Radio Mirchi - Spicing up the Indian Air Waves


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Case Details:

Case Code : MKTG124
Case Length : 16 Pages
Period : 2000 - 2006
Pub Date : 2006
Teaching Note :Not Available
Organization : -
Industry : FM Radio
Countries : India

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

The First Wave of FM Radio Privatization

In July 1999, the GoI decided to privatize the FM radio sector in keeping with Supreme Court directions and commitments laid down in the Ninth Five year plan. The GoI offered licenses for a 10-year period, charging a license fee with a 15% annual hike (Refer Exhibit II for policy guidelines for phase I of FM privatization)...

The Second Wave of FM Radio Privatization

The losses, caused by the irrationally high license fees, gradually worsened the situation and in June 2003, Go 92.5 FM sent a conditional notice to the GoI threatening to close operations if it did not change its policies. Radio broadcasters, including Radio Mirchi, started pressurizing the GoI for a policy change and on July 24, 2003, the GoI constituted a committee, Radio Task Force, headed by Dr. Amit Mitra, General Secretary, FICCI to study the FM radio industry and make recommendations for change in the licensing regime...

New Challenges

The policy guidelines in the second phase of FM privatization were seen as a major step in making FM radio viable. Financial viability was expected to allow radio stations to shift to more varied programming and hence deliver more choice and options to the Indian listener. “Diverse program formats have not emerged because of a regulated environment and a huge payout to the government”, said Steve England (England), owner of S2blue...

Outlook

Radio Mirchi was quite optimistic about the new policy changes in the FM industry. In the changed scenario, where license fees would be half the amount that was being paid earlier, Radio Mirchi expected to earn healthy profits. The company had also taken measures to reduce the ratio of its employee cost to total income from 99% in 2002 to 21% in 2005. Its administrative expenses (as a % of total income) for the same period were brought down from a high of 174% to 34%. In October 2005, it set off its accumulated losses against its share capital and securities premium account through a reduction in issued and paid up capital...

Exhibits

Exhibit I: Some Interesting Facts about Radio in India
Exhibit II: Policy Guidelines for Phase I of FM Privatisation
Exhibit III: Private FM Radio Channels in Various Cities (Phase I)
Exhibit IV: Listenership Statistics in Mumbai and Delhi
Exhibit V: Financial Status of Radio Mirchi
Exhibit VI: Policy Guidelines for Phase II of FM Privatisation
Exhibit VII: Some New Players in Phase II of Fm Radio Privatisation



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