TRAI recommendations on FM radio: Industry hopeful of expansion and revenue growth

The Telecom Regulatory Authority of India’s latest recommendations on the radio industry’s long-standing challenges have come as a sigh of relief for the private FM radio players.

TRAI, on Tuesday, recommended a series of reforms for the FM radio sector including the removal of an avoidable clause on annual license fees, enabling private FM radio players to create news and current affairs programmes and making it mandatory for mobile handset companies to offer in-built FM radio.

If implemented, it will offer a new lease of life to the radio platforms in the form of increased opportunity, revenue and reach growth, expansion of radio stations and new players joining the industry.

Nisha Narayanan

Nisha Narayanan, Director and COO, Red FM and Magic FM, said, “This might open gates for newer players to join the league and make the industry more competitive. With the expansion in reach, one will also get to see newer categories of advertisers on the radio. To bring in differentiation with increased competition, radio platforms will also bring more variety in content. Probably, in the future, one could launch a completely non-music station.”

According to TRAI’s latest data, apart from the radio channels operated by All India Radio, there are 388 private FM radio channels across 113 cities, operated by 36 private FM radio operators.

Rahul Namjoshi

Rahul Namjoshi, CEO, My FM, said, “We are thankful to TRAI for doing a detailed deliberation on the subject, listening to all the stakeholders, and then taking a positive step. We are super excited and very hopeful that the Ministry will soon take a positive decision on these recommendations.”

Ashit Kukian

Ashit Kukian, CEO, Radio City, seconded, “We are excited about the positive recommendations given by the Telecom Regulatory Authority of India to the Ministry of Information and Broadcasting. We are optimistic and would like the Ministry of Information and Broadcasting to implement most of the recommendations given.”

While these challenges have existed for a long time in the industry, it is finally seeing the light of day under TRAI Chairman PD Vaghela’s helm. Stating the reason why it took time for the government to look into the challenges pertaining to the radio industry, an industry leader who didn’t want to be quoted said, “While radio makes the loudest noise, it holds the smallest portion of the advertising pie. We may have grown from a value point of view, but the overall ad pie has shrunk. Being such a small composition of the industry, it didn't take enough priority for the policymakers. The medium failed to be noticed in terms of its effectiveness and reach.”

De-linking of the annual license fee from NOTEF

TRAI, in its recommendation sent to the Ministry of Information and Broadcasting, asked to de-link the annual license fee of FM radio channels from the Non-Refundable one-time entry fee (NOTEF).

TRAI stated that the license fee should be calculated as 4% of the gross Revenue (GR) of the FM radio channel during the respective financial year.

Kukian, commented, “The license fee to be calculated at 4% of the gross revenue of the FM channel during the respective financial year is a much-needed recommendation that will aid the radio industry in getting back in the black.”

Until now, one has to either pay 4% of the gross revenue or 2.5% of the one-time entry fee, whichever is higher. In the recommendations, TRAI has suggested removing the ‘whichever is higher’ bit, i.e. 2.5% of the one-time entry fee.

Explaining the above, an industry insider said, “For example, if Station X has paid Rs 10 crore for its license fee and makes only Rs 4 crore as annual revenue, it will not have to pay 2.5% of the license fee (Rs 10 crore), but just 4% of the annual revenue (Rs 4 crore). In the current scenario, even if station X is not making enough revenue, it has to pay a huge sum of the license fee to the government as it is higher than the annual revenue. After the implementation of the recommendations, it will change.”

According to Namjoshi, the delinking of NOTEF from annual license fees is a welcome step as it will end an anomaly that was created in 2015 due to the scarcity of frequencies in some cities.

Namjoshi added, “Some cities saw an exorbitant bidding price as the frequency was only 1. While the relief was given in the migration fees, annual license fees were to be paid on NOTEF only. This was causing a huge dent in the profitability and cash flows of the broadcasters.”

As per Narayanan, this will improve the ease of doing business. She said, “In the current state, this forms a huge cost for us. The situation was even worse during the Covid period. While some of us may have emerged to pre-Covid levels in terms of revenue, there are many who are still struggling to come to the pre-Covid level surface.” 

From a business point of view, the radio industry is still struggling to increase its ad rates. The implication of this is that the ad volumes have grown extensively. The fact remains that the listeners do not want to listen to too many ads while consuming content on the radio.

Radio’s share in the overall adex in 2023 is estimated to be around 1% at Rs 1,951 crore, according to a GroupM report.

TRAI also suggested that GST should be excluded from Gross Revenue (GR), it suggested.

Stating it as a welcoming step, Namjoshi said that while GST was already delinked from the gross revenue for telecom and DTH players, it is a much-needed step for the radio industry as well. 

Private FM players can broadcast news and current affairs

The regulator has recommended that private FM radio operators should be allowed to broadcast news and current affairs programs, limited to 10 minutes in each clock hour.

Namjoshi said, “Allowance of news and current affairs was a long pending demand by the industry.”

Currently, the ‘government-controlled’ Akaashvani is the only player with the license to broadcast news and current affairs programs in an independent India. Community radio platforms can also broadcast news sourced only from Akaashvani.

Until now, the government has been refraining from allowing private radio channels to broadcast news due to the lack of monitoring of content on private radio channels.

Finding a solution to the above, TRAI has recommended that the program code of conduct applicable to All India Radio for news content may also be applied to Private FM Radio channels,” stated TRAI recommendations.

Namjoshi added, “We all are responsible media houses and have been trying to convince them that we shall be able to handle the nonbiased news with proper internal controls.”

Narayanan believes that from a business point of view, this is a breakthrough. There is an entire category of advertisers who advertise specifically on news and will look at radio as a medium to advertise. 

This move will also help the radio audience to listen to news developments that are happening at the local level.

She said, “While we are NAT- Local in nature. Therefore, allowing news on the radio will help us broadcast news at the local level which impacts the common man. News is not just national or international.”

TRAI recommends making it mandatory for mobile handsets to have FM tuners

Namjoshi commented, “Regarding the issue of FM tuners in mobile phones we have been raising this issue that many device manufacturers have deliberately disabled the FM chip which was against the interest of general people at large who are being devoid of information from this free medium.”

Narayanan pointed out that the availability of radio on mobile handsets will also help radio platforms grow their reach multifolds. “Mobile phones have the ability to reach listeners nestled in tier II and tier III cities. This means, that this will encourage more business opportunities and propel advertisers to observe radio as a consequential medium to launch brands and create impact.”

Namjoshi added, “It will not only be very useful during natural calamities but the medium has the power to reach out to nooks and corners of Bharat and can help in spreading government policies to common people in real-time.”

On May 11, 2022, the Ministry of Information and Broadcasting (MIB) also sought TRAI recommendations regarding the extension of the license period by 3 years to help mitigate the losses due to COVID-19.

According to Namjoshi, while TRAI has not made a direct recommendation, it has requested MIB to look at the matter with compassion and take the best possible course of action.

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