Thursday, June 08, 2006

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...

21 comments:

  1. nice post Rashmi. Puts things in perspective. I guess we have to move on. Life hai. As I posted - RIP Go 92.5FM. Thanks.

    ReplyDelete
  2. Well, first of all, what did they think when they paid 30 crores in the beginning...if you a niche channel, you would obviously be given less attention by mass brands like Pepsi. Pepsi wouldnt really care if the listener stayed in Bandra and went to MMK college..

    Although I know little about the radio business, but I think Shariq' argument is simplified.....There are ways to appeal to niche brands and get them to spend money, there are ways to extend the 'tremendous' brand that you have developed outside the 'radio' world.....but yes,it takes time.

    I guess the 30 crores initial investment ka bhoot was too much for them..

    coming back to where I started from, fire the people who did the initial analysis for you !!

    ReplyDelete
  3. "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."

    You want Go 92.5 FM and JAM to think of economics, and expect charity from Govt? It makes business sense from their point of view!

    ReplyDelete
  4. a well written article as usual :) yes, the huge license fees the radio companies have to pay end up being both entry and exit barries to the players in this industry. on top of that the radio software / towers are a huge cost in addition to the fees that they have to pay artists' association. Most of the radio stations in India are still in the red and have yet to break even. even Mirchi i think.
    Radio Mirchi has launched in bangalore and they're duplicating their localized strategy here too. the RJs speak a weird mix of Kannada and English but play mostly hindi songs. I think this alienates the non-kannada audience, but i guess their TA is the kannada speaking populace. So i don't think Radio City has taken a hit in listership as of now. Ofcourse 'the mirchification' of Radio city in blore is happenly slowly, with popular RJs struggling to pepper their lines with kananda sentences. i think they should continue what they were doing before mirchi came on the scene. else city will become just another "me too" product, or is it "me mirchi too" product :)

    ReplyDelete
  5. If the government were to be less greedy, we'd see more stations with more diversity...

    The floor fees for licensing was Rs 1 Crore. The competition pushed that Rs 30+ Crores. It is completely free market at play.

    Then, spectrum is a limited resource. If telcos are paying a small fortune for using it, so should everybody else. Also, some spectrum will go for free to non-commercial ventures. e.g. Universities are allowed to setup their own FM channels. And Govt doesn't charge.

    You can allow only a certain number of players in the market. As Govt makes a cut with revenue sharing, it is best to have only a few medium-to-large players instead of tons of small players.

    To sum up, Govt has acted smart and not greedy.

    ReplyDelete
  6. Mirchi sux big time. Sounds like the audio version of Zoom TV or B4u. Guess Ill just stick to Lukes afterhours on V and my mp3 player.

    ReplyDelete
  7. Nice post, But I, for one, havent ever really felt that the FM is here to stay...there was an age of radio before, there is one now but sooner rather than later it will be over. It doesnt really matter if the government eats the dinosaurs or the dinosaurs eat themselves...:)

    ReplyDelete
  8. I think Radio One is doing a good job catering to the aged segment of the society. The aged ones always like to listen to the older songs.. I dont think one shud say that its just like "andheri nagri mein kana raja" or anything of that sort. Think about what the elderly and aged people will also like to hear on FM..

    ReplyDelete
  9. I will miss GO so much. Its T-man's birthday on 11th June. Gone are the days when I would eagerly await his Sunday Brunch show which played the classics. Perfect start to my Sunday!!! *sob sob*

    ReplyDelete
  10. thanks for making the death of 'GO' easier to accept;)

    ReplyDelete
  11. Indian orthodox Brahmins & their slaves Present All Over Indian System Will Never Allow the Development of the Rest Indians i.e OBC/SC/ST/Rest Whose Population Is Over 85% of India - Come What May ! B/c Brahmins/their Slaves -- Don't Even Consider OBC/SC/ST/ REST INDIANS - Humans !So ------:---

    The Permanent Solution I Think Is that :- Divide India Into Small Nations On Caste Lines, E.g. One Country For Brahmins, One for Upper Castes, One for OBC/SC/ST/ Rest -- On the Basis of Population of the Caste. Every Caste Will Have 100% Reservation In their Respective Country -- So No Fighting Any More & All Will Develop. A Non Indian Commission of United Nations should be Formed Under ChairManShip of It's Chief Koffi Anan --- to Divid India, to Maintain Impartiality, In Light of Historical Facts of Over 3000yrs, With No India In High Power Commission to Avoid Partiality. B/c In Present India Brahmins & Upper Castes Manage to Corners All Resources Meant for All Indians (OBC/SC/ST/REST INDIANS)- that's Why Brahmins/Upper Castes are Happy In Present India. OBC/SC/ST/Rest are Not Socially & Educationally Backward By - Choice - BUT - B/c Brahmins & their Slaves In Power have Kept them So - By Force & Conspiracy Since Over 3000yrs Particularly 1947 Onwards !

    ----- Let's Face the India's Ground Level Realities/Truths the Way they Are & Go For the Final Solution that Is Once & For All !!!

    --- So Rashmi Bansal What's Your Is ???

    --- Non-Brahman Hindu ! By For NOW !!!!!!!!!!

    ReplyDelete
  12. Well..Bottom of Pyramid funda!!
    That's why item numbers are a safe bet rather than good music.
    Its all about the m-Ass!!


    Ashish Sinha
    http://sinha.wordpress.com

    ReplyDelete
  13. Rashmi
    Very Insightful post.

    But all said and done, music that pleases masses will never please classes.
    You and me and all sundry are a small Niche.

    I guess all of us are waiting for 6 months. *wink*

    I urge you to peep into This

    ReplyDelete
  14. err. is being a brahmin going to get me brickbats?

    am a writer too.
    peep into www.iyerup.com
    blog too : www.iyeruptheladder.blogspot.com..

    i miss mumbai!

    ReplyDelete
  15. Hey there,

    Just chanced upon your blog when Googling Mumbai FM channels. Yeah I know about the Gone Go. You might want to read this which is based also on the same topic.

    -Ram.

    ReplyDelete
  16. Hi! Radio One Fm 94.3 (Formerly Go 92.5FM) plays ONLY English music now 9pm onwards! Tune in :) xox Malini
    P.S. I need your support!

    ReplyDelete
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