Talking Heads with Prashant Panday

Deepasree Venugopal - Televisionpoint.com | Mumbai

Prashant Pandey

Undoubtedly, Radio Mirchi has been the undisputed leader in the private FM space for the last eight years, cornering 50 per cent market share and a network of 32 stations. However, with the second phase of radio licensing in 2005, a host of new players entered the radio sector, threatening the leadership of the station.

Anil Ambani's aggressive Big FM, which has surpassed Radio Mirchi in terms of network, with 45 stations, is considered to be the biggest competition for the channel. However, Prashant Panday, chief executive officer, Entertainment Network (India) Ltd (ENIL), is unfazed with Big FM's aggressive expansion as he feels building a huge network is not the only ingredient for success. He shares his strategic thrusts, expansion strategy and take on competition.

What are Radio Mirchi's strategic plans for the coming year?
Our major focus will be on the consolidation of the new station launched last year. Consolidation means revenues being picked up profitability being achieved and monitising the station. Our second strategic thrust is towards retail oriented advertising clients. We would like to target retail clients in each market in a much bigger way, this is the strategy that we call 'disaggregate and grow' and we will be following that strategy for next 2-3 years.

Why so much focus on retail advertisers?
We get a much higher price from retail advertisers as compared to a national advertiser because a national advertiser who buys our network demands a far better rate. It's a long term strategy and the whole idea is actually to realise higher pricing and one of the ways is to increase retail advertisers.

What are the other revenue sources you are looking at apart from advertising revenues?
There is no other revenue source in radio apart from ad revenues. We also earn revenues through Mirchi activation business, but it again is a modified form of ad revenues.

What's the current market share of Radio Mirchi?
We command a market share of 48-50% in the private FM market. We earned revenues of Rs.2.29 billion this year. We believe we have surpassed AIR too in terms of revenues. AIR's revenues for the last two years have been between the range of Rs 1.8-2 billion and they have not been growing much. However, their results for this year are still awaited.

How much investment are you planning to make?
We are not looking at making too heavy investments in the next twelve months. We will go for minimum maintenance investment required. But at this point of time we don't think much of capex happening.

What are your plans for phase III of radio licensing? How many channels will you bid for?
We are not interested in building a network for the sake of building a network, it's very important that in this business you keep an eye on profitability. That's why our approach will be very cautious like in phase II. We will evaluate profitability quotient in the new market and then determine our bidding strategy. One of the key determinants of profitability in the smaller market will be the music royalties.

Because of the current judgment by the Supreme Court of same royalty in any town the cost of music royalty is Rs 40-60 lakh per annum for any town whether it has one lakh population or 10 lakh. This is obviously a ridiculous proposition.

However, we have referred the matter to the copyright board and we are hoping that in 3-6 months time the copyright board will rule in favour of logical distribution and cost of music royalties. Depending on that, the profitability of smaller station will get determined which will further decide our bidding strategy, but we will surely not bid just for the sake of building a big network.

What's your take on the competition in the industry?
Unfortunately competition is disappointing and below our own expectation. When I say that we command a market share close to 50 % market share its surprising. Two years ago we thought that our market share will come down to 35 %. Competition is relying just on creating networks and not on fundamentals of the business like developing new formats, and creating new propositions for listener. The new competition is very disappointing and the old competition is exactly where it was. In true sense there is no competition at all.

Big FM has been expanding very aggressively, what's your take on that?
The media market is a business where you have to micro manage. It's not a business where you throw money and you grab market share. It's not driven by money. After two years of their launch in Delhi Big FM is 30-35% of Mirchi's revenues. They are already running ad volumes in most of the markets, but the pricing is so poor they are not able to build much revenues.

Now it will be very difficult for them to build revenues. Reliance group is a large competitor, there is no doubt about that. They have the largest number of stations and had they not brought the pricings so low they would have benefited and the entire radio industry would have benefited. They are the number two player in the radio industry but they are long way behind us. I don't think that by just growing their network they will come close to us.

According to you what is the biggest challenge in the Indian radio industry?
The biggest challenge for Indian radio industry is to start thinking big about its own role and stop doing silly things that we as a industry do especially in terms of pricing. The long term challenge for the industry is pricing. When the ad spends gets larger the advertisers start comparing it with television which is not done because we deliver far more than television. We deliver to more than 30 million people every day.

According to the RAM data, we deliver to 11 million people in just Bangalore, Bombay and Delhi and on an average these people are spending one to two hours on our channel. Compare that with television: not even Star Plus gets that kind of numbers. TV totally get 2½ hours of viewing daily that gets fragmented among channels. If we are able to come together as an industry and explain to advertisers the merits of our industry we can garner a larger share for the medium. That is the biggest challenge.