2012 was a tough year for all the media segments but I think radio handled the economic slowdown far better than what print did and outdoors did, and I think on par with what television did. I think overall radio will grow by about 10% to 12% this calendar year, same as television, so it has handled it relatively well. Having said that, it has been a tough time. Clients have generally demanded and gotten away with more values from radio broadcasters as a result margins have been under pressure and clearly price increases have not happened the way they should have happened. And this is probably the only sector in the entire economy which is in deflation when there is such a high inflation in the entire economy, so 2012 has been a tough year overall.
We saw some recent growth in the October –December quarter but it’s still too early to say whether it’s a sustained growth or its just a flash in the pan. January to march is a critical period. We are hoping if the RBI cuts the interest rates and the budget is a little better then there will be a general uptake to the economy and that should help the media industry.
In 2013, we are hoping that phase 3 will eventually roll out, we are now being told that by March, April, May or June something should happen, if that happens then it will provide us with an opportunity to grow our network. It will take 12 more months, after the auctions, for any real action on the ground but even so the path would have been laid. This phase 3 expansion was supposed to happen by march 2012 and has gotten delayed by at least one year. It is very critical for the radio industry that phase 3 happens and the other important thing for next year is that economic revival happens.
If economic revival happens then it will make our current operations slightly more healthier to look at. In terms of key imperatives for the radio industry, I think it is important that the government relook the phase 3 policy for some of its aspects in line with what has recently happened with other sectors in the economy. The ascending e-auction methodology for phase 3 is clearly a no-no, almost all radio broadcasters are opposed to it. This same method was followed in the year 2000 by the government of India and it was a disaster.
The radio industry prefers the single step e-tendering method which was tried in the phase 2 policy in 2006 and that was a big success. We believe that single step auction will sell licenses at different prices and as a result of that there will be programming diversity which will be possible in the market. If ascending e-auctions are conducted there will be no programming diversity at all and you will have more and more radio stations playing contemporary hindi music and contemporary tamil music or whatever. The second and very important thing to do is that they have to re-look the reserve price formula.
Just like in the 2G auction, the reserve price for the phase 3 is also extremely high and I have a feeling that out of the 800 channels that they have offered in the phase 3 not more than 200 will be taken up because the reserve fee is so debilitating that it doesn’t make any sense at all for any broadcaster to go beyond these number of towns. The further complication is that whatever the eventual bit is realized this time, that will become the starting point for bidding in the next phase so we would all enter a cost spiral.
We should not forget that this is the smallest medium in the media mix and it is the one that pays the most revenues to the government of India and if we were to enter into a cost spiral it is just a matter of time before we all vanish from the planet. So key imperatives are good policy and quick roll-out of the policy.
