FM Radio Business in India

FM Radio Business

Fearing a drop in listenership as listeners move to OTT music streaming space, private FM radio broadcasters are now airing fewer advertisements. From 18-20 minutes for every 60 minutes of programming, advertisements now account for just about a fourth of the time every hour. However, in an effort to protect their toplines they’ve upped advertising rates by about 7-8%. In some smaller markets, the rates are up by as much as 20%. In absolute numbers, though, the increase isn’t too much because prime time spots in the metros cost between Rs 800 and Rs 1,200 while in the smaller towns the rates are only Rs 200 to Rs 300.

But the strategy has cost stations some revenue, concedes Prashant Panday, MD and CEO, Entertainment Network India (ENIL), which runs Radio Mirchi stations. “In our opinion, that’s a temporary loss, given the listenership has strengthened after this initiative,” Panday observed. Panday added that on some of his stations advertisements are down to ten minutes an hour and it’s paying off. “We have emerged the number one station in Chandigarh beating two well entrenched players,” he said. Given how music streaming apps are now easy to access with the sharp fall in data bandwidth charges, radio stations may not have an option but to keep ads to the minimum.

As Rohit Dokania, VP, research, IDFC Securities, explains “listeners are more likely to switch to streaming apps because the costs are falling”. Nisha Narayanan, COO, RED FM, which is owned by Sun Group, confirms that listeners are complaining about the large number of advertisements and believes capping ad inventory is the only way to build a differentiated product. Asheesh Chatterjee, CFO, Reliance Broadcast Network, too feels listeners views’ must be heeded even if the rules don’t call for a cap on ad inventory for radio broadcasting. He believes it’s easier to broadcast fewer ads now because post the Phase III auctions, the inventory has increased. “With fewer stations it was hard to sustain the business without 18-20 minutes of advertising,” Chatterjee said.

The metros, of course, continue to be the bigger revenue generating markets. And broadcasters are trying to beef up weekend programming to try and earn more revenues. Apurva Purohit, president, Jagran Prakashan, which runs Radio City stations, says she is trying to build up weekend advertising inventory by creating special shows. This follows from an AC Nielsen study which found that listeners spent almost as much time listening to the radio on the weekends as they did on weekdays.

Sun Group’s Narayanan is focusing on events to drive revenues. “Projects such as Yellow Taxi Music not only help enhance the image of our brand, they also generate revenue. The idea is to gradually reduce the dependency on radio advertising and create additional revenue streams,” Narayanan explains. The Indian Readership Survey reveals listenership in the 11 am to 2 pm time band is as strong as it is in the morning and evening though there is a slight drop in during the afternoons.

Future

Hyper local advertising on radio will see huge growth in next 5 years. Radio is the second most accessed media platform, with listeners tuning in five days a week, says a study conducted by market research firm Nielsen. The market research report states that mobile phone is the most used device to access the radio and the medium is driving maximum awareness for advertisements across categories. Radio also has the maximum reach. Media analyst like Abraham Thomas, CEO of Radio City, and L V Krishnan, CEO, TAM Media Research discuss the findings of the report and understand the future and its credibility.

“We took Mumbai as ‘metro’ and Lucknow as ‘mini-metro’ and carried out the study across these two markets to understand how radio shapes up as a medium,” said Abraham Thomas, CEO of Radio City. He said “market research report’ is an initiative that we have been carrying out to evangelize the medium. Among all conventional broadcast media, radio clearly seems to be growing the fastest. Radio is actually coming into its own now. It is probably the only medium that seamlessly integrates with digital and on-ground, and therefore, it now has a different role compared to what it had earlier. Radio used to be a mantelpiece medium in the beginning, but it has now reached mobile phones. It has now become more active and engaging. We thought we should validate all these factors. And so we got Nielsen to do a detailed study on the power of radio. There are two parts of the presentation. One is about the power of the medium itself, where is it consumed and how is it consumed. The second part is about how it increases the reach of advertising. Fake and unratified news is a major concern for print and TV. In this scenario, an RJ’s role has been enhanced for greater trust and credibility. Radio ranks higher than print in terms of trust and credibility.”

He also said “When we started private radio 15 years ago, it was common for advertisers to prefer us for audio ads over TV. Today, we receive 12 different creatives from one brand for different regions. So not just the language but even creatives differ from region to region. One of the reasons why radio is growing is because local advertising is growing. There are intrinsic preferences when it comes to listening radio on air and on the internet. Listening radio on air has its own benefits: it is local, it is live, and it is through a trusted friend or companion in the form of a RJ who has earned the trust of listeners over the years. Online has its own strengths: you have the option of making your own playlist. But studies suggest that people prefer existing playlists such as ‘Editor’s Picks’. So intrinsically the two mediums are different but they seamlessly integrate. RJs have now become influencers. Brands are increasingly going towards influencer marketing.”

He also said “Budgets allocated for radio is 4-5% of the total amount. This has scope for growth. With local and national ads increasing, we see growth in this sphere. And that is why we have been carrying out the ‘Power of Radio’ study across markets to popularise the medium.”

L V Krishnan, CEO, TAM Media Research, to discuss the findings of the report & said “There are multiple ways in which one can use this medium for advertising – one is to use it through airtime, while the other way is the RJ promoting a brand. The trust that consumers have in RJs can lead to powerful communication. Radio provides a hyper local approach to advertising, something that print, TV or social media cannot. In radio, the content is localized, the talk is localized and it connects with the listeners. Hyper local advertising on radio will witness a huge growth in the next five years and this is where radio can capitalize. Around 10 years ago, 75% of the ads on radio were national. Today, 55% is local. The only medium competing with radio in terms of localization is print. For example, Jagran alone has 250 hyper local editions in UP.”

He also said “I have a different perspective on radio ad budgets. Getting 4-5% share of the ad spends is not bad as long as you are growing faster than the average ad growth. There are only two mediums which are growing above the ad growth– digital and radio. So, sooner or later, the share will grow. If you look at digital and TV, the number of networks in the market is humongous. In radio, though we have around 800 stations, there are only five networks– AIR, City, Fever, Red, BIG.”

New Investment

HT Media, the company that publishes the Hindustan Times newspaper, said it obtained approval from its board of directors to invest another Rs 400 cr into its FM business. The company operates ‘Fever 104’ FM stations in over a dozen cities in India. However, it is dwarfed by competitors like Radio Mirchi from the Times of India group, which is present in over 32 markets, including outside India. A wider footprint is crucial to winning national advertising campaigns from brands and political parties. HT Media did not clarify the specific purposes for which the funds will be used, except to say that it will be to fund ‘expansion/ growth opportunities in the FM radio business vertical’.

The company is present in print, radio and digital news. Out of the three, radio is the only division that did not show a revenue decline for the three months ended March. While digital revenues plunged to Rs 29 cr from Rs 39 cr last year and print revenue declined by 2%, radio revenue remained stable Rs 45 cr. Moreover, the company has been seeing steady improvement in the operating profit margin of its radio business as it is able to ramp up the relatively younger division. For the last quarter, for example, profit before interest and tax was 42% of revenue, compared to 13% a year ago.

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