As the leader we remain front runners to make the most of the future. Our long termstrategy- Mirchi Everywhere- will help us exploit new opportunities
A year that began with a bang ended in a whimper. The radio industry grew a strong 18%in the 1st guarter of FY17 a healthy 10% in the 2nd guarter and a weak 1.8%and 0.6% in the 3rd and 4th guarters. The government'sDeMonetization initiative - which will hopefully provide a long term growth impetus to ourbusiness - was responsible for this poor finish to the year. The shortage of cash affectedall big companies and small. Real Estate FMCG Durables Auto Retail....all bigadvertisers on radio....cut ad spends in response to DeMonetization. The only sector whichupped ad spends was BFI having directly benefited from the initiative. Even thatincrease was limited only to December '16. Thereafter as banks got busy handling cashtheir ad budgets went South. The only savior was the Government of India which increasedad spends consistently.
The other savior - albeit a smaller one- was the roll-out of new stations launchedunder Phase-3. Collectively new stations generated about 7 40 - 50 crores in FY17 in anindustry that crossed the 7 2000 crores mark. New stations accounted foralmost70% of theradio industry's muted growth in the period after DeMonetization.
I must mention here that while the impact of DeMonetization has waned new initiativessuch as RERA (Real Estate Regulatory Act) and GST have created a fresh spell ofuncertainty for the corporate sector. With uncertainty comes an immediate thoughtemporary cut in ad spends. Who will advertise when the distribution pipeline is dry orwhen customers are staying away from the market? It is now believed that growth can onlybe expected during the festive season starting mid to end August. This belief also is alittle shaky considering that the impact of GST may last through FY18. These are choppytimes but hopefully they will result in a long period of more energized growth.
You will recollect that your Company invested strongly in the Batch-1 auctions ofPhase-3. We built a network of 2nd-frequencies in all major towns. We evenacquired a 3rd frequency in Hyderabad. During the year all these stationsbecame operational. We created two new brands. The first Mirchi 95 is what the Hindichannels in Bangalore and Hyderabad are called. The second Mirchi Love is the lovenetwork that we created in Hyderabad (3rd frequency) Ahmedabad Pune LucknowKanpur Jaipur Surat and Nagpur (all 2nd frequencies). Further during FY17we became the ad selling agents for the radio stations of TV Today in Delhi Mumbai andKolkata which they re-launched as Ishq FM again a love format. Together we now offeradvertisers a love network spanning 11 of the biggest cities.
We also launched brand Mirchi in new cities Chandigarh Kochi Guwahati and Shillong.We are doing very well in all these markets most of all in Chandigarh where we havebecome listenership leaders. The story in the other three markets is equally encouraging.Clearly the popularity of brand Mirchi is helping us bore our way to the top.
We have adopted a bold sales strategy in our new stations. The media business ismerciless to those who price themselves cheap. Raising prices later becomes difficult.Unlike in other businesses a launch discount scheme often ends up becoming a permanentone. We have avoided this in every market. Our pricing is pegged either to the top or atworst to the 2nd top most player. We have also kept our advertising volumeslow below 10 minutes so as to give a superior listenership experience and attractaudiences. We have been successful with this strategy. In Bangalore and Hyderabad Mirchi95 (Hindi) commands a price premium of 10% and 5% respectively over the Kannada and TeluguMirchi stations. In Chandigarh we are already the price leaders. In Mirchi Love marketswe have launched at the number-2 player price since in most markets the number-1 playeris Mirchi 98.3 itself. Our volume growth is expectedly slow but our advertisers havestarted accepting our price point understanding that less clutter makes their ads moreeffective.
We also bid in the Batch-2 auctions conducted in October-December '16 and won 21licenses in as many new cities. These new cities have been chosen so as to strengthen ourexisting network in fast growing states. We will soon be present in 10 cities in Gujarat(plus 2nd frequencies in Ahmedabad and Surat making a total of 12 stations) 8in Maharashtra (plus 2nd frequencies in Pune and Nagpur) 6 in TN/Puducherry 7in Madhya Pradesh/Chhatisgarh 5 in AP/Telengana (plus 2nd and 3rdfrequencies in Hyderabad) 4 in UP 4 in Karnataka (with 2 frequencies in Bangalore) and 3in West Bengal. During the year we gave up our Goa station because of poor financialviability. At the end of all this we will have a network of 63 cities with a total of 73frequencies the biggest by far in the country!
FY17 also saw a big growth in our digital presence. We look at the digital revolutionas an opportunity to extend the brand bring in more listeners/viewers and also make morerevenues. During the year we grew our fan base on Facebook to more than 4.3 million. OurYouTube channels in different languages have more than 1.1 million subscribers. Ourcontent generated nearly 200 million views last year. Our presence on Instagram andTwitter has also grown manifold. All these platforms have increased the reach of brandMirchi way beyond that provided by the FM signals. We believe our brand's reach could beas high as 100 million people against the 55-60 million estimated through FM radio. Wereach these extra people mostly via video made by the same creative teams that have maderadio such a pleasurable experience. In addition we now have 21 online radio stationshosted on Gaana.com. We get an estimated 3 million online listeners per month. Onlineradio listenership is measured in terms of "streams" with one stream equivalentto one song heard by one listener. In FY17 we generated close to 275 million streams. Ourstations were so popular that 5 of the top 10 slots on Gaana belonged to us! Finally onrevenues the challenge in the digital business is well known. The advertising ecosystemis still emerging. However we are innovating and trying new ways of making monies. Thefuture holds much promise. We need to keep working at it!
While FY17 was surprised by challenges and FY18 could remain affected by disruptionsas well the long term prognosis for consumer businesses stays positive. As the leader inthis exciting segment of media we remain front runners to make the most of the future.Our long term strategy - Mirchi Everywhere - will help us exploit new opportunities. Iwould like to thank all stakeholders - our loyal listeners our supportive board membersour hard-working team members our business partners the government the regulatoryauthorities and most of all you our trusting shareholders. We will continue as alwaysto live up to the confidence you have reposed in us.
Managing Director & CEO (DIN: 02747925)