FM Radio Industry Shows Growth In 2017 Credit May Go To Digitization

As per the research company, Radio forms 3.6 per cent of the total advertising pie in India, with ad spends on the medium clocking up Rs 1,545 crore. However, in terms of growth rate, radio showed the best growth rate (13.2 per cent) after digitisation (42.9 per cent). For 2017, the report forecasts a growth of 15 per cent to take radio ad spends close to Rs 2,000 crore. One of the major reasons that came out was the expansion of private FM due to Phase III, which is set to turn radio into a truly pan-India medium.

“Our estimate is in sync with the research company Report. Today, radio has become an integral part of all media plans. The top growth factors according to us are Phase III implementations, which are starting broadcast now, government spending on radio, which has increased, and increased advertising by e-commerce, especially digital wallets,” said Harrish Bhatia, CEO of My FM.

Satyanarayana Murthy, CEO of Radio Indigo, also agreed that a 15 per cent growth was quite possible and pointed out that markets have enough elasticity to not just foster additional inventories of the new stations, but also sustain growth. “With the GDP growth sustaining at 7 per cent and a projection of 7.5 per cent, and enough indices showing robust growth, we are confident that radio would grow at a 12-15 per cent CAGR,” he said.

According to Prashant Panday, MD & CEO of Radio Mirchi, one of the major reasons for growth are the new stations coming up under Phase III.  He also stated that the generally poor economic conditions (despite claims of 7 per cent+ GDP growth) was a reason as this resulted in advertisers spending more on promotions than brand building, helping radio growth. “Other reasons include fast growth in population that is out of home (car population rising, more traffic on roads, no entertainment on public transport, etc) leading to a captive audience for radio and radio being the best way to reach rich audiences (car listenership, long hours) and those actually interested in shopping (last medium consumed before entering a shop). There are other reasons as well. However, the radio industry has managed growth by increasing advertising inventory, not by increasing prices. That will now reverse in the years ahead,” he opined.

Tarun Katial, CEO of Reliance Broadcast Network Limited (RBNL), which runs 92.7 Big FM, also said expansion into new geographies with launch of new stations will help radio. “Radio advertising growth will be driven by increasing spends from FMCG, BFSI, auto, media, and retail. The launch of new stations will expand the target audience while resulting in a wider reach. Lastly, a push towards measurement across more markets will only add to the growing radio ad spends for the year,” he said.

Post demonetization growth

Like all mediums, radio also suffered as business sentiment reduced in the months post demonetization. Though there was some relief as digital wallets, government, BFSI, etc., increased spending on the medium, but the effects of demonetization continued to be felt in Q1 of 2017. However, the general feeling is that this is now a thing of the past. “Radio has always been a spontaneous, engaging medium with instant results, be it with listeners, products, or the radio station itself. 2017 looks to be a very good year for radio, with more channels in the offering, retail opening up spends after demonetization, 360-degree solutions becoming the norm, it’s a very positive outlook; moreover, digital growing leaps is very beneficial to the growth of radio in terms of innovation and engagement on the digital sphere,” said Jimmy Tangree, Head of 91.9 Friends FM.

“The impact of demonetization has been very high on media companies. November 2016 was a terrible month, of course. But the impact of demonetization is being felt in Jan-March also. Only December 2016 was good, because payment apps, banks, and the government itself spent a lot on advertising. Since December, even they have stopped advertising. Our belief is that advertisers are cutting ad spends in Jan-March 2017 to manage their profit goals. They’ll be back in April 2017,” opined Panday.

Ad fatigue

Owing to growing ad fatigue among listeners, private radio stations across the country are revisiting their advertising volume and ad rates to expand listenership and increase revenue. Some of the leading FM radio players have cut down on their commercial time from 15-18 minutes (on an average) per hour to approximately 10 minutes an hour to counter ad fatigue. FM brand Radio Mirchi, owned by Entertainment Network India Ltd (ENIL) has capped commercial time on its stations at 10 minutes per hour, simultaneously increasing its ad rates by 5% in the markets where it has been present for long. In new markets such as Bengaluru, Kochi, Guwahati that it has entered recently, the company has attached a premium to the ad rates as compared to competition. Additionally, Radio Mirchi is also looking to bring down its peak season (festive season) advertising from 22 minutes per hour to 18 minutes this year.

“One constant complaint we got from listeners was that radio stations play too many ads. In order to stem this problem, we decided to cut the inventory down. I expect our average (peak season) to eventually come down to 10 minutes per hour,” said Prashant Panday, chief executive at ENIL, the radio broadcasting unit of Bennett Coleman & Co. Ltd. DB Corp Ltd-owned radio brand 94.3 My FM has announced a hike of 25% in its ad rates effective 1 April 2017 and is looking to cut down advertising time to 10 minutes per hour from the current 15. “Customer experience cannot be compromised which is why it is not possible to increase the inventory beyond a point. We need to ensure that listeners keep coming to radio. We have to reduce the inventory and raise the rates to strike a balance,” said Harrish M. Bhatia, chief executive officer at My FM.

Currently, FM radio companies charge anywhere between Rs300 and Rs4,000 per 10 seconds in cities like Delhi and Mumbai (depending on the time and programme), while the ad rates in remote areas go as low as Rs25 per 10 seconds. Taking a cue from Radio Mirchi and My FM, Sun group-owned 93.5 Red FM is also looking to hike ad rates on its network and go easy on ad volume during festive season. “We also have plans to increase our rate. We will be announcing it soon. That’s the only way forward for radio,” said Nisha Narayanan, chief operating officer at Red FM, adding that advertising during festive season goes as high as 24 minutes per hour.

Media experts say that radio companies can afford to do so because of the increase in number of FM stations. “Radio companies were limited in terms of frequencies and that led to shortage of inventory. With phase 3 licensing, that pressure is somewhat reduced and now radio companies can spread inventory minutes across more channels,” explained Ashish Pherwani, media and entertainment advisory leader at EY India. Additionally, fewer commercials will lead to increased listenership, giving advertisers value for their money. “As a result of short ad breaks, listenership will actually increase. It’s a win-win for all—advertisers because the ad works more powerfully, listeners because they have a far better experience and us because our listenership will grow,” said Panday of ENIL. However, not everyone is sold on the idea of cutting back on commercial time. Reliance Broadcast Network Ltd-owned 92.7 Big FM and HT Media Ltd-owned FM brands Fever and Nasha have refrained from making changes.

“We have been much disciplined about our advertising time. For many years, we have maintained 20 minutes threshold on prime time. Everything else (non-prime time ad time) is even lower. We are not changing anything as of now but it’s good that the industry is looking at the cut for better customer experience,” said Tarun Katial, chief executive of Reliance Broadcast Network Ltd (RBNL). Harshad Jain, chief executive, radio and entertainment, HT Media, agreed: “We run extremely strict inventory norms on both stations. For us, there is hardly scope for change. However, tighter inventory check and control is an ongoing endeavour for both stations. For instance on Radio Nasha we have only 3 premium ad breaks in an hour, 2 ad breaks in the afternoon slot and we play maximum songs per hour. This has propelled Radio Nasha to become the destination station for listeners and ensured that when a listener tunes in to Radio Nasha, he doesn’t tune out,” he said. In November, RBNL sold a 49% stake in its radio business to Zee Media Corp. Ltd. The deal is subject to regulatory approvals. HT Media, the publisher of Mint, competes with other radio firms in several markets. The radio industry is expected to record a compound annual growth rate of 16.1% between 2016 and 2021 and is projected to touch Rs4,780 crore by 2021, according to a report titled Media for the masses: The promise unfolds by consulting firm KPMG and lobby group Federation of Indian Chambers of Commerce and Industry. Currently, the industry is valued at Rs2,270 crore.

Conclusion

Though the year might be looking positive from Q2 onwards, there are still a number of issues that the radio industry would like to see the back of. Most of these relate to ongoing tussles with the government regarding news broadcast, high license costs, etc. “The biggest challenge remains the viability of smaller radio stations. If we really want Phase III to be successful and radio to reach all corners of the nation, we simply cannot ignore this issue. Talking about Odisha, we have been waiting for Phase III to happen for the last eight years now. How do we keep growing without enhancing our reach? And the government has been consistently ignoring all our demands, be it about news on radio, reasonable base price, etc. I feel this is the right time for us to come together as an industry to establish radio as an affordable, effective, and creative mass medium by creating more awareness among advertisers, designing creative content, and engaging with events. These are really simple things that we have always talked about but are extremely essential,” explained Tanaya Patnaik, Executive Director, Radio Choklate 104FM.

Apart from this, the radio industry will need to realign its focus to emerging cities and the smaller towns as the major metros get saturated. For example, Vineet Singh Hukmani, MD & CEO of 94.3 Radio One, opined that the top 10 metros will not see more than 3-4 per cent growth. “While radio revenues may grow about 12 per cent if the market improves, this revenue will come from the newer 100+ stations, which are cheaper priced stations in the BCD category towns. On a total inventory increase of over 60 per cent on an all-India basis, the revenue growth will only be 13 per cent. The cost of acquiring this revenue has gone up significantly as radio companies burn rate of cost due to new stations has gone much higher than their earn rate. What is needed is an upward price revision in the older established Phase II stations to bring back profitable growth versus topline growth at increased losses.”

Related posts