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July 15, 2007

Losing money on radio

Business Standard Weekend has an article on how the challenges of making money in the FM radio business.

The estimates of how much a radio company pays PPL (Phonographic Performance Limited), the body that represents the interests of the music companies, vary from 20 per cent to 40 per cent share of its revenue. Complains Rahul Gupta, director, Radio Mantra, owned by Dainik Jagran’s Shri Puran Multimedia, “Content for radio is limited to music and the music industry’s demands are astonishingly high, not even remotely in line with global standards.” The international benchmark on revenue share between music owners and radio stations is between 2 per cent and 4 per cent, he claims. That is not all. Even as radio stations crop up in class C and D towns, PPL is not offering differential pricing for the music.

...After royalties (T-Series and Yash Raj Music negotiate separately since they are not part of PPL), the next major cost is human resource, marketing and branding. “The number of stations has grown from 20 to 200 leading to a talent crunch and resulting in spiralling manpower costs,” says Manajit Ghoshal, CFO at Mid-Day Multimedia that operates Radio One in Mumbai, Delhi, Bangalore and Chennai.

Add to these the one-time licence fee the operators have paid to the government, the investment in studios and the payments to Prasar Bharti to use its transmission towers. “Collectively, we have paid Rs 1,300 crore as one-time entry fee to the government and invested another Rs 1,000 crore as capital expenditure. The industry will take years to generate the kind of money we have given away as entry fee,” says Radio Mirchi’s Panday.

UPDATE: Businessworld has a similar two-part article - here and here - on the business of FM radio.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.