Last week, HT Media Ltd, the publisher of Mint and Hindustan Times, proposed to merge its radio arm with Mumbai-based Next Mediaworks Ltd. While HT Media owns the popular Hindi radio channels Fever 104 FM and Radio Nasha, with a dominant presence in the metros, Next Mediaworks through its subsidiary, Next Radio Ltd, operates FM stations in Delhi, Mumbai, Kolkata, Chennai, Bengaluru and Pune under the Radio One brand. The proposal is to move 13 stations of the two companies into Next Mediaworks in a strategic merger under an already listed radio firm. HT Media and its shareholders will own a 74% stake in the merged entity, while Next Radio and Next Mediaworks will hold the rest.
It is indeed a good time for consolidation in the FM radio sector. On 31 March, the deadline for the lock-in period that had disallowed the sale of radio stations ended for channels launched under phase II auctions of radio privatization. This allows for private FM radio companies to buy and sell stations. In an earlier column on the issue, some radio operators had said that they expected heightened deal activity post the deadline, while others had said the momentum may be slow. However, Jehil Thakkar, partner at Deloitte India, says: “You will see more stand-alone stations and smaller chains getting merged with national players.”
Although Prashant Panday, managing director and chief executive officer of Entertainment Network (India) Ltd (ENIL), which operates Radio Mirchi, feels that there will only be small deals in the future with some firms plugging their portfolio gaps, consolidation will be good for the industry. “There are 35-40 players, so there’s need for consolidation. It should be good for the industry, generally speaking. Fewer players will help reduce wasteful expenses, lead to more programming variety and put in more efforts in building the industry,” he says.
Consolidation makes sense, as the earlier premise that radio is a very local medium and, therefore, will attract lots of local advertising, did not actually materialize. While there may be a local component in terms of advertisers, it is largely national brands that advertise on radio. So a national footprint is essential. “And that is driving consolidation,” says Thakkar. Consolidation helps in other ways too: It rationalizes the cost structures. Besides, a radio firm can offer a better proposition to an advertiser in terms of specific consumer segments. That is not all. “It allows for greater ‘rate’ leverage. Radio operators can hold their rates better and not get beaten down in an extremely competitive market,” he says. Since radio works on reach and perception, “scale becomes very important”, adds Thakkar, commenting on the merits of consolidation.
According to Anita Nayyar, chief executive officer at Havas Media Group (India and South Asia), after print, radio has the second-highest ad-attention and is the most accessed medium, especially across the metros, with listeners on-the-go tuning in five days a week. “There is a fast growth of population in the metros that is out of home (car population rising, more traffic on the roads) leading to a captive audience for radio, and radio being the best way to reach rich audiences,” she says.
According to the 2018 Ficci-EY report on media and entertainment, around 60% of the radio segment revenues are generated by the top 10 cities. Besides, the effective rates of metros can be over 10 times the rates of smaller cities, the report added.
Yet, challenges for the sector remain. With increasing smartphone and broadband availability, the threat from music streaming apps continues. However, Nayyar says that while challenge from digital platforms such as Saavn and Gaana cannot be ignored, radio continues to be a spontaneous and engaging medium with instant results. “It is interactive, free-of-cost and local,” she says.
The other challenge for radio companies is to increase their ad rates as they can no longer expand their ad inventory for the fear of losing audiences. Besides, regulatory issues also remain.
“Part 2 of Phase III auctions hasn’t happened. We still do not have radio in small towns,” says Thakkar. There aren’t enough radio stations in the big cities either. While major cities around the world have more than 25 stations each, metros such as Mumbai, Delhi and Bengaluru barely have 9-10 channels. Says ENIL’s Panday, “More channels will give programming variety, get in more advertisers and increase listenership.” Besides, the government must put up more channels for auction, cut down the high reserve fee and allow news on radio for the industry to flourish.
HT Media Ltd, which publishes Mint, owns Fever 104 FM and Radio Nasha that compete with other radio stations across several markets.
Source: Mint