chairman Prashant Panday, who moderated the session, said the government should go ahead with Phase III so that the sector gets energised.

The sector would require substantial capital to fund the Phase III expansion. "For attracting investors, the main issue is that they should be having exit options. That is not so easy as there are shareholding restrictions. The FDI (foreign direct investment) limit, fixed at 20 per cent, should also be hiked," said Pitale.

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