FM radio companies eye digital space for expansion4 min read . Updated: 18 Oct 2016, 03:14 PM IST
FM radio firms like Radio City and Radio Mirchi are taking to Web to expand their brand to cities where they do not operate
In August, Radio City, a private FM radio, added seven new Web stations on its portal PlanetRadiocity.com, playing retro music from Saregama India Ltd for which it has purchased rights.
Adding these seven, Radio City, operated by Jagran Prakashan group company Music Broadcast Ltd, now has a total of 31 Web stations.
Radio Mirchi, another FM radio service operated by Entertainment Network India Ltd (ENIL), also plans to add 34 new digital radio stations in the next two years. The radio broadcasting unit of Bennett, Coleman and Co. Ltd (BCCL) currently operates 16 Web stations on radiomirchi.com. BCCL also owns the music streaming app Gaana.com through Times Internet Ltd.
Smaller firms are eyeing this space, too. Indigo 91.9 FM, which operates in Bengaluru and Goa, is revamping its portal to include more popular songs, club mixes and podcasts, and expects to earn around 11-13% of its revenue from its portal by 2017.
Clearly, FM radio firms are taking to Web to expand their brand to cities where they do not operate. Through Internet radio, they offer latest Bollywood hits, regional music albums, assorted playlists and podcasts, apart from short videos. “Interest in the digital audience is growing. There is a lot of content that we are creating for our digital platform through poetry and storytelling," said Abraham Thomas, chief executive at Radio City, adding the company is looking to earn 5-10% of its total revenue from the digital platform.
Radio City currently runs 28 FM stations and won 11 frequencies in the phase 3 auctions that concluded in September 2015. “With our digital platform, we are opening up our station to the entire world. There is a greater dispersion of our audience on digital because of the kind of format that we offer," said Satya Narayana Murthy, chief executive of Indigo 91.9 FM, which is part of Jupiter Capital-owned Indigo Music brand.
However, not everyone is convinced about the digital radio business. For starters, expensive music royalties and the cost of digital music streaming make the business unviable. Consequently, firms such as HT Media Ltd, which owns Fever 104 and Radio Nasha brands, and Sun group-owned Red FM have restricted themselves to podcasts and videos for their digital platforms. HT Media is the publisher of Mint and Hindustan Times.
“Internet radio at the current music licensing rates is not financially viable. We have restricted our current content offering to podcasts of marquee shows and sparklers which we upload daily," said Nisha Narayanan, chief operating officer at 93.5 Red FM, which operates FM stations in 48 cities.
Music companies charge Rs10-25 crore per year for digital music streaming.
“The current cost of acquiring digital rights of music makes the business unprofitable in the short to medium term," said Harshad Jain, chief executive, radio and entertainment, HT Media, which operates 15 radio stations in the country. However, he added digital is an interesting business opportunity and “we will explore the right business models".
Prashant Panday, chief executive at ENIL, agreed Internet radio is a loss-making business. But the idea behind Web radio, Panday said, is “to create niche stations online, while the FM stations offer the widest possible formats. This is in preparation of a future world where online is big and viable," he said.
ENIL currently operates 44 radio stations in the country. It won 17 frequencies in the first batch of phase 3 auctions and has launched a new brand called Mirchi Love.
Experts believe Internet radio model has some potential since there are no regulations on Web radio. “In Internet radio, you are not dealing with the government. You don’t need any public airwaves because it is essentially a streaming service," said Jehil Thakkar, head (media and entertainment) at consulting firm KPMG.
Secondly, it is easier to track online audiences, helping broadcasters and advertisers profile listeners and engage in targeted advertising. “Internet radio will remain an advertising-driven model. Measurability (of radio audience) on the Web is better. You can’t do that in the physical radio model," said Thakkar.
Media buyers, however, say advertising revenue from online radio is much less than FM radio. “The effective ad rates on digital are currently as much as one-tenth of that on physical FM stations in many cases because the reach is much lower," said Ashish Bhasin, chairman and chief executive, Dentsu Aegis Network South Asia.
“However, the model is so nascent that the figures are not yet established," he added.
In fact, the recent clarification issued by the Department of Industrial Policy and Promotion (DIPP) that digital music streaming falls under the Copyright Act of 2013 is likely to bring down the cost of music streaming.
The clarification essentially means music companies and streaming websites can approach the Copyright Board to decide royalty on songs. Up until now, music labels had the upper hand in deciding royalties.