Such A Deep Trough

Ask someone in the media what FM stands for, circa November 2000, and chances are the answer you'll get isn't Frequency Modulation, but Fine Mess. Stringent contractual clauses, high desertion rates and lawsuits have tied what was being seen as The Next Big Thing in broadcasting into several gordian knots. Barely seven months ago, the government opened FM channels to private broadcasters, hoping to have multi-level operations in 40 cities across the country. Today, the I&B ministry admits the much-hyped FM magic will take at least another year to materialise. And that date could also be optimistic.
Sadly, this is happening while there's a global boom in both FM and AM channels. In the US, FM advertising last year accounted for 12 per cent of the country's total advertising pie, while in the UK, it was 11 per cent. Yet, India seems to have been consistently botching its FM policy for years.
Everything was fine till mid-'98. The market was growing, and private operators running FM channels in the metros were pulling in Rs 30-40 crore worth of advertising per year. Then, suddenly, M.S. Gill, Prasar Bharati chairman in the Gujral government, told broadcasters like Times FM and Radio Mid-day to down shutters because the government had, well, just changed its mind. All India Radio (air) was now to be in charge of the new medium. Many observers, however, felt that this decision was prompted by active lobbying by a TV software company and a private TV channel which were very keen to join the bandwagon. But the fact remains that in air's able hands, FM advertising revenues fell to less than Rs 1.5 crore the following year.
The Vajpayee government realised the folly, ejected Gill, and announced an ambitious FM privatisation plan, asking private operators to bid for FM broadcasting licenses. Even foreign equity was allowed subject to a 20 per cent cap. Hordes of companies applied, including every major media player in the country. But today, they're also dropping out in hordes, citing what they claim are gross anomalies in the license agreement. Only a handful of applicants—seasoned players like Bennett, Coleman and Mid-Day Publications, and newcomers Living Media, Millennium Broadcast, P.K. Mittal's Music Broadcast and Sumangali (parent company of Sun TV)—seem to be still interested. The government has received bank guarantees for less than half of the licenses: just 40 out of 108. And worse, Zee is locked in a legal tussle with the ministry and is seeking refund of its early money deposit (emd, to be paid up as evidence of capital adequacy) and advance licence fee amounting to Rs 10 crore.
Though New Media head Deepak Shourie refused to comment as the case was sub-judice, Zee insiders say the reason for backing out is that had New Media got into FM, it'd have had to produce bank guarantees worth about Rs 90 crore for licences it won in as many as 29 cities.
Manjari Kamath, media director, hta, feels those getting into the FM business need to realise that open skies won't mean a cloudburst of profits. "The license fee is high, which means the operator's timeframe to recover the amount will extend beyond seven years. Besides, FM is not a mass but a niche market," he says. So it may be a case of companies realising now that they were wildly optimistic when they bid large amounts for FM licenses. They want to wriggle out of this now. Reliance's Observer Network, for instance, announced grandiose plans for both radio and television, having acquired Amit Khanna's Plus Channel lock, stock and barrel and recruited an army of professionals from various channels for its electronic media business.But now, the Ambanis have sent a letter to the ministry stating they would not be able to pay the bank guarantee because of agreement anomalies. Insiders feel that Reliance is waiting to see the outcome of the tussle between the ministry and New Media before seeking refund of its Rs 3 crore emd.
Even as it speaks of allowing the private sector to rule the FM waves, the government is hardly giving up control. The agreement has clauses like a strict ban on news and current affairs programming, that operators cannot sell their licenses before 10 years, and that operators can't also be in the TV business. "It seems both the ministry and the players went in with their eyes wide shut. Now the government will face a lot of difficulties in re-auctioning the slots: one operator having paid Rs 7 crore for a city and another picking up the slot in the auction for less. Won't the former raise objections?" asks an observer.

But the ministry remains confident of the FM magic. Senior officials say that Information and Broadcasting Minister Sushma Swaraj recently met a few parties and agreed to extend the date of submission of license fees to October 30. But this has not resolved the stalemate. "It's not a catastrophe as people are making it out to be. About 40 operators have submitted their bank guarantees and hopefully, FM operations should start bythe end of 2001," says I&B secretary Y.N. Chaturvedi. He also justifies the10-year ban on license sale and the government's retaining control over newsand current affairs. "The first private FM was an experiment which had to change to allow other participants to join the fray," he says. "Besides, broadcasting is serious business wherein one can shape people's values and should not be compared with any other industry."
But industry analysts differ. They feel that firstly, Prasar Bharati should not have abruptly closed down private FM and then continued its own operations for nearly a year. Secondly, even if the licensing process—which involves steep charges formulated by the ministry—start by March next year, actual programming will take another four to five months. Hence, the breakeven point would become visible only after seven to eight years. Besides, the government will have to work out the new advertising code for FM. "And this could be crucial because there's satellite television, and then there is broadband and web radio coming up," says Kamath, adding that "unlike last time, all those coming in won't like to take their FM business as a learning experience."
Rightly so. And given the current status, both sides appear to have halted in their tracks: private operators who are unsure of whether FM is good business and the ministry, which is desperately trying to achieve its dream of ushering in the continent's largest radio explosion.