* 2010: Another lost opportunity for the radio industry

I may sound pessimistic, but 2010 -- coming as it did immediately after a recession-hit 2009 -- could have been a landmark year for the radio industry in terms of bringing in the much needed liberalized policy as part of the Phase 3 licensing policy. Instead, the ministry has managed to dilly dally on this and has decided to keep it in cold storage for the moment  As an industry we can delude ourselves by saying that there has been growth of 10 to 15% and we will continue to grow at a CAGR of 16%,  etcetera-etcetera. Of course this is true,  but is it really what we want the radio industry to achieve in a country as large as ours?  The current industry projection given by various agencies -- not that I believe in them as they keep changing track -- pegs the industry to grow at 16% and by 2014 reach a figure of Rs. 1.6 billion, which would still be a mere 3.9% of the total advertising pie. So what are we talking about!

What pains me is the attitude towards this sector by the GOI. Here is a medium which has the highest penetration in the country, can cater to the heterogeneous population that a country of our size has, can be used effectively for local targeting, can create social change and is a great economic driver,  and yet the government chooses to neglect it in terms of not having a strategy to grow the sector.

This is probably the only industry where the investments in the sector are hugely disproportionate to the advertising investments.

While the industry has shown resilience in terms of achieving growth in listenership and revenues,  it is now for the government to lay the future roadmap which would see the industry achieving a share of at least 15% of the total ad pie. This is definitely achievable,  given the socio-economic conditions in India as compared to the west.

So  what do I think the industry needs? Here is my list, even if some of it has been repeated time and again.

1) First and foremost,  we need a regulatory body which â€?thinks'  for the industry on the lines of FCC in US so that there is intellectual bandwidth to look after the industry. Without this we will keep having a haphazard policy. As we have seen in the recent past, the so-called well regulated Telecom industry,  in spite of having a regulatory body,  continues to have issues -- so one can imagine the fate of an industry that doesn't even have a regulatory body in the first place.

2) License fee structure should be evolved based on a number  of criteria like type of bidder --  i.e. Network player, Single-Station player, Regional player, Format  i.e. News, Music, Sports or Language,  so that everyone gets an opportunity,  especially given the nature of the medium,  and it doesn't get limited to large players.

3) Revenue share should be permanently removed,  or removed till such time as the station starts making profits. Also,  small operators need to have different criteria than large operators.

4) Other government fees like land rentals, tower rentals need to be heavily rationalized. Currently, in some regions, the rental values being charged are more than the purchase value of the land!

5) FDI norms should be similar to those for TV – i.e. for News and non-News,  radio should be allowed to attract similar percentage of FDI as prevalent in those mediums. There is no logic for not allowing this.

6) News needs to be allowed on radio. The reason for not allowing it – that it cannot be monitored, etcetera... – makes absolutely no sense. It is for the government to decide how they do it,  but their inability to monitor news on radio cannot be an excuse to not allow news, especially in a democratic country like ours  Allowing news on radio will not only enable social change but also help increase the stickiness factor, which would attract more advertisers, leading to a growth in the  ad pie and thereby much better growth overall for the industry 

7) License period needs to be extended for another 10 years. 95% of the operators are not making money and are not likely to do so in the next 6 years, given the other constraints indicated above.

8) Music royalty: While the recent copyright order was welcome, the government needs to ensure this order is maintainable and that the industry doesn't get bogged down in another legal tangle with the music industry.

9) Multiple formats in content:  I think the absence of this has been the single bane of the industry, which has prevented it from growing its ad pie. It is but obvious that if all the stations have the same format, they won't be able to expand the listenership base or the stickiness,  and therefore will keep attracting the same ad spends. We desperately need multiple formats which would enable increasing the ad pie of the industry

10) Local focus: This is another area where the industry hasn't really worked hard in educating the local economy to adopt radio as an effective medium. There has been way too much reliance on national business, which has been the low hanging fruit. Currently, the business ratio of most stations is skewed towards the national business to the extent of 70%. Unless this reverses to local business generating 70%, we will not see the radio ad pie growing, and for this the industry needs to really include, educate and drive the local businesses to adopt this medium.

Finally, I think the industry needs to really push/enable the government in evolving a comprehensive radio policy for the next 10 to 15 years. There is a greater need than ever to have close interaction with the government as a single industry body and not as independent companies to impress upon it to come up with a policy that will enable radio's growth and not kill it before it stands on its feet. Now that Phase 3 has got delayed,  maybe the government can set up a panel to re-examine all the demands of the industry and engage the industry to help the government come up a comprehensive radio policy.

Finally, to end on a positive note, let me mention that despite all the problems that the industry is facing, the year 2010 saw radio stations  innovating and thinking out of the box to generate stickiness along with listenership,  which is a good sign and reflects the growing maturity of the industry.

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Prem Kumar, COO of Muthoot Group's Chennai Live 104.8 FM,  is a mechanical engineer with a management degree in Marketing. In a career spanning close to a decade and a half, he has established himself as a strategist in establishing new business, brand and product management, advertising, sales & e-commerce. A seasoned campaigner, he has to his credit the launch of a variety of products in the consumer durables segment for various lead business houses like Sony India and Murugappa Group, to name a few. His first job was with Sony India as Product Manager, after which he joined the Murugappa Group as business head for their sanitary ware business and established the faucets division of Parryware Roca Pvt Ltd. He also had a stint with indiamarkets.com as head of e-commerce.