Ministry agrees to third party evaluation on viability issue of radio business

By Sapna Nair , afaqs!, Mumbai | In Media Publishing | April 05, 2010
Radio investors met with the Information and Broadcasting Ministry on certain issues plaguing the industry

Top executives of the radio industry approached the Ministry of Information and Broadcasting on March 31 regarding issues that the industry has been grappling with for quite some time. The top most on the agenda was the issue of lack of viability of the FM radio business due to certain factors.

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In December 2009, a group of radio players formed the Radio Investors Forum (RIF) to address the same issue with the Ministry of I&B. While the AROI (Association of Radio Operators of India) is an industry body, it looks after the operational issues. The RIF comprises radio owners and has been built to ensure return of investments made by the owners.

Radio broadcasters such as BCCL (Radio Mirchi), Mid-Day Multimedia (Radio One), Dainik Jagran (Radio Mantra), Dainik Bhaskar (My FM), India Today (Meow FM), Malayala Manorama (Radio Mango) and Sun FM have been expressing concern over the viability of the radio industry owing to its short license period.

The radio players, in a closed door meeting, urged the Ministry of I&B to extend the license period from 10 years to 15 years and resolve the music royalty issue. Radio players are worried that none of them will be able to achieve profitability in the tenure of 10 years, of which four years have already passed. The initial years, players lament, were spent building infrastructure.

"The only player making some money (and not very much) is the market leader, Radio Mirchi, which controls more than 40 per cent of the radio spend. Even Mirchi hasn't been able to achieve breakeven in this span of time. Going forward, it is extremely unlikely that the radio industry will be able to get even return of equity," observes Vineet Singh Hukmani, managing director, Radio One.

The radio industry has reportedly accumulated losses of more than Rs 2,000 crore.

Pawan Agarwal, director, Bhaskar Group echoes similar sentiments. "We have been lobbying for the extension of the license period. Unless that is resolved, it is not practical to launch the third phase," Agarwal says.

The proposition made to the ministry is to address the issue of business viability and increase the license period to 15 years before the Phase 3 launch. The official statement from the RIF states 'While supporting Phase 3 in principle, we have suggested that an independent and transparent evaluation of the business viability of the existing FM radio industry be conducted before launching the new phase. This will ensure that existing operators will continue to serve the large listening public and build positive investor response to the new proposed licenses. In the absence of this evaluation and remedial measures, we will not be in a position to support the initiative of the government'.

The statement adds that the ministry has acknowledged the suggestion regarding an independent evaluation and directed the secretariat to proceed on that front immediately. To look into the viability issue, FICCI may be nominated as the third party. FICCI will prepare a report and submit it to the ministry, based on which a decision will be taken.

Prashant Panday, chief executive officer, Radio Mirchi, says, "As of now, the ministry has agreed on an evaluation by a neutral body in order to substantiate our stand. While there were talks about several ways to do it, nothing can be ascertained right now." It was also deliberated that a survey be commissioned to gauge the international radio scenario on issues such as royalty and profitability.

Meanwhile, RIF is also talking to other FM players such as Radio City, Big FM and Fever FM for their support.