Radio played a happy tune in the year 2010. Unlike 2009, the advertisers seemed quite upbeat about this medium in 2010. The total advertising revenue of radio in the year clocked an impressive Rs 885 crore, significantly higher than Rs 681 crore in 2009.
The year 2010 was a year of recovery for radio and the medium has grown faster than any other medium, except the internet. The overall ad pie stood at Rs 23,646 crore and radioâ€™s share in this was 3.7 per cent in 2010, slightly up from its share in 2009, which was 3.6 per cent. It surpassed the predicted growth rate of 20 per cent and grew at a robust rate of 30 per cent in 2010.
In sharp contrast, the growth for this medium, in 2009, was only three per cent. Ashit Kukian, COO, Radio City 91.1 FM, says, â€œLast year, we were all emerging from a slowdown phase, hence the industry witnessed a trend in growth. Radio as a sector was amongst the few media vehicles that grew last year. Thanks to our high quality relationships and performance delivery to the advertiser, we registered a 30 per cent growth in our top line.â€
However, the growth of radio is still some way away from the boom times of 2008 and earlier. Prashant Panday, CEO, Radio Mirchi sheds some more light on this. â€œIt is true that revenue growth has picked up again, but the quality of this growth is poorer than it was in 2008. Todayâ€™s growth is led largely by volumes. In 2008, it was a balance of pricing and volumes. Those players who have spare volumes available have tended to grow faster compared to those who rely on price increases,â€ he says.
Think solutions, not FCTs
Innovations have clearly played a very important role in boosting the top lines of FM players. Experts agree that innovations bring in a premium for the FM stations. And the extent to which they bring in the premium is completely dependent on the kind of innovation and its engagement with the listeners.
Talking about innovations, RED FMâ€™s tie up with Nokia on its 15th anniversary to celebrate Nokia Day on July 30 (in 2010), got an overwhelming response. The FM station created a 17 hour programming roadblock for Nokia. The initiative encouraged listeners to share their Nokia moments on Red FM on the day.
Even the three-day launch campaign of the new Wagon-R on the FM station, is worth mentioning. Red FM changed its name to Blue FM for a day. The stations jingle and RJ sign-offs were Also modified accordingly. The idea was to highlight WagonRâ€™s new positioning of â€˜The blue eyed boyâ€™.
Maruti Suzuki did a similar campaign with Radio City to promote the CNG variants of its vehicles. The campaign was called â€˜Green n Clean is the way of lifeâ€™ and for one day, Radio City changed its name to Green City.
And why not? After all, innovation in advertising indeed leads to better results for the advertiser and hence commands a premium over regular advertising both on account of the quality of creativity and customisation of radio content for executing such an innovation. Harrish M Bhatia, CEO, My FM, agrees, â€œWe charged a considerable premium from advertisers on all our innovations and none of the advertisers I would say, had any issue shelling out that extra money as they knew that associating with these outstanding innovations would not only give them a better reach but also strengthen their campaign message in the minds of the end consumers.â€ In short, innovation is the way to bring in premiums and large market shares in the radio space. Radio Mirchiâ€™s Panday, stresses on the importance of this, â€œInnovations is a continuous process in our business. We have a dedicated team called Creative Services Team that focuses on client integrations and client ideation for radio campaigns. Itâ€™s headed by one of our senior most and most creative programming people.â€
Amongst advertisers, telecom service providers, like 2009, beat all, to emerge as the top advertisers on the medium. Their share â€“ seven per cent â€“ to radio, equals their contribution in 2009. Independent retailers and properties/real estates follow telecom, with a contribution of six per cent, each. TV channels were another significant advertising category on this medium with a share of five per cent.
Though, financial services isnâ€™t in the top ten advertising categories on the medium,Â yet a lot of financial institutions have started betting big on this medium. Ajay Kakar, Chief Marketing Officer, Financial Services, Aditya Birla Group, says, â€œThe Aditya Birla Group â€“ Financial Services, is in a mass acquisition phase. But we still use the radio medium for local support and activation. It gets our message across, even when he is on the move. I would still like this medium to attract more of our budgets.â€
One reason for financial services using this medium is that it reaches out to the service class, the salaried people, and basically to people who would look forward to buying financial products. So, the graph of radio for financial product advertising is getting bigger and better. Abraham Alapatt, Head – Brand and Corporate Communications, Future Generali, sheds more light on this. He says, â€œRadio (FM) is a powerful media that helps directly and relatively cost-effectively to reach out to many office-goers in larger cities during their commute to and from work, and is, therefore, very important to use for campaigns like the Insurance Week, which require a large, quick and effective reach to Chief Wage Earners (CWE), youth and opinion leaders to spread awareness. Even otherwise, as insurers, our need is to reach out to the bread-winner and opinion leader of a family unit, and radio is a very effective media for this. Innovative scripts and ideas are key to making the use of the media more effective as innovation, humour, etc., can help get disproportionate attention in this media.â€
The insurance company spends 6.25 per cent of its marketing budget on radio, which is impressive keeping in mind the fact that radioâ€™s over all share in ad pie is 3.7 per cent. Also, the company used FM radio extensively to promote its Insurance Week.
Laxmikant Gupta, Chief Marketing Officer, LG Electronics India, feels that though radio spends are quite low, with an increase in the number of geographies covered, there is a strong likelihood of the spends going up. â€œRadio has a significant share in our media mix, and is used as a tactical communication tool for creating awareness about our products and services,â€ he says.
Similarly, United Breweries spends around five per cent of its media budgets on radio, which is about 1.3 per cent higher than the mediumâ€™s share in the total ad pie. â€œRadio works well for initiatives that require immediate attention and instant gratification,â€ says Samar Singh Sheikhawat, Senior, VP, Marketing, United Breweries.
Local vs National advertisers
An interesting pattern is seen in the contribution from national and local advertisers in the total revenues of radio. According to the Radio AdEx data, across the four metros, the local advertisers account for nearly 75 per cent of the total advertising on radio and a market like Chennai is even more skewed towards the local advertisers. However, when Pitch approached the radio stations and asked them about the ratio of local and national advertising revenues, there was a strong disparity in their responses. Stations focused in regional areas (like My FM) said that local advertisers have a higher share in the radio revenue pie to be around 60 per cent. My FMâ€™s Bhatia reiterates, â€œIn our markets, local retail advertisers continue to rule radio spots, and My FM corners 51 per cent share of their spends.â€
On the contrary, stations with large networks and a strong presence in metros and big towns state that national advertisers have a larger share in their revenue pie, as much as 60-65 per cent. This difference in the ratio may be because of the fact that local or retail advertisers buy ad spots on stations in a particular geographical area, hence, a local station of that area may appeal more to them. In comparison, national advertisers largely buy on the basis of the network of the radio broadcaster. Hence, stations spread across the country are able to lure more national advertisers. However, even bigger networks like Radio Mirchi and Radio City agree that though currently national advertisers have a bigger share in their revenue but it is shrinking. Radio Mirchiâ€™s Panday says, â€œIn the next two to three yearsâ€™ time, I expect local advertising to be 60 per cent or so. Retail advertisers use radio as their primary medium, while for national advertisers, radio is an add-on medium to TV or print.â€
Is there a cricket spillover?
Cricket tournaments which are heavily boosting the ad share of TV also have a spill over effect on radio. Simply, because a lot of people who are on the move, want to listen to score updates. Itâ€™s a good opportunity for radio broadcasters to connect with their audience and also make some revenues in the process. Kukian says, â€œThe affect of World Cup or IPL is positive for radio. Past trends have shown that the viewership of GECs decreases during cricket events. We believe that advertisers will look for radio to fulfil their reach requirements. Also, such events provide us opportunities to create properties on radio which can be monetised.â€
My FMâ€™s Bhatia shares, â€œMy FM has planned an exclusive on-air activity for the cricket crazy listeners and advertisers, which goes much beyond cricket experts and match updates.â€ However, on an overall basis cricket is still a small share for radio advertising.
While it seems on the surface, that everyone is joining the radio bandwagon or testing the medium, the worry for the radio broadcasters is that its share is still a small 3.7 per cent in the ad pie worth over Rs 23,000 crore. Apurva Purohit, CEO, Radio City blames it on lazy marketing and media planning.Â â€œIt is so much easier to do a TV only plan and park all monies in one medium. It requires far more effort to look at multiple media options and plan and monitor a complex multimedia campaign. Meanwhile, radio advertising is still in a state where for every large advertiser that uses the medium, there is another equally large advertiser who has failed to grasp the efficacy of the medium,â€ she says.
However, things are expected to change drastically with the much awaited Phase III licensing, which will add another 700 stations over 300 cities.
From on-air to on-ground
Though on-air advertising is the largest chunk of radio revenues, but almost all the broadcasters are focusing on taking the medium on-ground and thatâ€™s why activations have become an integral part of radio industry today. In fact, activationsâ€™ share in a radio broadcasterâ€™s revenue, currently ranges between 10-20 per cent. And as more advertisers look for an integrated offering for all their communications, activations will only play a larger role in getting those advertisers on radio and recognising the true potential of the medium.
In fact, activation is an important support not only for radio but for all media vehicles. However, radio can do activations more effectively because of the possibility of high frequency of communication and the local nature of the medium. Talking about the importance of activations, Mirchiâ€™s Panday shares, â€œWe started our activation business in 2002 when other broadcasters were still trying to understand FCT! Those days, we used to call it Non Traditional Revenues,Â and our Board told us not to call it that! Thatâ€™s when we launched Mirchi Activations business!â€
FM players agree that activations are here to stay and over the years will play a larger role for the growth of the radio industry.