Anand Chakravarthy, senior vice-president, marketing, Big 92.7 FM, speaks to Moneylife on how players in the FM space will have to ‘take radio beyond radio’
Moneylife (ML): As a result of unsustainable high license fees, the sector has been reeling under heavy losses. A few FM stations have been forced to shut down, as they could not afford to pay the annual license fees, set at levels significantly above their earning capacity. What are your comments on this scenario?
Anand Chakravarthy (AC): Ten years is too short a (time for a) license period for a player in the radio market to actually break even. We need to give them (players) a longer period of time to build their space in the industry. So our recommendation to the government has been to extend the license period to 15 years.
ML: Big FM, which operates 45 radio stations, had plans to gear up to bid for more frequencies as the government was to open up around 700 frequencies for the next round of FM expansion in the beginning of 2010. What has been the progress on this front?
AC: I think the government is waiting for the (amendments to the) Copyright Act and we are hopeful that by the next three to four months, they will be announced. We are hopeful that there will be some regulatory changes as well. Music royalty issues have to be sorted out, licenses have to be renewed-rather, an extension period is required which should be beyond 10-15 years, which has been our main contention since the beginning.
ML: What advantages does FM have over other media platforms?
AC: I think radio is the only democratic medium left in the country at present. Today if you have to download a ringtone, buy a newspaper or watch television, you will have to pay for it. For radio, you just need a Rs-20 set and you can pick up all the radio stations for free. Mobile penetration is also increasing and handset costs are coming down, which has helped in increasing FM penetration.
ML: A number of new entrants are trying to enter the market. Will the scenario become a little too crowded?
AC: In the Indian market, we have only six radio stations in the metros. Anywhere in the world, the number of stations is at least 25 or 30. Eventually in a market, consolidation does happen. But our market is too young for consolidation. Almost 2,500 towns have not yet been covered. I think that is the opportunity.
ML: What does the FM radio industry need to do in order to exploit the true potential of this sector?
AC: Radio has obviously still not reached its potential in India. In Phase II we have reached only 87 cities which is hardly anything compared to the US and Australian radio market spread across all cities. I think with Phase III coming up you will see another 300 licenses where we hope to move to another 100 stations. So that is when we will get significantly high scale of operations. That will really open up the next big opportunity for the radio industry.
ML: Most of the programming currently being aired, whether music or not, has little or no library value. Very little programming is developed to create any strategic intellectual property. How should players work around creating better value?
AC: We have to produce what a consumer likes-in India, Hindi music is what consumers like. I think there is a big difference between being 'different' and being 'relevant'. When you create innovation it always has to be relevant to the consumer. We don't have to be different just for the sake of being different because it does nothing for your brand.
ML: When will news broadcasting be allowed on Indian private FM channels? For example, the US has got something called National Public Radio-an excellent example of a radio (FM) channel that combines music, talk shows and news.
AC: I think a big positive for the category would be if the government allows the airing of news on radio like in the US. Today if you consider the only reason why people are listening to All India Radio is because they get to hear everything on that channel starting from news to songs and reviews. In private channels we don't get such privileges. But it will only be fair if news is open for broadcast on private channels as well. We have seen broadcasting of news and live sporting events in the television space and that can easily be introduced in the radio space as well. In Phase III we are expecting some positive changes for sure.
ML: With the advent of 3G and broadband wireless, people will be able to tune in to a host of channels across the world. Won't that mean that a huge chunk of listeners will be weaned away from what is being relayed on our FM channels?
AC: To my mind what 3G will bring in place is opportunities. For example things like visual radio and possibilities of creating actual interaction with RJs live while listening to the radio station. And I think as any media brand would do, we would like to embrace the technology.
ML: What is the outlook for the radio industry?
AC: The outlook for the radio industry is very positive. We react to the market very early in life because there are only six channels and we need to give them some more time. Radio channels are getting more and more advertisements with every passing day which means that the advertising space is quite positive about the radio industry. Of course there are regulatory issues and we hope to address them. Radio growth is still projected at 16%-18% by 2010, better than television and print media.
Latest data shows that developers are finding it difficult to sell high-priced properties
The residential apartment business turnover index of the Mumbai Metropolitan Region (MMR) has come down by half in the fourth quarter (ended in March 2010) of the last fiscal compared to the second quarter due to rapid increase in property prices. Ressex data (the Real-Estate Sensitivity Index) released by Liases Foras (a real-estate research firm) shows that the business turnover index fell significantly in the fourth quarter of the previous fiscal from the second quarter. The business turnover index fell to 53 in the fourth quarter from 102 in the second quarter.
Simultaneously, the price index drastically increased between the second quarter (ended in September 2009) and the fourth quarter (ended in March 2010) of the last fiscal, which led to sluggish sales. It was astounding to see the pace at which property prices had rebounded from the levels witnessed during the slowdown of 2008-09. Prices of various properties have shot up by 30% in a few pockets of Mumbai over the last quarter itself.
The sales index also fell radically during the same period. There was no significant reduction in inventories. The movement in inventories, reflected by Ressex data, is mainly due to sales in the affordable segment. For instance, the sales index fell to 18 in the fourth quarter of the last fiscal from 28 in the second quarter while the inventory index dropped to 121 in the fourth quarter from 132 in the second quarter. "The fall in business turnover shows that sales are not happening in the luxury residential segment (properties costing above Rs5crore). The movement in the sales index is mainly due to sales in the affordable segment," said Pankaj Kapoor, founder, Liases Foras.
Developers are launching a lot of high-priced properties in the market as they get to earn more profits in this category. During the slowdown in the industry (CY2008-CY2009) the developers' main focus was to construct residential apartments in the affordable segment. A lot of projects costing between Rs15 lakh-Rs70 lakh were launched during this period, which was absorbed quickly by the market. Around 17.7 million sq ft of new projects will be launched during the calendar year 2010, all costing above Rs5 crore. Most of these properties are being launched in the Dadar-Mahalaxmi belt (central Mumbai). These properties will witness very low absorption because around 7,000 high-priced units (costing above Rs5 crore) will be launched (almost simultaneously) and completed over three years within a restricted area.
Developers have started offering discounts on properties, seeing the sluggish sales of these apartments. "I expect sales of properties to be down by around 20% in the current quarter (ending in June 2010) as there is very little movement in sales. Developers have started softening their prices and offering discounts on properties to push sales," said Mr Kapoor.
The uptrend is not broken but the market is finding it tough to head higher. The Sensex has to close above 17,900 over the next few days
The market closed a choppy trading session on a flat note. The Sensex settled at 17,730, down 25 points (0.1%) and the Nifty closed at 5,320, down 2.5 points (0.05%). The benchmarks started the day in the green, taking cues from Asian markets. The market was range-bound till the early afternoon session. It pared its gains on the negative opening in European markets to end marginally lower.
Asian stocks witnessed a mixed trading session today. Key benchmark indices in Japan, Indonesia, South Korea and Taiwan were up by 0.05% to 0.8%. Markets in China, Singapore, and Hong Kong were down 0.1% to 0.8%.
US markets ended steady in a volatile session on Wednesday after the Federal Reserve downgraded its assessment of the economic recovery and it vowed to keep easy money flowing. The Dow was up 4.9 points (0.05%) at 10,298. The S&P 500 was down 3.2 points (0.3%) to close at 1,092. The Nasdaq was down 7.5 points (0.3%) to close at 2,254. The Fed held overnight rates in the zero to 0.25% range, set in December 2008. The recent job and housing market reports had raised doubts about the economy.
Japan's annual growth slowed for the third consecutive month in May. Exports rose 32.1% in the year to May on gains in shipments of cars, steel and semiconductors, less than the median forecast for a 36.9% rise, the Japanese ministry of finance said. Exports to Asia, which account for more than half of Japan's total shipments, increased 34.4% from a year earlier, slower than a 45.2% annual increase in the previous month.
Back home, the food price index rose 16.9% in the year to 12th June, higher than the previous week's annual reading of 16.1%. The fuel price index remained unchanged at 13.18% in the year to 12th June.
The monsoon is 11.1% below normal for the period between 1st and 23rd June. India will ship at least 2 million tonnes (MT) of wheat if the monsoon is normal. The country's wheat stocks stood at 35.2MT as of 1st June, nearly nine times the government-set target of 4MT, while the rice inventory was at 25.3MT, sharply up from a target of 12.2MT.
Foreign institutional investors were net buyers of equities worth Rs265 crore on Wednesday. Domestic institutional investors were net sellers of Rs866 crore worth of stocks.
McNally Bharat Engineering Company (down 1.1%) has received an order for supply of an ash water recirculation & treatment system package for the Singrauli super-thermal power station for Rs41.4 crore.
Core K12, the US education arm of Core Projects & Technologies (up 5.5%), has bagged a contract covering 375 schools from the Los Angeles Unified School District to design and implement a comprehensive formative assessment programme for nearly 700,000 students. The contract, worth $24 million, involves diagnostic testing for all key subjects, at all grade levels.
Reliance Industries (RIL) (down 0.7%) has announced that its subsidiary, Reliance Eagleford Upstream LP, has executed definitive agreements to enter into a joint venture with US-based Pioneer Natural Resources Company under which Reliance will acquire 45% interest in Pioneer's core Eagle Ford Shale acreage position in two separate transactions. Pioneer and Newpek LLC, Pioneer's current partner in the Eagle Ford, will simultaneously convey 45% of their respective interests in the Eagle Ford to Reliance.
Infrastructure Development Finance Company (IDFC) (up 1.1%) has been classified by the Reserve Bank of India (RBI) as an 'Infrastructure Finance Company' within the overall classification of a 'Non Banking Finance Company.'