Wednesday, 16 April 2014

Why don’t we have format shows on Radio!

Why don’t we have format radio shows of scale, and even if we have format shows why is it difficult to recall a single  name unlike the format shows on television, such as Fear Factor, Who Wants to be a Millionaire, Dancing with the Stars or many other such shows? Is it because of the nature of the radio as a local medium (each city having its own programming mix), or because of the economics behind it? Let us discount the fact that due to the aural nature of the medium, creativity on radio is limited. There are enough creative options to build format properties on radio.

In the case of multi city radio networks, I have seen concerted social campaigns that gained national traction and attracted public notice, be it Red FM’s ‘Dabaa Ke Bajaao’, urging the public to vote during the 2014 Lok Sabha Elections or Fever FM’s ‘Voice of Change’. Was it the magnitude of the cause behind the success of these social campaigns? Why can’t the same success with social campaigns be replicated to create format shows of national stature on radio?

These questions merit a detailed debate, beyond the scope of this post. Let us attempt an answer by taking an economic view.

We’ll make some assumptions.

Assumption 1: Contests/games format such as identify the voice, identify the song etc. are the result of a station’s own creative process. 

Assumption 2: The station uses a premium priced short code, i.e. each time you send a text to the short code, you are charged an amount typically INR 3.00 or any other  amount, which is not per your regular SMS tariff plan.

Assumption 3: The premium SMS charge is split between the telecom service provider and the short code owner (in this case the station) with telco keeping a lion’s share.

Assumption 4: The amount retained by the station is used to sponsor the prizes. For example, if the station receives 1,000 responses to a contest question on a given day on its short code, the total kitty is INR 3,000 (1,000 * INR 3.00). Assuming the revenue share is 50:50 between the telco and the station, the amount available to the station for prizes is INR 1,500.

Pretty simple, isn’t it?

Let’s add another entity to the mix. The entity that develops contest formats powered by the underlying software solutions, which integrate with various media to produce game shows that can also be played over radio. Let’s call this entity ‘contest IP provider’. Now, if a station uses the concept/format provided by this entity, the above kitty of INR 3,000 has three claimants. Assuming the share of the telco is fixed, not much is left on the table for the other two.

Is the radio ecosystem ripe enough to accommodate contest IP provider? What are the potential hurdles faced by such contest IP providers:

First, it’s an additional overhead for the station. A station has the ability to attract sponsors and advertisers even without paying extra for add ins. At best, it could be a quid pro quo wherein the station can provide air time to ‘contest IP provider’ to promote themselves, thus translating to zero dollars for the contest IP provider.

Second, even if it is a fixed license fee charged by the contest IP provider, the fee needs to be realized by the station’s sales and marketing folks when they go looking for sponsors for such licensed format shows. I believe sponsors may not be willing to pay more than what they are currently paying for air time because it increases their budgets. Sponsors may also give a pass to give high value prizes in lieu of dollars, which directly impacts the number of people who participate in the game/contest because the number of participants is proportional to the value of prizes.

Third, the SMS revenue share between telecom service providers and Radio Stations is not favorable for innovation in India. If the show goes well, the contest IP provider makes money for the telecom service providers. Not much is left for the radio station and contest IP provider, thus there is not much motivation for a station to run a licensed format show thereby incurring additional costs.

I am not into the skin of the business of radio, and would like to have your thoughts on this. Is the nature of the medium such that it does not lend itself to format/license shows of scale? Is there no room for Endemols, Celadors or Freemantles of the world on radio?

I’ll look forward to your answers.

4 comments:

  1. Interesting :). I suppose the amount of time people spend listening to radio will also be a factor. In today's fast paced world, I see that most "family people" tune in to radio only when they commute between Home & Office. The exception may be folks who stay in a shared accommodation mode that does not have TV - majority of this population will be the youth crowd. I suppose that limits the landscape for the sponsors.

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  2. Very well articulated! It is really dependent on the advertiser and producers of the show really based on their marketing strategy. Though effectiveness and reach can be extremely effective

    Nisrine

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  3. I think it is a great article that you have written. It's some thing Punch Media has been facing up front last 5 years. Everyone who has seen our software has said "WOW!!".. then when it comes to the license fees.. there are second thoughts and the "will get back to you" comment comes. Other than 2 Radio stations who are our regular partners we see that other stations are reluctant to pay us for the Add-in software.. they feel they are sharing their pie with us and we understand that they need not do that.

    The root cause of the problem is the TRAI regulations in force in India. Of the 3 INR charged to the subscriber who takes an SMS ticket,, 80 - 90% is kept by the telecom service provider and the rest is kept by the SMS gateway service provider. Nothing comes to the Radio Station and contest IP providers and also in addition to this.. the radio station pays a monthly rental fee for the keyword and short code. All this is cash outflow for the radio station and with no revenue coming back.. it is not surprising that radio stations are not keen on continuing with new formats and fall back on regular contests like guess the voice/song/movie/birthday/requests kind of content for their stations which does not require any additional tech support.

    Our format has generated more than a million SMS for one Radio Station.. but not a single paisa of this 30 Lakhs INR + additional revenue generated has gone to the radio station or the contest IP software services provider. The additional SMS traffic generated is because of the creative and aggressive promotion of the Music Jockeys and what do they get for it.. NOTHING. That is a real Killer of Innovation. Nobody wants to burn the midnight oil to generate money for someone whom you are never going to see. So back to mediocrity.. we will not rock the boat right now..gaadi chal raha hai.. chalne dho :-)

    Unless the ground rules are changed.. we will not see any Endemol or Freemantle like innovation coming from India.. We will follow the west.. with game formats like Who Wants to be a Millionaire - (Original host Chris Tarrant - have seen this program in English, Dutch, French, Hindi, Tamil, Malayalam), Big Brother, Are you Smarter than a 5th grader, Bruce's price is right.. and not to forget UK Pop Idol.. the live show I saw when I was in Belgium had around 7 million SMSs being received only for the finals.

    In UAE, the SMS revenue share is 65:35.. 65% of SMS revenue generated goes to the radio station.. enough to sponsor prizes and pay license fees and still have profits for the station. We need to move to this to encourage healthy competition in the FM radio and TV domains in India.. whether that will happen.. no Idea :-)

    Will sign off.. appreciate your insight and interest of the FM radio domain in India.. maybe you will be a catalyst of change.

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  4. Thank you a bunch for sharing this with all of us you actually realize what you are talking about! Bookmarked. Please also seek advice from my site =). We could have a hyperlink change contract between us! Sign Companies Minnesota

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