Friday, 3 February 2012

I can’t text as it’s my song that they are gonna play..!!

Recently Uninor tied up with RedFM and Hungama Mobile to offer RedFM on Mobile.
How it works?
Uninor subscribers dial the toll free number 55935 from their Uninor mobile and select their favorite RedFM station stream. Favorite RedFM station stream…? Yes, if I am a Uninor subscriber based in Bangalore, I can dial 55935 and listen to what RedFM is playing in Chennai or Pune or Kolkata….. Isn’t it cool  (FYI…The RedFM city specific radio streams that are made available to Uninor subscribers are Delhi, Pune, Ahmedabad, Mumbai, Kolkata, Jamshedpur, Chennai and Bangalore).
Pricing:
The subscription charges are INR 10.00/week, bundled with free 100 minutes of service usage. This is the upper end of the subscription plan. The subscription starts at INR 1.00/-.
Eco-system Players:
Uninor – Brings in the capability to bill/collect monies from the end users and provide access to its (approximately) 33 million subscriber base.
Hungama Mobile – Platform Provider/System Integrator – Integrates RedFM content feed with Uninor.
RedFM – Provides programming and content.
Music Labels – Providers/Owners of music content that flows through Uninor’s toll free number 55935.
What this tie-up means for RedFM?
As per the conditions of the license granted by Government of India (GoI) to operate a FM station, FM players are allowed free to air broadcasts on main carrier and data on sub-carriers only. As far as terrestrial radio is concerned, the only manner in which the radio station can make any money is by selling advertisement slots.
However mobile value added services offer radio stations such as RedFM,
-         Additional revenue stream, via subscription revenues.
-         Ability to distribute content in regions where they still do not have a terrestrial presence.
-         Ability to leverage brand RedFM and the equity earned by some of its prominent RJs with their listeners, e.g RJ Mallishka, in regions where RedFM does not have a terrestrial presence.
-         Experiment with programming and content to gather a rich data set on consumer preferences.
-         Sample consumer preference in towns where RedFM does not have a presence (ahead of Phase III FM license auctions).
-         Audience measurement and
-         Ability to offer “airplay” to music from fledgling Music Labels such as Talent Roof Records, assuming that the feed on mobile is programmed differently from the main terrestrial FM Channel(s) of RedFM.
What I could not gather from the public domain about this tie-up is,
1.      What are the charges levied to subscribers once they have exhausted their first 100 minutes of free radio stream? I also assume that the browsing duration is included in the free minutes of usage, thus effectively bringing down the actual free minutes available for listening of music.
2.      Is RedFM offering a linear feed/simulcast of their existing stations or is the programming tailor made for mobile? If it is tailor made for mobile, what is the %age of RJ Talk/Advertisements (if any) with reference to (say) every 15 minutes of programming?
3.      Apart from the current 8 stations, does RedFM plan to add more stations to the toll free number 55935?
4.      Is the tie up exclusive between RedFM and Uninor, or Uninor can also bring other FM brands? Alternatively, can RedFM launch this offering with other Telco’s? If not, what is the period of exclusivity with Uninor?
Who promotes the Service?
Being the only media organization among the Eco-system players, there is a natural expectation from RedFM to promote this service on its media vehicles of Radio (Advertisement Slots/RJ mention), Internet (Website/Social Media Presence) and SMS Footer Messages. But it will be interesting to note if this expectation has translated to a favorable revenue share for RedFM.
How much does RedFM actually earn?
Assume,
·         Each Eco-system player gets an equal revenue share @ 33.33%.
·         The number of Uninor subscribers as 33,000,000.
·         2% of these subscribers sample the service over a three month period and each of them spend an average amount of INR 5.00 to avail this service.
Therefore, revenue over a three month period is 33,000,000 x 2% x INR 5.00 = INR 33,00,000/-.
Share of RedFM equals (INR 33,00,000) / (3 Eco-System Players) = INR 11,00,000/-. As the calculation considers a three month horizon, the monthly gross revenue accrued to RedFM = INR 11,00,000 / 3 months = INR 3,66,667/month.
Music Royalties – Now comes the hard part, necessitating the need to benchmark our assumption on certain established practices. Let’s assume that RedFM pays out 18% to 30% of its gross receipts as revenue share to Music Labels, which is in line with the current established practice within the Mobile VAS eco-system, wherein the Telco shares a % of End User Price with the content aggregator and the content aggregator in turn shares a % of its receipts with the content owner. Off course there are levers available to each of them (content aggregator and content owner) to get a better bargain, but let’s keep that aside from the current discussion. Assume an average payout of 25% from the gross receipts of RedFM to Music Labels, therefore the amount payable towards Music Royalties equals INR 3,66,667 x 25% = INR 91,667/-.
Personnel Cost - For programming the feed, revenue reconciliation, maintaining additional paperwork for Music Royalty Agreements on mobile platforms etc. Let’s assume this effort @ INR 40,000 per month.
Promotion of Service - Assuming an average rate of INR 500 per 10 second spot and 4 spots a day for 30 days in a month (across RedFM stations). The cost for advertising this offering comes out to INR 500 x 4 Spots x 30 Days = INR 60,000/-.
Therefore, the net income stands at INR 3,66,667 – INR 91,667 (Music Royalties) – INR 40,000 (Personnel Costs) – INR 60,000 (Advertising Spots for promoting the service) = INR 175,000/-.
I have also assumed that the above income does not get added to Gross Revenue of RedFM’s FM radio channel(s); otherwise it will be factored towards the calculation of the Annual Fee to be paid to the Government of India, charged @ 4% of Gross Revenue. Assuming the latter statement to be true, the net income will stand at:
INR 3,66,667 – INR 91,667 (Music Royalties) – INR 40,000 (Personnel Costs) – INR 60,000 (Advertising Spots for promoting the service) – INR 14,667 (4% Gross Revenue payable to GoI) = INR 1,60,333/-.
Well, the above calculation is based upon lot of assumptions and theory. But it gives a generic idea on the commercial success / failure of this tie up of RedFM with Uninor. Also the organizational objectives in this case, especially at the start of the service, may not be completely weighed towards commercial factors.
It will be interesting to see how this service is adopted by Uninor subscribers and pans out across India.
Disclaimer:  All company, brand and product names mentioned here are trademarks of their respective holders / individual parent companies.

3 comments:

  1. Hi Himanshu,

    Great insights and observation. Innovative thought by Uninor and RedFM. Would be interesting to know if they are planning to have different programming on mobile platform, would help labels like us.

    Very nicely written.

    ReplyDelete
  2. Hey , That is really superb in-detail info... Nice Tie-up they made.... and nicely explained by you...

    ReplyDelete
  3. Hey , That is really superb in-detail info... Nice Tie-up they made.... and nicely explained by you...

    - Nishi

    ReplyDelete

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