Digital Radio rollout: FM players raise concerns over costs, ROI

New Delhi: As the Indian government plans to roll out digital radio broadcasting in 13 metro cities in the coming months, private broadcasters expressed concerns regarding policy adjustments, the OPEX-CAPEX burden, and the return on investment (ROI) from digital radio broadcasting.

These issues were discussed in detail during a conference organised by the India Cellular and Electronics Association (ICEA) in collaboration with the Association of Radio Operators for India (AROI). Industry players such as Radio Mirchi and Mango FM highlighted the challenges that stand in the way of transitioning to digital radio.

Adopting digital radio: But at what cost?

Preeti Nihalani, Chief Operating Officer of Radio Mirchi, shared her reservations, stating that while digital radio presents many opportunities, there are significant challenges that need to be addressed before these opportunities can be fully realised.

“From an opportunity perspective, digital radio offers more accessibility to content, a broader reach for broadcasters, and potentially more revenue. But we are, at the end of the day, commercial radio stations,” she commented.

Nihalani further explained that radio relies heavily on ad-based revenue, unlike platforms like Spotify or Gaana, which generate substantial income from subscriptions. 

“Since we have a single source of revenue, which globally has not proven to be particularly lucrative, we need to carefully consider the cost implications,” she said.

Citing data from the US, where digital radio is already well-established and audio advertising is more mature, Nihalani pointed out that digital radio holds only a 5% share of the total radio audience.

“The FM radio industry in the US is worth approximately $323 billion, while the digital audio industry is valued at just $4.3 billion. There’s a huge difference,” Nihalani noted. She raised concerns about the sustainability of a single-source, ad-based model that radio works on.

Licensing, CAPEX, and everything in between

Highlighting the possible financial burden on broadcasters, Manoj Mathan, Chief Operating Officer of Mango FM, said, "Even a minor upgrade in CAPEX can be a significant strain on broadcasters. We urge the government to consider offering subsidies and incentives for these capital expenditures," Mathan said.

He also addressed the issue of music royalties. Unlike traditional broadcast radio, where statutory licensing fees are clearly defined, the digital radio landscape remains unclear. 

“In the digital space, that is within the courts, essentially at the mercy of whoever owns the rights to the music,” Mathan explained. “This lack of clarity is one reason broadcasters don’t yet have digital apps,” he quipped. 

Mathan emphasised that one of the biggest hurdles for broadcasters moving to digital radio is the uncertainty surrounding music licensing in digital radio. “We would prefer it if it were statutory,” he said.

Return on Investment

The ROI from the Phase-2 Radio Frequency (RF) auctions, conducted by the government earlier this year, remains uncertain, according to Nihalani. 

Over this investment, there lingers a new licensing fee for digital radio, Nihalni conveyed. “If you burden the industry further, with the OPEX and CAPEX, the industry is not going to survive,” she warned. 

While the government expressed optimism about the future of digital radio, private broadcasters remained wary, citing the numerous challenges they would face in transitioning to the new format. Despite the potential benefits outlined during the summit, the practical challenges overshadowed the discussion, leaving a sense of caution among industry players.