In this age of technological disruptions, radio continues to hold its ground – at least for now. 2015 started well with healthy ad spends. The completion of the Stage I of the Phase III auctions, migration of existing operators from Phase II to Phase III and the announcement of the hike in the foreign direct investment (FDI) cap for FM radio brought much cheer to the industry. Companies spent approximately Rs. 10.56 billion to acquire 91 new stations and will spend Rs. 39.33 billion as they migrate their existing 243 stations to Phase III in 2015.
Stage I of Phase III rollout fortifies the government’s commitment to see FM radio proliferate to more than 85 per cent of India – reaching newer cities and audiences. On the completion of Phase III, FM Radio would reach smaller towns and cities providing quality entertainment to audiences and enable marketers to penetrate a larger part of the country.
India is expected to see 839 additional radio channels in 227 new cities, most of them being tier-II and tier-III cities. Despite some key contentious issues of high reserve prices for the auctions, high license fees, the 15 per cent limit on the total number of frequencies, etc., continue – the industry is resilient.
The radio industry is enjoying a steady CAGR (2011-2015) of 14.5 per cent and grew by an estimated 15.1 per cent in 2015 – to reach revenue of INR19.8 billion. Growth has been driven by both – volume enhancement in tier-II and tier-III cities and an overall increase in ad rates.
Radio players across the country have been able to hike ad rates04. For e.g. Big FM hiked the ad rates by 30-35 per cent, Red FM increased ad rates by 35 per cent. Apart from these stations, Radio One, My FM and Fever FM also hiked rates by 20 per cent.
The sluggish economy in 2013 and stringent market conditions had compelled companies to look at internal efficiencies – this had created a strong base for profitability. Real growth in 2015 is estimated to be higher, since 2014 included the impetus given to the industry by the general elections. The positive economic climate has also given a shot in the arm to the sector. Similar to last year, the radio industry continues to have robust growth and this without Phase III.
Radio’s share in the overall media and entertainment industry pie continues at approximately 4 per cent of the total advertisement market size.
As expected, e-commerce companies have emerged as big spenders in 2015 in radio04. Internet start-up companies have been aggressive in their communication with high emphasis on tactical promotions and on customising their offers for local and regional markets.
E-commerce brands with high expenditure seek uniqueness and contextualisation in communication and content differentiation to standout. Radio has the potential to provide this very effectively and efficiently.
Other sectors like automobile, retail, consumer durables, financial services etc. also continue to drive growth in this segment. Falling interest rates have supported promotional activity by real estate companies, although the sector continued to be challenged in 2015. In fact, many of the radio players we spoke to agree that e-commerce would continue to remain a major contributor to ad revenues in the coming years.
It is estimated that approximately 10 per cent of radio advertising comes from the government and political parties. Radio is now integral part of marketing plans and marketers are acknowledging this fact.
