Apurva Purohit, CEO, Radio City

Whether there is Phase 3 or not, radio will grow to 6 per cent from the current 3.5 to 4 per cent of the ad pie. The first push in that direction will come from ratings itself. We are already seeing very early green-shoots of loyalty towards slots or RJs, which did not happen in the past. Slowly we are seeing the time spent listening to stations going up. The second growth driver is from revenues. Increasingly there are more people who are trying radio at the lower end. From 5,000 advertisers on radio last year, this year there were 9,000 advertisers. At the higher end, the amount of money that people are spending on radio is increasing. So, we can say that overall only 4 per cent of ad budgets reach radio, but large advertisers are spending 8-10 per cent of their budgets on radio now.

When Apurva Purohit quit the television medium to take on an assignment in radio in 2006, the medium suddenly looked sexy. For many, radio was the next big opportunity because industry leaders such as her were experimenting on an otherwise young medium -- the signal was that radio has arrived. From then to now, in the last five years, radio FM industry has seen big developments and lots of action, but has it delivered on that big promise?

In this interview with Noor Fathima Warsia, Apurva Purohit, CEO, Radio City speaks on the road ahead for radio and the role that companies like Radio City will play in that growth path.

Q. Some aspects of Phase 3 still appear to be vague. Have you nonetheless drawn out what your growth plan would comprise?

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The various contours of Phase 3 are clear to everyone except for the e-auction aspect. But largely, everyone knows the new cities, the licenses available, the FDI component and so on. As a result, most of us have worked out our expansion plans. Specifically to Radio City, let me first remind you that even in Phase 2, we had a very clear strategy. We are not going to try and be the largest network in the country because large networks have a very long tail of stations that will take 5-10 years, depending on the markets, to make any money. We decided we would go for the more profitable centres, where advertiser monies are still coming. And this was the top 20-25 cities. We have done that. After Mirchi, we are the only ones who are delivering reasonably large EBITDA margins. The expansion, therefore, would be again around this vision. Around 60 per cent of advertising revenues are still concentrated on top 20-25 cities. Now there are certain gaps in our network – Kolkata, for instance, is not there, some more markets in the north and south - so we would be exploring these centres. Multiple-frequency is another thing that we are keen on. I don’t know whether you are aware, but we are the only radio company who run a network, which means to stream out of one city. So, out of Ahmednagar, we are streaming to five cities. Therefore, we are the only ones who have any expertise on how to run the network.

The year 2010 has gone very well for us. We have grown at 26 per cent and if you compared that with the industry, the industry has grown at around 10-12 per cent. So we have gained more market share and we would like to consolidate and build on this. In certain markets, we are doing very well in ratings and revenue. We believe South is a strength that we have not capitalised on – both internally or externally.

Q. Is that the reason why unlike other industries, we have not seen radio players unite to take a stand on industry issues - music royalty, for instance?

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I will agree there are certain things where everyone could have come together far strongly than they did. But you said it - the medium is five years old. Unlike other media verticals, radio has only faced challenges. It started 20 years later – by that time television had developed and Internet was already on the horizon. The first three years the stations bled because of licence fees. In 2005, when a more progressive working arrangement came in, competition hit the medium. Every industry goes through the highly competitive, dropping of revenue phase. As that began to stabilise and people roughly found their footing, recession hit the medium. There was no player like a Zee in television or The Times of India or The Hindu in print who had lived a long, undisturbed run to develop the medium. Nobody in radio was able to consolidate the medium. But the industry is coming together now. If you take the example of the music royalty issue, we were not battling a City or Mirchi, it was an industry problem and our struggle will benefit all players.

Q. Would you like to elaborate on that?

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When we started Radio City there were some things that we were acutely aware of. We were and are not a part of a large media conglomerate, so it was a situation of David versus Goliath because when you are running a single medium company versus players that are present in multi-media, there are many challenges that come your way. There is no support from a mother organisation, and you are barred from a lot of publications for competitive reasons. We are not able to do marketing like some of our competitors due to that. People retention was another huge challenge. Having recognised five years back that these are challenges we will face, we focussed on building an organisation that gave attention to people and processes. In fact, for processes, we worked with companies such as Accenture and similarly, we partnered with only the best for people and for research. I have worked personally on balance score card of the company. We have invested efforts so that we could go out and say that alright, we are not a part of any big conglomerate, but we are a process-driven organisation, and far more professional than others.

We have a 12-member HR team that is ensuring that this is a great place to work in. Every year we do an HR study in which this year, we were in the top 20 percentile of best employers. The whole iceberg is five years of hard work put in by the team, right from managing cash flows to ensuring consistency in product. RAM and IRS are only vindication of the work done.

Q. And if Phase 3 is further delayed?

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The industry will still grow. The first part to that will come from a rating perspective. We are already seeing very early green-shoots of loyalty towards slots or RJs, which did not happen in the past. Slowly we are seeing the time spent listening to stations going up. This kind of loyalty is natural progression of any media vehicle. Second growth driver is from the revenue side. You will see that increasingly there are more people who are trying radio at the lower end. Suddenly, from 5,000 advertisers trying radio last year, this year you had 9,000 advertisers on radio, which is much higher than TV. TV is still at about 3,500 advertisers. At the higher end, the amount of money that people are spending on radio is increasing. So, we can say that overall only 4 per cent of advertising budgets reach radio, but large advertisers are spending 8-10 per cent of their budgets on radio now. It is now up to us how we evangelise the medium, because if one player from a category is spending so much on radio, why are the rest of the players not spending that much. Category needs are the same. There is a lot of work happening on that front. We have our own strategies of how we are approaching this.

Radio will grow to 6 per cent from the current 3.5 to 4 per cent of the ad budget, whether there is Phase 3 or not.

Q. We have been hearing a lot from your station in the last couple of months on counts of RAM (Radio Audience Measurement) and IRS (Indian Readership Survey), though both have their constraints right now. But how are you viewing these numbers?

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From an advertiser perspective, measurement is very important because it gives a good indication on which media vehicles advertisers would like to partner. It also justifies a media planner’s stand on any media. We were in a sense pioneers in getting RAM in the picture because we knew measurement was key in growing the medium. But apart from RAM, we are happier with IRS right now, as IRS has become more frequent and hence, more relevant. RAM is restricted to three markets. The big story that we want to tell our advertisers is that radio has become a truly national medium today and this will only grow stronger as FM grows. Radio FM at present is in 91 cities and this will soon be 250 cities. RAM cannot help in highlighting this complete picture.

So, we are relying on IRS too, as it is available across all our markets. Where RAM gives more depth, IRS gives a sense across markets. We are happy we have been doing well on RAM numbers, and we are equally happy with the recently released IRS radio data. We have done well across markets and that augurs well on our organisation. But what you see through data is only the tip of the iceberg. The iceberg comprises the effort that has gone in building Radio City in the last five years.

Q. But your south strategies in South did look like it was frequently changing...

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That is not completely true. Our strategy has been fairly consistent for markets such as Hyderabad, Vizag and Coimbatore. In Bangalore, we were the only station in the beginning and that was akin to being a general entertainment channel, because the station was catering everyone, so we had English, Hindi and Kannada. But the moment more stations came in, we had to pick one and we moved to a Kannada position in Bangalore. Chennai was the only place where we experimented, which was worth trying because unless you experiment, you do not know where it is going. Today, we are on the number three position in Chennai, which we are alright with. But the market does not realise this, so we realise that one important task on our agenda is to focus on building the South network.

Q. As we move forward, what are the other growth drivers for radio?

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It has to be Phase 3, because radio is about geographically expanding your brand. There are many facets to Phase 3, but the big thing is moving from 90 cities to 250 cities. The second biggest thing would be multiple frequencies, because now we would be able to offer genres. Any key player who would pick up a second channel will offer something niche.

Q. You just spoke about people retention and focus on human resource - in the last five years, it also appears that radio ceased to attract the kind of talent that it had when say you joined the business. There also was Tarun Katial, who joined Reliance then...

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It is a fair point. In 2006, when I had joined or Tarun had joined, the medium itself was looking very good. Five years down the line, the challenge that the industry faces is if Phase 3 keeps getting delayed, what would be the growth path we can show to people. That is somewhat fuzzy and a constraint at the middle-manager level. At the lower-end, there is still traction and people still find certain glamour in radio. RJs have become celebrities in their own right. So, at the grass-root levels, we are still getting good talent.

Q. Is South as challenging as it appears in radio. Unlike the print and television medium, radio does not seem to be generating loyal listeners.

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But that is a fundamental issue with radio itself. Radio is far more difficult to run because you are running 20 different channels by virtue of just being present in these markets. And what we observed in television or print medium is that you are either a north expert or a south expert. Sun will never do well in the North or Star and Zee in the South. The problem on radio is because we cannot afford a core competency of that nature, it has to be a national competency, which is difficult and will take time. Radio is a very young medium right now.