Why Go had to go

It's official. Go 92.5 Fm is now Radio One. The station that plays 'hit pe hit pe hit'.

Ever since Go went 'fully desi' the frequency with which I tune in had gone down. But as they say andher nagri mein kaana raja. When all stations are playing Himesh, Jaggu and Tarana - even in Hindi - provide some distraction.

Yesterday morning I figured something had changed when there was no talk, just music on the hour long drive to office. Was this a radical new strategy - a 'radio station minus radio jockeys?

Well, I thought the best person to answer this question would be Shariq Patel, station director of 'Radio One'. And here's what he said:"No, RJs will continue but yes, on day one we did consciously decide not to have any RJs so that the focus would be on the music." The idea was to attract more 'new listeners'.

And given the anguish so many Go loyalists felt when it went all-Hindi in April, I simply had to ask: Is the strategy 'working'?

Says Shariq,"The feedback has been positive except for 'small pockets' of hardcore listeners'". These include dear old ladies who called in to say they missed the 'Night shift' show which aired retro English songs.

The official numbers will take 3-6 months to come in but he claims 'internal tracking' shows that the station's listener base has increased.

Shariq then explained to me the economics of the decision to go desi. Because that's what it was - a decision based on where the dhandha is.

Yes, we were a 'college radio' station but...
The sad truth is that there were enough college students who liked to listen to other radio stations. So go never owned that segment.

At the end of the day, numbers matter
Population of Mumbai: 14 million
Those who tune in to radio regularly: 5 million

Listenership data
Radio Mirchi: 2 million
Radio City: 1.2 million
Red FM: 1 million
Go FM: 400,000-500,000
Vividh Bharati (107.1 FM): 100,000

Go 92.5 FM with half a million listeners was ALWAYS seen as half as small as the no 3 radio station Red FM. And no, 'quality of listeners' did not cut ice with the advertiser.

Shariq elaborates: "If you're seen as a 'niche' player, advertisers will allocate only a small portion of their budgets to you. So for example, if Radio Mirchi (would get a 20 lakh contract from Pepsi, we would get a 2 lakh contract. Or maybe get ads for the 'Diet Pepsi' campaign."

It was mass vs niche as well as the fact that the mass channel had a pan-India footprint with operations in several cities.

The License fee
But the biggest factor of all is the license fee. "The cost structure of all the stations is the same. We pay the same license fee, and give or take 10% all stations pay similar amounts for RJs, studios, software etc".

So the guy with the 'mass appeal' who can attract more advertisers has a significant advantage.

On a revenues minus cost basis, says Shariq, the niche channel Go was 'making money'. But factor in the license fee (30 crores paid over the last 4 years and more for the years to come) and the business was in a Rs 50 crore 'net loss' position.

The 'revenue share' formula was meant to take care of this issue. In theory the minimum acceptable bid was Rs 1 crore but with so many players wanting a piece of this juicy media pie, very high bids were made.

So to 'migrate' from Phase 1 to Phase 2 Go - and other players - paid the government Rs 24 crores upfront. They will also pay 4% of their revenues.

"We had to look at which strategy would deliver deliver value to the shareholder".

Strategy 1 - remain niche meant Go might take 10 years to be 'profitable'.
Strategy 2 - go mass meant Go might achieve break even in 3 years.

There was no alternative - sigh!
Like I said in my earlier post ('The Mirchification of Go'), once Go had taken on two big ticket investors and bid for licenses in multiple cities this decision was inevitable.

When I wrote that, however, I still held the belief that you can make money from a niche audience. My chat with the very candid and numbers-driven Shariq has convinced me otherwise. You can't make 50 crores out of a niche audience however high its perceived quality might be.

Because the difference in audience scale between the mass and the niche would be '10 times'. And yes, in the advertiser's mind there is a distinction. As Shariq put it: If brand X has a 100 crore ad budget he'll devote 98 crores to 'mass' and 2 crores to 'niche'."

And hundred niche brands - across print, radio and TV will compete for that 2 crores. Simply put, "Every sales deal is a stress... You will never be in the superbucks league."

Of course it was not easy. Says Shariq,"Last week I visited the paediatrician and he spent half an hour asking me why we did this! My wife is upset, my friends have 'stopped talking to me' (laughs). We've got hate mail... But it's economics, pure economics".

I promise Shariq I will check back in 6 months on whether the economics of it all worked out. He believes that if we could build a niche brand which so many people felt passionate about, we can build a mass brand as well.

"All stations play hits but no one has owned the "hit" platform. Like thanda matlab Coca Cola we want to own the hit property" . A hit he defines as a song which 100% of the audience can recognise and hum and yes, these will be mainly post year 2000 numbers.

A first cut feedback from someone in the radio business,"They're playing good hits... they'll get the shops and taxi listenership!'

As for the 'Radio One' rebranding - that was undertaken to create a consistent brand across 7 cities (although local feeds will be served to each city).

Looking at the whole situation dispassionately - almost as a case study -all of the above makes sound business sense.

Very rarely do we find companies being rational about 'sunk cost'. You don't persist with a strategy just because you've already invested a lot of time, emotion and money into it. If Go as a niche brand is unlikely to make big money in the next 10 years, you are brave enough to junk the brand.

It takes a lot of guts to do that. Kudos to Tariq, Shariq and their team for that.

What about us?
As for the half a million loyalists of Go, for them there is hope. There will soon be new players in radio such as HT and Win 94.6 (which is on the comeback trail). Both are expected to cater to the erstwhile 'Go' audience. Guess they have some other magic formula to recover the humongous license fee - who knows.

If the government were to be less greedy, we'd see more stations with more diversity but hey, that ain't gonna happen anytime soon.

Actually, Shariq offered an interesting analogy. 'If you had to pay Rs 10 crores to start a magazine would JAM exist as a niche product?" He has a point.

All I can say is, thank God there there is no licensing in print media or JAM too would have to put Mallika Sherawat in a bikini or 'interview with IAS topper'. Or whatever sells to the largest possible number of people...