Thursday, June 18, 2009

FM-III auctions may take place by end-2009

The government may delay its plans of announcing the third-phase auctions of over 500 private FM radio stations by at least four months, say informed government sources. This is significant because the Ministry of Information and Broadcasting (I&B) is actively looking at making a policy announcement for the third-phase roll out of FM radio as part of its action plan for the first 100-days of the United Progressive Alliance (UPA) government.

A final recommendation to this effect has already been made by the sector regulator Telecom Regulatory Authority of India (Trai).

Sources in the I&B ministry say that while the policy announcement for the third-phase roll out of FM radio stations will still be made, the auctioning process is likely to be pushed towards the end of this year.

This comes in the backdrop of a recent meeting between the Association of Radio Operators (AROI), the apex body of existing 40-odd private FM radio companies with Ambika Soni, the new I&B minister.

The AROI has urged the government to delay the auctioning process for the third-phase of FM radio till the issue of payment of music royalty to various music companies and their associations is resolved.

"If the auctions for the phase-three takes place soon, we fear none of the existing radio operators would be able to participate as the current rate of music royalty makes the entire radio business unviable," said Prashant Pandey, chief executive, Entertainment Networks India (ENIL) and a senior AROI.

Pandey said the AROI was hoping for an early settlement of the music royalty issue as the matter was before the Copyright Board that will begin the hearing on the matter by end-July.

Pandey, along with other senior members of the AROI, recently met the I&B minister and made a brief presentation on the radio business in the country.

According to the AROI, the radio industry has made around Rs 2,000 crore of combined investment so far while the advertising revenue stands at less than Rs 800 crore per annum. The only source of income for the FM radio industry is advertising revenue.

"We want the third-phase and we have conveyed the same to the minister. However, we are expecting a settlement in the music royalty issue in the next few months. If the government can delay the auctioning process till the music royalty issue is resolved, it will be beneficial for the existing FM radio operators," Pandey told Business Standard.

ENIL operates 32-FM stations under the Radio Mirchi brand name and is one of the oldest private FM radio operator and the only listed radio company.

For the last five years, the private FM radio companies have been involved in a legal battle with the music companies over payment of royalty for the much played by the FM radio stations.

"At the current rates fixed for paying music royalty, a FM station, irrespective of its geographical location, ends up paying Rs 80-90 lakh per annum to the music companies. Then there are other operational expenditures. However, the revenues for a FM radio station depend on its geographical location. So there is a practical problem in operating a radio station under the current scenario," says a media consultant who advises several radio companies.

So far, the I&B ministry has successfully launched the phase-one (2000-01) and phase-two (2005-06) of the private FM radio stations that has resulted in the launch of over 250 FM stations across 90 cities in past nine years.

While the first phase saw FM stations getting launched in the metros and certain state capitals, the second-phase turned out to be very significant for the private FM operators as the government tweaked the radio policy in favour of revenue-sharing model from the escalating licence fees regime in 2000-01.(Business Standard)

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