RADIOACTIVITY: Will it blow up in their faces?

The second phase of bidding for FM channels has resulted in the aspirants coughing up a staggering Rs. 539 crore as one time license fees.

As we go to print, the bids for the North Zone have come in: another whopping Rs. 84 crore in the Government's kitty.

The successful bidders are euphoric, the unsuccessful dismayed. Should it be the other way round?

Seen simplistically, an FM station's competition will come from other FM stations. That's not just simplistic, it's naïve and foolhardy.

FM stations, at the most complicated assessment, will compete against all available entertainment options. They will compete with TV, they will compete with multiplexes, they will compete with DVDs, VCDs and CDs.

But these are not their biggest dangers. The biggest danger, from what we at Impact are able to understand from a study of the state of affairs in mature radio markets, most notably the USA, will be from the channels themselves: from their understanding of the consumer, from the commercial models, from their understanding of the advertisers.

An almost equal threat will be from the Internet. The Government's iron grip over the medium till now has resulted in two "technologies" virtually overlapping: as most of India samples the clarity of FM for the first time, the metros and large towns will, almost simultaneously, be able to marvel at the wonder of digital quality audio available through the Internet.

While the mature markets had decades of FM exposure, and have had to deal with competition from the Internet only after terrestrial stations had established brands, established shows and healthy bottom-lines, the Indian FM players will have to deal with this upstart from the word go. Players such as World Space have, after a period of low presence, got significantly more aggressive in marketing and pricing. And their positioning makes it abundantly clear: They're meeting FM head on.

To complicate matters, there's not exactly a mountain of advertising money going around. The share of radio is currently less than 3% of the total adspend, and the most optimistic view does not see this grow to more than 7% over the next 10 years.

In what is clearly the world's most advanced radio market, the United States, a combination of factors has seen the industry plummet into a crisis - and one can see the possibilities of the nascent Indian market heading in the same direction.

Impact spoke to Ken Dardis, President, Audio Graphics Inc., USA, after learning that he was the authority on radio, and one of the most vocal critics of consolidation, of Clear Channel Communications, of Big Business.

With Dardis' permission, we reproduce two articles that he has written on the state of the radio industry in the United States.

You will be as shocked as we are to see the relevance of the American situation to the Indian market.

In addition to the problems that are highlighted by Dardis, India will see a few more that are peculiar to it.

There is, and will continue to be, an acute shortage of manpower. As far as voices are concerned, there simply are not enough for the 330 odd channels that we will end up with; this will, as was the case with print journalists early last year and with TV journalists in the second half of 2005, see pay packets going through the roof.