Will new FM Radio channels in small towns be a viable proposition in the long run?

The Union Cabinet, chaired by Prime Minister Narendra Modi, on August 28, 2024, approved the proposal to conduct the 3rd batch of ascending e-auctions for 730 FM radio channels in 234 new cities, with estimated reserve price of Rs 784.87 crore under the Private FM Radio Phase Ill Policy.

Following this, in an order issued dated September 10, 2024, the Ministry of Information and Broadcasting (MIB) announced amendments to Para 4.6, Para 6.1 (a), and Para 6.1 (b) of the FM Phase-lll Policy Guidelines dated 25.07.2011.

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Cabinet nod to private FM Radio in 234 uncovered new cities & towns

The MIB said that for FM channels to be taken up in uncovered new cities under Batch - II FM Phase-lll, auction “The reserve price shall be the reserve price recommended by TRAI in 2022.”

Notwithstanding the provision in Clause 6.1 (a) and subject to provision contained in 6.1 (ba); the permission holder in uncovered new cities under Batch – III, FM Phase-lll auction shall be liable to pay an Annual Fee to the Government of India every year charged at 4% of Gross Revenue of its FM radio channel for the financial year for the concerned city, excluding Goods and Service Tax.

However, the permission holder in the uncovered new cities in the North Eastern states – Manipur, Meghalaya, Mizoram, Nagaland and Tripura; Union Territories of Jammu & Kashmir; and island territories (Andaman and Nicobar islands and Lakshadweep) under Batch-lll FM Phase-lll auction will be required to pay an annual fee charged at 2% of the gross revenue, excluding GST for each year for an initial period of three years from the date from which the annual license fee becomes payable and the permission period of 15 years begins.

Reacting to the announcement, both Dr Sandeep Goyal and Ashish Pherwani expressed their doubts on the viability of FM radios in large numbers. On the other hand, Jagdeep Kapoor remained more optimistic, seeing this as an opportunity for brands and advertisers to have penetration into smaller towns and cities.

Speaking to Adgully, Dr Sandeep Goyal, Chairman, Rediffusion, pointed out, “FM channels have had a chequered history over the years.” He shared that he was involved with the FM bidding 20 years ago when he was at ZEE. “There was much enthusiasm and excitement, but eventually there were lots of dropouts,” he noted.  

According to Goyal, “The new licenses are good and will intensify coverage of newer geographies, but that does not necessarily mean that the businesses are sustainable in the long run. I honestly have my doubts on the viability of FM radios in large numbers.”

Sharing his sentiments, Ashish Pherwani, Partner, M&E, EY, said, “Several existing smaller radio stations are not profitable, and hence, going into even smaller towns and cities will need careful evaluation.”

He further said, “Radio companies may pick up stations to fill in significant gaps in their network offerings. Critical issues like robust measurement, ability to provide news, and a stable and more conducive licensing regime need to be addressed in order for the auctions to see a significant uptake.”

On the contrary, Jagdeep Kapoor, Founder, Chairman, MD, Samsika Marketing Consultants, noted, “The penetration of private radio channels deeper into Indian cities will also lead to the penetration of brands and advertisers through this mass medium. In many ways private radio has not reached cities in India where YouTube, Instagram and OTT already have. So, private radio is playing catch up here, but will need to increase distribution to be a local advertising medium of choice in these cities.”

On the strong focus on regional and local, Kapoor remarked, “Local private radio content always generates local stars, celebrities and helps highlight local issues. When the cities increase, the RJs, the artists, the shows and even the Brands will have a local flavour because of the nuances of each city’s culture, issues and taste. Vocal for Local is literally the mantra for radio, which is the perfect platform to be vocal about local culture, topics and tastes.”

Shedding light on the current state of the private FM radio industry in India, Kapoor said that there is less internal competition and more external competition. He added, “As customers get used to streaming apps on their phones and even in their cars, private radio competes for attention share with both audio and audiovisual competitors. But the key differentiator that Radio can leverage is that it is ‘Live’ and that it is ‘Alive’. It is Live unlike preset playlists or even albums on a streaming app, and it is alive because it has a local RJ who may be much more interesting than just listening to tracks back to back.”

According to him, “The key issues to be addressed are to differentiate with content in the age of streaming apps, and show what true radio and spoken word content is capable of in a live setting, in a way that can compete with podcasts and streaming apps. Listeners aren’t attracted to technology or platforms, they are attracted to content. And if the content is good, their ears will gravitate towards that RJ or channel, irrespective of whether it’s on Radio or on streaming apps or podcasts. Private radio should bring the golden age of content back, and I am sure today’s listeners will follow.”

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