Radio Mirchi stations claims to have broken even in hinterland

By Justin Thomas , afaqs!, New Delhi | In Media Publishing | September 05, 2008
After the second phase of licensing, Radio Mirchi launched 25 stations in hinterland India, and it claims to have breakeven in 22 markets

Radio & #BANNER1 & # Mirchi, the radio venture of Times Group, was one of the early players to jump into the private FM game. In the first phase of licensing, Radio Mirchi began stations in Mumbai, Delhi, Indore, Kolkata, Chennai, Ahmedabad and Pune. Immediately after the second phase of licensing, Radio Mirchi's Bangalore, Hyderabad and Jaipur stations became operational. This was in the fiscal year 2006-07.

In the last fiscal (2007-08) the channel launched some 22 stations mainly in hinterland India. These are in Aurangabad, Baroda, Bhopal, Coimbatore, Jabalpur, Jalandhar, Kanpur, Kolhapur, Lucknow, Madurai, Mangalore, Nashik, Nagpur, Panaji (Goa), Patna, Raipur, Rajkot, Surat, Thiruvananthapuram, Varanasi, Vijayawada and Vishakhapatnam.

The private FM player claims to have attained cash breakeven in all these markets where it launched in the second phase except Jabalpur, Raipur, and Thiruvanthapuram, that too in a period of just a year. These three stations were launched in the last quarter of fiscal 2007-08.

The cost of launching a station in smaller towns is around Rs 2.5 crore. Depending on the station, the operational cost ranges between Rs 80 lakh to Rs 1.4 crore.

Confirming the same with afaqs!, Nandan Srinath, COO, Entertainment Network India Ltd (ENIL), the company which owns Radio Mirchi, says, "Our small town stations have achieved operational breakeven."

The earnings for these radio stations have come in the form of advertising revenue, out of which 20-40 per cent is localised advertising, while the remaining is from national advertisers.

Prashant Pandey, CEO, ENIL reveals that the local advertisers range from jewellery shops to real estate and academic institutions.

Speaking to afaqs!, Pandey says, "The potential for these local advertisers is huge; hence, in the first year itself, there are stations where the share of local advertisers are an impressive 40 percent vis--vis national advertisers."

Both Srinath and Pandey are hopeful that this skew towards national advertisers would change in the current fiscal, with regional players increasing their advertising spends.

"Flow of advertising depends on the market size and region. So, the markets we entered had a strategic value and the last fiscal's report endorses our choice," asserts Srinath.

As far as zeroing in on these towns and cities is concerned, Pandey affirms that business potential and profitability were the main criteria; and Radio Mirchi has hit bull's-eye. "The growth is remarkable, because in their second or third quarter of operations, most of the stations have achieved a breakeven. That indicates that our initial bidding strategy, which we employed two and a half years back, was correct." He adds that all the stations are doing well and none are pulling the profitability of the network down.

ENIL, which runs Radio Mirchi, has posted total income for the year ending March 31, 2008 at Rs 229 crore, up from Rs 168 crore, a growth of 37 per cent over the last financial year.