The private FM radio industry, still in its nascent days, had a successful year in terms of advertising revenues if the figures in the Pitch-Madison Advertising Outlook 2008 are any indication. Clocking 68 per cent growth to corner Rs 480 crore in ad revenue from the previous year’s Rs 285 crore, this high-growth media emerged as the fourth largest medium in terms of size, cornering 2.7 percent of the total advertising pie of Rs 17,690 crore in 2007.
This significant growth was driven by a number of factors such as the massive expansion of industry under the second phase of FM licensing, which saw nearly 150 new stations going on air in tier II and III towns. Another key growth driver was the establishment of radio audience measurement (RAM) that brought in a sense of objectivity to the claims of the channels with regard to their reach. The industry also saw more content differentiation and flocking of more advertisers from new categories like retailers, television channels etc.
Radio Goes Pan-India
Though there have been many significant developments in the industry that paved way for this stupendous growth, the most important growth driver was expansion of the radio footprint into tier II and III cities under the second phase of licensing that was issued in 2003. While 2006 saw the birth for several radio players, 2007 witnessed their healthy consolidation in the sector with operators like Jagran group, Bhaskar group, BAG Films, Matrubhumi, Asianet, Malayalam Manorama, and Sun TV group among others launching their operations. It also saw the birth of the first just for women station Meow FM from Radio Today. The year also saw the birth of 150 more new radio stations in over 50 towns.
Commenting on this enviable growth Red FM chief executive Abraham Thomas says, “radio is getting a lot of attention in the minds of marketers and media planners. Suddenly markets, which did not have radio, are beginning to use radio and consequently its growth at an overall level is looking better than what it actually is.”
BigFM marketing vice-president Anand Chakravarthy hopes that multiple frequencies for players in a single city would further spur growth. “With multiple stations, players can get into niche programming and offer better quality entertainment. Over a period, we will also see greater segmentation and differentiated offerings. All this will help the industry grow exponentially with more players,” he says.
RAM Brings in Objectivity
The second most important growth driver was the launch of the radio audience measurement (RAM) towards the later part of the year by TAM Media Research, which to a greater extent has addressed the shortcomings in the audience measurement, also giving a syndicated tool to the operators, albeit only in three cities. Almost all major players, including Radio Mirchi who initially contested the methodology adopted by RAM, have now adopted the measurement system.
According to the RAM data on listenership, on an average a Bangalorean spends maximum time on radio at 8.40 hours, followed by Mumbai and Delhi. In Mumbai, Red FM has 19.5 percent share leading on an average total listenership during Monday to Sunday 12.01 am-11.59 pm, followed by Radio Mirchi at 16.8 percent, with BigFM standing very close at 16.7 percent. However, Delhi, which has comparatively the lowest listenership, places Radio Mirchi at 21 percent whereas Radio One is way behind at 12.8 percent, followed by AIR FM 2 Gold at 10.3 percent. Amongst all the three cities, Bangalore has the highest listenership and Radio Mirchi scores 20.9 percent share here, followed by Big FM at 16.2 percent and Radio One at 13.2 percent.
Chakravarthy of BigFM, however,Â refuses to go by the RAM figures, saying his station has done extremely well in Delhi and Mumbai along with Bangalore. As per the RAM data (week ending October 20), Big FMâ€™s delivered reach of over 1.1 crore listeners cumulatively in Mumbai, New Delhi and Bangalore. Radio Mirchi chief operating officer Nandan Srinath observes, “our understanding from clients is that RAM has still not found acceptance and adoption. The results from across the markets continue to be amazing.”
Assessing the noteworthy developments in the space, Radio City chief executive officer and the newly instituted Association of Radio Operators of India president Apurva Purohit says, â€œthe first major milestone was the advent of RAM. The second would be the convergence of radio broadcasters across the nation under the aegis of the Association of Radio Operators of India (AROI), which will emerge as a very strong entity to work aggressively towards the progress and strengthening of this medium and industry in the years to come.”
Attributing growth to the availability of a common currency in the form of RAM the lack of which made marketers and media planners skeptical on putting money on radio, RedFM chief executive officer Abraham Thomas says, â€œsince now we have a measurement tool broadcasters are accountable and advertisers are more confident that they are spending their money in the best possible way.” Radio Today chief executive officer Anil Srivastav feels that the radio did well, primarily because of the increase in the number of stations. He however adds, â€œpeople have not understood the actual potential of the medium. Radio has a lot more to offer than just music; there are many creative ways in which radio can be used, but unfortunately, we stick to only a few popular ones and do not experiment enough with the medium.”
Content is the King
Though numerous debates and discussions on rights to air news and current affairs programmes on private stations could not reach any logical end, operators did not take this as growth deterrent, as they kept on creatig new content. ‘Talk’ or ‘Music’ or ‘Talk+Music’ was another debate that came under the scanner during the year. But a good thing that stood out was the re-found love for English music, aired by many players along with Hindi and regional language content. The year witnessed the launch of the countryâ€™s first talk-based radio station. Srivastava of Radio Today claims that this forced people to look at radio differently.
Some radio players also tried going the English+Hindi way. While Radio City added English to its content, Mid-Day’s re-branded Hindi channel, RadioOne too, turned to Hinglish in the quarter of the year, playing a handful of English songs in the night slots. The Bangalore-based Radio Indigo, which is also airing in Goa, continues to be the only radio station that remains the only complete English station in the country today.
Some stations used film associations to make more noise and most of the banner movies released in the year tied up exclusively with one radio station or the other. These partnerships proved to be a win-win situation for both the parties as they gave the much-required marketing push to both. While operators cashed in on the celebrity quotient, producers took to radio for its reach capabilities.
New Revenue Streams
Apart from on-air advertising, the industry also tried many innovative ways for revenue generation. Activations have been one of the important ways. Increasingly advertisers asked more value for their money and 360-degree solution for their campaigns. This includes the conventional radio spot and seamless integration into content on air, SMS, mobile and web digital medium and the on ground application of the same message. “Activations have become an integral part of any marketing communication today. Increasingly more and more clients are demanding a holistic approach that is where activation is playing a key role,” says Thomas of RedFM.Â However, Srivastava of Radio Today considers activation as a very small part of advertising and backs on-air-advertising as the main driver for revenue generation. On the other hand, Srinath of Radio Mirchi says, “relatively small revenue streams can be generated through content monetisation and moving content to the web and mobile. Activation is a relatively small and nascent part of the radio business, albeit growing fast.”
Industry Bullish about 2008
The year ended with a promise of an even more action-packed 2008 and on the revenue front. The Survey projects the industry to grow by 40 percent to touch Rs 672 crore in 2008, and says the share of radio in the ad pie would touch 3.2 percent in 2008. Many more radio stations are scheduled to go on air in the year, as the government has already initiatedÂ the third phase of licencing.Â The overall objective of the third phase would be to achieve 60 percent coverage of the population through FM stations.
The radio sector is poised to become an Rs 1,200-crore industry by the end of the decade, according to recent Ficci-Pricewaterhouse Coopers study. With the majority of licences in phase II going operational by the end of this year, 2008 is going to be a very good year for radio and the industry will experience dramatic expansion in its listener base leading to major growth in business and 2008 will be the tipping point for the radio industry, as per the study.
On the outlook for the industry, RedFM’s Thomas optimistically says, “it looks like a very promising and exciting year because media and advertising industry is looking for a high robust growth. Moreover, we are optimistic about our own growth too.”Â Chakravarthy adds, “we hope that news and current affairs will be opened for private broadcasters. In that case, this will lead to a new wave of growth.”
“Spends on radio have definitely gone up and radio today is the most cost-effective medium. In the FM broadcasting space, commanding higher advertising rates is the key to profitability. Radio is becoming an important part of the advertising mix today. The future will see more advertisers coming on board,” says Chakravarthy.
Radio Mirchi’s Srinath believes that the private FM business will continue to grow strongly in the coming years, and should post y-o-y growth of over 50 percent over the next three years. â€œPresuming that All India Radio revenues stay in the region of Rs 200 crore and the ad industry as a whole continues to grow at 15 percent, over the next three years, radio will constitute 6.5-7 percent of the ad industry,” he says optimistically.
Purohit of Radio City says radio would emerge as a new age option in conjunction with the Internet, activation and mobile platforms.Â With most stations set up and focused, 2008 will see radio unfurling as a truly national medium with stability seeping in for new stations.
Advertisers in the cities that got FM stations recently will discover the power of radio, and realise that it is an extremely effective medium in improving traction with their consumer base because of its immediate, engaging and interactive nature. Develop ments in the regulatory regime are likely to lead to a lot more experimentation, newer formats, music and content innovation.