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A year that began with a bang ended in a whimper. The radio industry grew a strong 18% in the 1st quarter of FY17, a healthy 10% in the 2nd quarter and a weak 1.8% and 0.6% in the 3rd and 4th quarters. The government’s DeMonetization initiative - which will hopefully provide a long term growth impetus to our business - was responsible for this poor finish to the year. The shortage of cash affected all, big companies and small. Real Estate, FMCG, Durables, Auto, Retail....all big advertisers on radio....cut ad spends in response to DeMonetization. The only sector which upped ad spends was BFI — having directly benefited from the initiative. Even that increase was limited only to December ‘16. Thereafter, as banks got busy handling cash, their ad budgets went South. The only savior was the Government of India, which increased ad spends consistently.
The other savior - albeit a smaller one- was the roll-out of new stations launched under Phase-3. Collectively, new stations generated about Rs. 40 - 50 crores in FY17, in an industry that crossed the Rs. 2000 crores mark. New stations accounted foralmost70% of the radio industry’s muted growth in the period after DeMonetization.
I must mention here that while the impact of DeMonetization has waned, new initiatives such as RERA (Real Estate Regulatory Act) and GST have created a fresh spell of uncertainty for the corporate sector. With uncertainty comes an immediate, though temporary, cut in ad spends. Who will advertise when the distribution pipeline is dry, or when customers are staying away from the market? It is now believed that growth can only be expected during the festive season starting mid to end August. This belief also is a little shaky, considering that the impact of GST may last through FY18. These are choppy times, but hopefully, they will result in a long period of more energized growth.
You will recollect that your Company invested strongly in the Batch-1 auctions of Phase-3. We built a network of 2nd-frequencies in all major towns. We even acquired a 3rd frequency in Hyderabad. During the year, all these stations became operational. We created two new brands. The first, Mirchi 95, is what the Hindi channels in Bangalore and Hyderabad are called. The second, Mirchi Love, is the love network that we created in Hyderabad (3rd frequency), Ahmedabad, Pune, Lucknow, Kanpur, Jaipur, Surat and Nagpur (all 2nd frequencies). Further, during FY17, we became the ad selling agents for the radio stations of TV Today in Delhi, Mumbai and Kolkata, which they re-launched as Ishq FM, again a love format. Together, we now offer advertisers a love network spanning 11 of the biggest cities.
We also launched brand Mirchi in new cities Chandigarh, Kochi, Guwahati and Shillong. We are doing very well in all these markets, most of all in Chandigarh, where we have become listenership leaders. The story in the other three markets is equally encouraging. Clearly, the popularity of brand Mirchi is helping us bore our way to the top.
We have adopted a bold sales strategy in our new stations. The media business is merciless to those who price themselves cheap. Raising prices later becomes difficult. Unlike in other businesses, a launch discount scheme often ends up becoming a permanent one. We have avoided this in every market. Our pricing is pegged either to the top or at worst to the 2nd top most player. We have also kept our advertising volumes low, below 10 minutes, so as to give a superior listenership experience and attract audiences. We have been successful with this strategy. In Bangalore and Hyderabad, Mirchi 95 (Hindi) commands a price premium of 10% and 5% respectively over the Kannada and Telugu Mirchi stations. In Chandigarh, we are already the price leaders. In Mirchi Love markets, we have launched at the number-2 player price, since in most markets the number-1 player is Mirchi 98.3 itself. Our volume growth is expectedly slow, but our advertisers have started accepting our price point, understanding that less clutter makes their ads more effective.
We also bid in the Batch-2 auctions conducted in October-December ‘16 and won 21 licenses in as many new cities. These new cities have been chosen so as to strengthen our existing network in fast growing states. We will soon be present in 10 cities in Gujarat (plus 2ndfrequencies in Ahmedabad and Surat, making a total of 12 stations), 8 in Maharashtra (plus 2nd frequencies in Pune and Nagpur), 6 in TN/Puducherry, 7 in Madhya Pradesh/Chhatisgarh, 5 in AP/Telengana (plus 2nd and 3rd frequencies in Hyderabad), 4 in UP, 4 in Karnataka (with 2 frequencies in Bangalore) and 3 in West Bengal. During the year, we gave up our Goa station because of poor financial viability. At the end of all this, we will have a network of 63 cities, with a total of 73 frequencies, the biggest by far in the country!
FY17 also saw a big growth in our digital presence. We look at the digital revolution as an opportunity to extend the brand, bring in more listeners/viewers and also make more revenues. During the year, we grew our fan base on Facebook to more than 4.3 million. Our YouTube channels, in different languages, have more than 1.1 million subscribers. Our content generated nearly 200 million views last year. Our presence on Instagram and Twitter has also grown manifold. All these platforms have increased the reach of brand Mirchi way beyond that provided by the FM signals. We believe our brand’s reach could be as high as 100 million people against the 55-60 million estimated through FM radio. We reach these extra people mostly via video, made by the same creative teams that have made radio such a pleasurable experience. In addition, we now have 21 online radio stations, hosted on Gaana.com. We get an estimated 3 million online listeners per month. Online radio listenership is measured in terms of “streams” with one stream equivalent to one song heard by one listener. In FY17, we generated close to 275 million streams. Our stations were so popular that 5 of the top 10 slots on Gaana belonged to us! Finally, on revenues, the challenge in the digital business is well known. The advertising ecosystem is still emerging. However, we are innovating and trying new ways of making monies. The future holds much promise. We need to keep working at it!
While FY17 was surprised by challenges, and FY18 could remain affected by disruptions as well, the long term prognosis for consumer businesses stays positive. As the leader in this exciting segment of media, we remain front runners to make the most of the future. Our long term strategy - Mirchi Everywhere - will help us exploit new opportunities. I would like to thank all stakeholders - our loyal listeners, our supportive board members, our hard-working team members, our business partners, the government, the regulatory authorities and most of all, you, our trusting shareholders. We will continue, as always, to live up to the confidence you have reposed in us.
Managing Director & CEO