The media and entertainment industry seems to be slowly overcoming the blues of demonetisation and the new GST regime. Different verticals and players within those verticals in the industry will definitely not have the same rate of progress. One of the verticals, private FM radio, is slowly coming to terms and has staged a bit of a recovery, going by the numbers released by the Telecom Regulatory Authority of India (TRAI) for the quarter ended 31 December 2018 or Q3 2018 as the quarter is known in fiscal terms (quarter under review, third quarter).
According to TRAI data, 16 new radio stations became operational in fiscal 2018 until the end of the third quarter. Of these, four became operational in the October-December 2017 quarter taking the total number of private commercial FM operating radio stations to 326. TRAI data for the quarter under review reveals that 325 private FM radio stations reported total advertisement revenue of Rs 570.08 crore (Rs 5,700.8 million) or about Rs 1.75 crore (Rs 17.5 million) per station. Comparative numbers for the first and second quarter of fiscal 2018 were Rs 477.51 crore (Rs 4,775.1 million) from 310 stations or Rs 1.54 crore (Rs 15.4 million) per station and Rs 539.04 crore (Rs 5,390.4 million) from 322 stations or Rs Rs 1.67 crore (Rs 16.7 million) per station respectively.
Of course the industry is quite a way off from the peak ad revenue of Rs 2.22 crore (Rs 22.2 million) per station two years ago (Q3-2016, the October-December 2015 quarter) or Rs 533.70 crore (Rs 5,337 million) from 240 stations; or even the Rs 2.01 crore (Rs 20.1 million) per station of the year ago quarter when demonetisation hit the completely unaware Indian citizen (Q3-2017, October-December 2016 quarter). In Q3-2017, TRAI reported ad revenue of Rs 547.76 crore (Rs 5,477.6 million) from 272 stations. Please refer to the figure below for average ad revenue per station trend since Q1 2012 (Q1-12, quarter ended 30 June 2011, April-June 2011 quarter) until Q3 2018 (Q3-18).
It must be noted that the average revenue per station number is just an indicative figure. Big players such as Entertainment Network India Limited (ENIL), Music Broadcast India Limited etc. that operate a fraction of the total number of private FM stations in the country have a lion’s share of revenues. More than 25 percent of the ad revenue reported by TRAI can be attributed to ENIL or Radio Mirchi. Mirchi’s consolidated operating revenue for Q3 2018 declined 1.5 percent y-o-y to Rs 148.42 crore (Rs 1484.2 million) from Rs 150.65 crore (Rs 1506.5 million). Consolidated profit after tax (PAT) declined 19.9 percent y-o-y to Rs 13.16 crore (Rs 131.6 millon) from Rs 16.42 crore (Rs 164.2 million). ENIL’s numbers for the quarter under review were affected by an early Diwali and an errant client according to its press release.
Commenting on the results, ENIL MD and CEO Prashant Panday said: “While our revenues dropped a notch, it was because of some issues with one single client. Had that not happened, we would have reported a 4.6 percent growth. Fortunately, the issue has been resolved recently. There was also the impact of early Diwali which advanced as much as Rs 12 crore (Rs 120 million) from this quarter into the previous one. With all this behind us, we remain confident about rapid revenue and profit growth in FY 2019 and beyond. We are delighted that our new Phase-3 stations have started making a profit within just a year and a half of launch!” MBL or Radio City revenue from operations increased 4.7 percent y-o-y to Rs 76.18 crore from Rs 72.79 crore (Rs 727.9 million). PAT increased 16.4 percent y-o-y to Rs 11.88 crore or Rs118.8 million (15.6 percent margin) from Rs 10.21 crore or Rs 102.1 million (14 percent margin).
MBL director Apurva Purohit said, “We have delivered a strong topline growth of 9 percent against mixed trends of the market. The growth is achieved mainly on the back of rapidly growing new markets along with an uptick in volumes. Despite a nonconductive environment, we have grown at 5 percent in volume terms in comparison to the industry growth rate of 2 percent. There has been a 20 percent revenue growth in both November and December, we believe that the impact of demonetization and GST has reduced to a great extent and business will only continue to grow from here. There are signs of an economic revival which will further bolster our growth prospects.” Among the major players are the two mentioned above, Red FM that is associated with the Sun TV Network group, Reliance Broadcast Network Limited (RBNL)/ Zee Media Limited owned Big FM. There are even single station players. Among the listed successful ones whose numbers are available in the public domain are ENIL, MBL, DB Corp’s My FM and HT Media’s Fever FM.
More and more local entrepreneurs
The Information and Broadcasting Ministry is engaging with national and regional industry bodies, as part of its efforts to encourage more and more local entrepreneurs to participate in the e-auction of the third batch of private FM radio frequencies under FM Radio Phase-III policy.
Information and Broadcasting Minister Smriti Irani told, “We have been engaging with various stakeholders on how to ensure more and more people bid for local FM radio frequencies, especially in smaller towns. In the past, the bidders have been very limited.” “We have reached out to industry bodies such as the CII and FICCI and stakeholders in the local industry bodies in this regard. We want more and more local entrepreneurs to bid for these FM radio frequencies,” she added.
The Union Cabinet previous month announced approval of the PH-III third batch auction of 683 FM channels in over 236 cities in a bid to usher new and enhanced experience for listeners in fresh cities. The new channels will help cater listeners in fresh cities that were uncovered by private FM radio and are also to prove instrumental towards rising income groups and evolving lifestyles, a release said. The Minimum net-worth requirement for an Indian company to apply bid for permission for a PH-III radio channel in D category cities (cities having population from 1 lakh to 3 lakh as per 2001 census) is set to Rs 50 lakhs. Further, permission for the channels shall be granted on the basis of Non-Refundable One-Time Entry Fee (NOTEF). Once the permission holder starts operating a FM channel, he will be liable to pay an annual fee to the government prescribed at 4 per cent of gross revenue or 2.5 per cent of NOTEF, whichever is higher. The government has also put up a complete FM Phase III policy guidelines detailing the terms etc. for award of FM radio channels as well as Notice Inviting Application (NIA) on the Ministry’s official website. The same can be accessed at mib.gov.in under the broadcasting tab by clicking on FM Radio Phase III.
Also, the Cabinet gave its nod for auction including the border areas in Jammu and Kashmir and the North-Eastern States. The government said the auctions are expected to generate revenues of more than ₹1,100 crore. The Ministry is learnt to be testing the infrastructure, including security checks, as part of the preparations for the e-auction. It will also appoint independent external monitors to oversee the e-auction of the subsequent batches of private FM radio channels.
The first batch of auction of private FM radio stations was conducted in 2015, while the second batch auction was done in 2016. While 97 FM radio frequencies were sold in 56 cities in the first batch, 66 radio channels in 48 cities were sold in the second batch. The government had earlier said the rollout of the third batch auctions will help expand the FM radio coverage to new cities and provide better choice of content to listeners. “With the complete rollout of FM Phase-III auctions, all the 29 States and 6 out of the 7 UTs (except Dadra & Nagar Haveli) will be covered by private FM radio broadcasting. This is also likely to generate direct and indirect employment of more than 10,000 persons on a pan-India basis,” an official statement had said. The third batch auctions are expected to be conducted some time later this year.
“With the complete roll-out of FM Phase-III auction, all the 29 states and 6 of the 7 UT, will be covered by private FM radio broadcasting. With the rollout of the third batch auctions, those cities will be benefited where there are no private FM radio channels. They include several cities in border areas of Jammu and Kashmir and the northeast, where the population is less than one lakh. Besides, this batch of auction will also cover cities in districts badly affected by Left Wing Extremism. With the complete rollout of FM Phase-III auctions, all the 29 states and six out of the seven union territories – except Dadra & Nagar Haveli – will be covered by private FM radio broadcasting. “This is also likely to generate direct and indirect employment to more than 10,000 persons on a pan-India basis. These auctions will yield an estimated revenue of more than Rs 1,100 crore,” media report added.
Radio business analysts’ points out advertising rates in tier 2 and 3 cities are low in Delhi or Mumbai. Nonetheless, radio operators are expected to try and share networks in most of the acquired frequencies rather than setting up full-fledged stations which might not be financially feasible. That way, new frequencies are likely to break even and turn Ebitda positive from the very first year. Radio business analysts believe the FM radio industry has the potential to double revenues in the next five years. They say advertising volumes would get a fillip with more reach following the regulations in Phase III; radio is expected to cover 294 cities — from 86 at present – and reach 85% of the country’s population. Phase III offers more flexibility because it allows ownership of multiple frequencies or channels in one city and sharing of network infrastructure. Also, the licence period has been extended to 15 years as against the earlier10 years.