| 'Till we're viable, no one will invest in radio' | |
| Q&A: Prashant Panday, CEO of Radio Mirchi | | Shuchi Bansal / New Delhi July 03, 2009, 0:22 IST | |
 Prashant Panday, CEO of Radio Mirchi, the FM-station brand of the Times Group and senior vice president at the Association of Radio Operators of India (AROI) met the Information & Broadcasting (I&B) minister Ambika Soni recently on behalf of the FM radio industry. He spoke to Shuchi Bansal on the problems plaguing the sector and AROI’s plea to the government. Excerpts:
Why is AROI opposed to the government’s plan to auction more frequencies for FM stations under Phase III?
No, no, it’s not that the FM radio industry is opposed to Phase III. We re-affirmed our commitment to Phase III when we, as AROI, met the I&B minister and her team recently. What we have requested is a delay in the auctions for new towns. (Frequencies in 250 towns with population of between one and three lakh will be up for auction).
Our point is simple — these towns will be totally unviable until the music royalty issue is resolved. And since the royalty issue is likely to be resolved in the next few months by the Copyright Board — the Board will hear the matter from July 28 onwards — we have only requested the ministry to examine the possibility of delaying the auctions till the new royalty regime is announced. Surely, a few months’ wait is better than a failed Phase III?
What is the real issue with music royalties? Why hasn’t it been resolved so far?
Music companies have a monopoly. The last Copyright Board order of 2002 (passed much before FM spread to smaller towns) heavily favours the music industry. For instance, if a 24-hour radio station plays music for 18 hours a day, it ends up paying Rs 70 lakh as royalty a year to music companies. It does not matter if the station is in Hisar or in Mumbai. That’s why music companies have been dragging their feet on negotiations.
However, last year, the Supreme Court directed the Copyright Board to resolve the issue. The board will start hearing the matter from July 28 and then give its judgment.
The industry is also seeking a review of the satellite-radio policy. Why can’t you welcome competition?
We have no problem with satellite radio per se. AROI’s complaint has always been that the policy initiatives on satellite radio should not inadvertently kill the nascent, and the severely loss-making FM industry. For the record, the FM industry has invested more than Rs 1,800 crore in the form of One-Time Entry Fee (OTEF) and capex since 2006. The total industry losses are substantial as can be seen in the most recent results that have been announced. Sun TV’s radio operations have recorded a loss of Rs 68 crore. Other broadcasters like Big FM, Radio One and Fever have also announced losses. We’ve barely managed a marginal profit of Rs 1.5 crore on a revenue of Rs 229 crore. It is against this backdrop that we are urging the government not to do anything that will kill FM radio.
Our complaints are based on Telecom Regulatory Authority of India’s (TRAI’s) recommendations on satellite radio. Firstly, there is no reason for satellite broadcasters to be allowed terrestrial repeaters. Satellite radio is supposed to be a national service while FM radio is city-centric. Everyone knows that terrestrial repeaters are being sought so that their signals can enter cars. It is also known that the stations earn the maximum revenue from in-car listenership. Basically, we charge a premium from advertisers for the morning (7 am to 11 am) and evening (5 pm to 8 pm) slots when listenership among people who drive is high. The remaining spots sold during the day are cheap. If people get satellite radio in their cars, it will affect the premium we charge from advertisers. (Incidentally, satellite radio will not be allowed to accept advertising).
Secondly, the entry fee for the satellite-radio platform owner as well as the channel operator is much lower than what the FM companies had to pay.
Will the government increase the FDI limit in radio and allow news?
The FDI bit has become irrelevant since February 2009 when the government issued the new press notes — especially the one on indirect FDI through holding companies.
It is true that the radio industry needs funds but one should not link this to FDI. There are domestic sources of funds too. Most radio broadcasters have not even availed of the 20 per cent FDI permitted today. The reason is that projects have been unviable and no one invests in loss-making businesses. Unless the radio business becomes structurally viable, there will be no real inflow of funds.
On the issue of news on radio, the government seems to be caught up in old worries. Under the garb of security concerns, it is unlikely to allow unhindered reportage of news even under Phase III.
You have also asked the government for a moratorium on licence fee, extending the licence period from 10 to 15 years, reducing the Prasar Bharati infrastructure-usage charge and much else. Why is the radio industry always looking for subsidies from the government?
The request for moratorium on licence fees as well as extending the period of the original licence from 10 to 15 years, is to help us tide over our crisis. With so many years already gone by, it’s not possible for the industry to generate decent IRRs. Most likely, there will be no IRRs at all unless these concessions are given.
Besides, the cost of using the Prasar Bharati infrastructure is unbelievably high. For instance, in Delhi three of us (FM operators) pay Prasar Bharati Rs 80 lakh every year for using its transmission tower. With the rent it collects from private broadcasters in a couple of years, it can built a new tower.
What is the total radio industry revenue and at what rate is the industry growing?
The numbers have been derived from published results of a few companies, estimates of media-planners and data published by TRAI. In 2008, the total radio industry was around Rs 800 crore (net) in size. Of this, as much as Rs 250 crore was All India Radio’s revenue. So the private FM industry would be around Rs 550 crore.
Last year, the industry grew at between 7 and 10 per cent. It is expected to grow at 15 per cent this year, but it is still early days.
How are the FM stations doing in smaller towns? What are the challenges?
FM stations in smaller towns have opened up the category. There is a lot of listener interest. There is a fair amount of buyer interest as well. So all this is good news. The bad news is that there is no visibility of profitability even in the distant future. With the kind of music royalties that are being demanded (approximately Rs 75-100 lakh per annum), and with the kind of revenues that most of these stations make (Rs 25-40 lakh a year), something needs to be done quickly or all of them will shut down, sooner or later.
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