It looked like Bollywood at its best. Filmstar Kareena Kapoor -- dressed in flaming red and fashionably late -- made her appearance seated in a brightly decorated cycle rickshaw. The photographers went berserk as Kapoor posed prettily bathed in the glow of flashlights.
But it wasn't the mahurat of the latest Bollywood blockbuster. It was the flamboyant launch of Radio Mirchi, the FM channel that started belting out nonstop music for Delhi listeners this week. Radio Mirchi isn't the only one that has just had a high-decibel launch in Delhi.
Two other stations have also launched in the last few days and they are battling it out over the airwaves -- both for listeners and advertisers.
It's action time once again for music lovers. One year ago, a string of private radio stations went on air in Mumbai, Bangalore and smaller cities like Indore and Lucknow. Now the FM radio companies are staging a second round of launches and, in the process, transforming themselves into pan-India private radio operators.
Moving to Delhi is only the first step. In the next month, 10 new stations are scheduled to launch, doubling the number of private stations dotted around the country. Kolkata will be ablaze with sound as four new channels switch on in the next week.
Meanwhile, three new stations that will start broadcasting almost simultaneously in the next month will serenade Chennai. The spate of activity has forced even All India Radio to rebrand its FM stations and give them names like Rainbow and Gold.
How much will it cost? The private FM operators will invest over Rs 200 crore (Rs 2 billion) in the next one year to make radio hip and happening once again. In the thick of the action are a clutch of giant media houses which are determined to conquer the airwaves. There's Star's joint venture, Radio City, and Red, promoted by India Today.
Besides that there's Mid-Day's Go and Mirchi, run by the Bennett Coleman Group that owns the Times of India and which has the biggest plans of all. Each group believes that radio is about to turn into a giant medium that will attract advertisers of all sizes.
Each group is bringing different strengths to the studio. Star has three stations in Mumbai, Bangalore and Lucknow and it is investing over Rs 22 crore (Rs 220 million) to launch its Delhi station. It's hoping to turn TV hits into winners on radio. For instance, it plans to create radio capsules of popular TV serials like Kyunki Saas Bhi Kabhi Bahu Thi.
There's also an ambitious effort to launch a localised radio version of Kaun Banega Crorepati (the prizes will be in lakhs and not crores) with Amitabh Bachchan at the microphone.
A similar programme is already running in Mumbai.
At another level, Star is launching educational programmes, which, it hopes, will attract large numbers of listeners eager to improve themselves.
It will, for instance, start programmes devoted to teaching English to Hindi speakers and others on computers. Says Sumantra Datta, chief operating officer, Radio City: "The whole idea is to create compelling programmes which listeners will tune in to wherever they are."
Then, there's Red, which is expanding from Mumbai to Delhi and Kolkata. Red is taking a different approach from the other channels and offering a star-studded -- but ageing -- line-up of anchors that includes pop singer Usha Uthup and veteran radio hand Amin Sayani.
That isn't the only quiver in Red's bag of tricks. It hopes listeners will tune in to hear live events in different parts of the country. One example: it has signed a deal to be the official radio partner at the Samsung IIFA film awards ceremony.
The FM channels are chopping and changing their formats to suit local conditions. In Mumbai, Radio Mid-Day has switched from English to a 60 per cent Hindi and 40 per cent English mix. And, in Delhi, Red is broadcasting only in Hindi. But in Kolkata, it will throw in the occasional Bengali music programme to draw audiences. Red also hopes to generate about 10 per cent of its revenue from creating or participating in events like shopping festivals.
Radio Mirchi, however, is absolutely clear that its first target is the 15-35 year crowd. Mirchi, which has the deepest pockets of all, has bought an expensive tracking system called Moods Analysis and Mapping to make sure that it reaches its target audience. Mood Analysis works out what type of music listeners of various age groups want to hear at different times of the day.
Mirchi is also hoping that its pan-Indian reach will help draw advertisers. Once it launches in Chennai and Kolkata it will have nine stations and will be in all the biggest Indian cities -- that's a footprint no other group can match.
Once it has launched in the metros, it will move in the next few months to smaller cities like Bhubaneswar and Jabalpur. Says A P Parigi, managing director, Entertainment Network India: "We got 50 paid advertisers on the first day of our operation in Delhi. Our USP is that we are present in cities with an addressable population of 160 million."
Those are compelling numbers. But are advertisers taking the FM radio bait? The growth of radio has been stunted by government regulations. As a result, it gets only a minuscule 1.5 per cent of the Rs 8,000 crore (Rs 80 billion) spent on advertising annually in India. In other parts of the world, radio usually gets about 6 per cent to 7 per cent of total ad revenue.
Obviously that's poised to rise swiftly. The private stations are already pulling in advertisers and listeners. A recent IMRB study showed that 62 per cent of Mumbai households have FM radios and at least 77 per cent of people who have an FM radio had listened to it in the past three months.
Most impressively, the time spent listening to FM radio has grown dramatically in Mumbai from 47 minutes when the private stations launched a year ago, to about 180 minutes currently according to a Radio City study. Says Rajesh Tahil, station director, Go 92.5 FM, Radio Mid-Day: "I think the impact of radio in Mumbai has been phenomenal. There's been near a 60 per cent growth in the number of people listening to radio today from a year ago. That's something that nobody really expected."
As a result, a large number of advertisers are suddenly discovering the magic of radio. JK Tyres, which already spends 15 per cent of its ad budget on radio, expects this to climb by 20 per cent now that new stations are going on air.
It has struck a 12-month deal with Radio City, under which it will advertise regularly between 7am and 11am and it will be the only tyre company on air during that time. Says Neeraj Bhatia, marketing manager, JK Tyres: "Our target audience is the guy in his car and he is the one who listens to FM. We catch him in the morning on his way to the office."
Similarly, insurance company ICICI-Prudential has bought spots both in the morning (8 am to 9.30 am) and the evening (7 pm to 8.30 pm). Says Saugata Gupta, chief marketing officer, ICICI-Prudential: "Our target audience for insurance is the young executive driving to office and back home in his car. So advertising in the right time segmentation makes immense sense."
Other companies are hoping to woo the younger generation. Take Airtel, for instance. The Bharti Group believes it can reach both the young and slightly less affluent groups. Says Hemant Sachdeva, director, Bharti group: "We will use FM to address to our intending users which is the youth. Also, we are trying to attract SEC C and SEC D to use mobiles. In this income group, the penetration of radio is very high despite TV."
Samsung is also going on air for similar reasons and it will increase its radio ad budget by over 15 per cent this year. What's more, it's already using radio as the primary medium to promote its audio range of products. Says R Zutshi, director, Samsung India: "The key target for our audio products is youth."
Then, there's PepsiCo that is targeting customers on the move. The company says that radio also allows it to hold activities like city-specific promotions. And car company Hyundai is using radio to target people on the move and to reinforce its message, says marketing manager Sanjeev Shukla.
Many companies are sceptical about the medium. For instance, R L Ravichandran, vice president, Bajaj Auto wants more figures before he takes the plunge. Says Ravichandran: "The target profile is not defined, so how can we put in money?"
Advertising industry experts say that the FM radio stations won't really take off until they are able to attract local retailers. Asutosh Shrivastava, managing director of media buying house Mindshare, says that radio's share of total ad revenue won't grow beyond 1.5 per cent of the total pie in the next two to three years until they successfully tap local retail advertisers.
Parigi says that local retailers constitute 30 per cent of his advertisers in Mumbai but he knows this isn't enough. Says Parigi: "The uptake in Mumbai of local retailers has been low. But we hope their numbers will grow."
If advertising doesn't grow swiftly, the FM stations could be in a desperate financial bind. The stations are paying crippling licence fees to the Government. For example, in Mumbai the five private FM stations have spent around Rs 80 crore (Rs 800 million) in the past one year. But they made only Rs 26 crore (Rs 260 million) from advertising.
The main problem is that they paid Rs 48 crore (Rs 480 million) as licence fee, which goes up by 15 per cent annually -- a second instalment is due in the next week. Other costs include the roughly Rs 660 an hour that is needed to buy music rights.
Datta says that Radio City earns about Rs 1,200 for a 10-second spot. But to cover basic costs he needs to earn about Rs 1,600.
The FM operators reckon they could break even in about two years if the government dropped the licence fee and substituted it with a revenue-sharing model.
Says Parigi: "About 60 per cent to 65 per cent of our losses are due to the high licence fee." Adds Tahil: "It's impossible to survive with a viable model unless the fees are rationalised."
The big industry players -- who pack plenty of clout -- are lobbying furiously to have the licence fee system altered. In fact, they met Deputy Prime Minister L K Advani this week.
They point out that the telecom industry was almost brought to its knees by unrealistically high licence fees and that the Government eventually had to change the system.
On the other plane, FM operators are aggressively trying to boost advertising. Star, for example, has launched a sales blitzkrieg aimed at around 12,000 retailers in Delhi (it has already approached 4,000 retailers in Mumbai).
Datta hopes that at least 25 per cent of his advertising revenue in the first year will come from local retailers.
Meanwhile, Red is trying a different tack. Its sales team are also offering to create the advertisements. Red is hoping that it will be able to establish itself as a leading player in the business of making ads for radio.
Says Nishchint Chawla, CEO, Radio Today (Delhi) Broadcasting Ltd: "What we are selling is innovation. We will go to the advertiser, understand his needs and create radio programming which suits his needs."
It has been a year since the first private radio stations made their tentative debut on air. Now they are moving forward aggressively -- even though they've been losing money and will continue to do so until the government tunes in to their demand to lower licence fees.
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