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Licence fees: The bane of radio

By , agencyfaqs! | In | June 02, 2003
At Rs 11.25 crore for the Mumbai circle and growing at an annual compounded rate of 15 per cent, licence fees is the biggest bane of private radio


The cacophony that characterises the airwaves in Mumbai was distinctly sober on the afternoon of May 27. At the stroke of one, Win 94.6, the FM station promoted by Millennium Broadcast Pvt. Ltd, went off air, ostensibly for "a few days". The official line of communication pointed at "unresolved legal and technical issues" as the cause of disruption. But the real reason for switch-off was clear - "complications on the licence fee front", as cited by company sources.

Leaving aside Win 94.6, the other four players, namely GO 92.5 FM, Radio Mirchi, 93.5 Red FM and Radio City 91 FM, have paid their licence fees for the current year, which is a whopping Rs 11.25 crore per station. According to industry sources, Win 94.6 hasn't paid up its licence fee for the current year, implying that the station does not have an operating licence, resulting in the disruption of service.

Though the official communiqué insists that the company is in the "process of resolving the various issues and hopes to be back on air within the next few days", the industry remains doubtful. "Legal hassles could creep up," states an executive with a rival station.

Nonetheless, there is no denying the fact that the licence fee structure is a millstone around the private FM operator's neck and the Mumbai circle has the distinction of being the most expensive of the lot. From Rs 9.75 crore last year, the jump is a cool Rs 1.5 crore this year with revenue earned (taking into account all five stations in the city) amounting to just about Rs 2.2 crore per month.

As Rajesh Tahil, station director of the Mid-Day Multimedia-promoted GO 92.5 FM, states, "Licence fee is the one big issue for private FM operators today. With the current licence fee structure, one is simply playing into the hands of the big boys, which could result in a monopoly or duopoly. My point is, is such a scenario conducive for the growth of radio?"

According to round one of IRS 2002, listenership for radio (as a medium) in Mumbai is 17 per cent in the target group of 12 years and above. Individual vehicles such as Vividh Bharati account for 12.8 per cent, while private FM makes up 9 per cent of listenership (note: the listenership of the two is not mutually exclusive). When compared with the findings of the previous round, that is, round two of IRS 2001, the results are startling. Listenership for the medium as a whole was 19 per cent, Vividh Bharati stood at 16 per cent while FM was constant at 9 per cent. "There's a trend here," points out Partho Ghosh, AVP, Initiative Media. "In a sinking medium, FM has managed to hold on to its listenership, which speaks for itself. Definitely FM is doing well," he states.

Akansha Gupta, corporate sales manager, 93.5 Red FM, illustrates the aspect of growth in FM listenership, in the following manner. "Average listenership of FM is 63 minutes vis-à-vis television viewership of 118 minutes. In Pune for instance, listenership and viewership run neck-to-neck. So clearly there is growth in the listenership of FM."

On the revenue front though, the situation is diagonally opposite. Depending on the station, time band or programme, ad rates for a 10-second spot on radio in Mumbai could vary between Rs 500 to Rs 1,000, indicate industry sources. However with "measurability of the medium" a big question mark, media planners have been slow to divert monies, resulting in a slower pace of growth in terms of revenues.

"Yes, level of spends are not high, adaptability to the medium has been slow, but these are regular issues," asserts Tahil. "The fact is that the high licence fee leaves you with no room to experiment with different programming formats, resulting in me-too programming across the board. Thus the concept of choice, variety or appealing to a smaller target audience is unthinkable because one has to look at numbers," he says.

Ditto is the problem on the measurability front. "Players can invest in a proper measurement system only when the licence fee issue is off their minds," states Akansha Gupta of Red FM.

Nevertheless, industry sources also point at the fact that Time Monitoring Services and TAM have stepped forward in the area of radio audit, each working on a competing mechanism. "If the audit part falls in place, then monies are bound to pour in," asserts Ghosh of Initiative Media. "Measurability involves listenership and audit. With listenership data available, planners have been able to take a viewpoint on radio. When audit happens, spending decisions will be sharper," he adds. © 2003 agencyfaqs!

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