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Political advertising fattens FM radio’s revenue
MUMBAI: FM radio broadcasters have reported a strong revenue growth this quarter, outperforming other media vehicles such as print and television.
Five listed FM radio players – Radio Mirchi, Big FM, Fever FM, Radio One and Oye FM – have got a combined revenue of Rs 197.8 crore (Rs 1.98 billion) in the fiscal third-quarter. This is 14.24 per cent higher than the year earlier and comes amid a tough and uncertain economic environment.
The revenue list looks impressive. Entertainment Network India Ltd (ENIL), which operates the FM radio business under Radio Mirchi brand, reports its highest fiscal third-quarter revenue ever, up 12.7 per cent from year-ago to Rs 98.5 crore (Rs 985 million). Reliance Broadcast Network’s Big FM grows 10.2 per cent to a revenue of Rs 53.02 crore. HT Media’s Fever FM expands 25 per cent to a revenue of Rs 26.7 crore. BBC and Next MediaWorks’ Radio One gets an increase of 10.3 per cent in revenues to Rs 15.22 crore, while TV Today’s Oye FM climbs 77 per cent from Rs 2.47 crore to Rs 4.37 crore.
|Revenue figure in crore|
Although the reason for radio’s strong performance in the quarter is a combination of different happenings in the television and print sectors over the past few months such as TRAI’s ad cap regulation and the fracas over rating guidelines, the real factor has been political advertising which has significantly fattened radio’s advertising pie.
The entire nation has been brewing in a political brouhaha since 2013 when the state elections were on the anvil. This highly benefited the radio broadcasters in the quarter which saw the share of government advertisements in the total radio ad pie go up by 40–60 per cent.
Agrees Madison Media Sigma COO Vanita Keswani, “Overall, private FM broadcasters have seen good revenue in Q3, thanks to a boost from the government and political party advertisements due to the state and upcoming general elections.”
The government had a mandate to spend money in the last quarter of the year (Oct–Dec) as it was election time, and who would better benefit from this than radio? With the medium offering localised services and deeper penetration into the smaller towns, the message of the government reaches out more effectively.
Players like My FM, which went through assembly elections in four of its markets, also witnessed a significant spike.
Red FM COO Nisha Naraynan affirms, “The volume of government ads increased to almost 50 per cent more than the previous year. For Red FM, almost all the stations which were in election-bound states, there was a 25-30 per cent YoY revenue growth.”
However, Radio City president and COO Ashit Kukian maintains that the major boost from political advertising is yet to come. Other radio players too echo a similar sentiment, stating that although radio has not emerged as the preferred mode of advertisement, now there are specially designed campaigns that run only on radio.
Narayanan agrees that government advertising did not help much in terms of revenues, as their rates are far below what the average commercial advertiser pays. But stations were able to optimise their inventory as they spread their ads equally in prime and non-prime time.”
With the approach of the 2014 general elections, the medium is set to gain some more with the government continuing to advertise majorly on localised mediums to reach a wide segment of audiences. Media planners too agree that this year will be good for radio due to increased government spending as election is one of the big properties skewing money towards the medium.
Retail, aka the next big thing
With a dwindling economy blanketing the country, radio grew on the strength of tactical advertising led by retail clients in the previous year.
Retailers have now begun to choose radio as the preferred medium of advertising as it gives them a direct response from their target audience in a short span of time.
Over the last two years or more, advertisers have shifted their spends from core brand building to promotions. This, industry experts claim, is why we see a sale happening all the time. While sales during festivals and national holidays are common, retailers are now looking at newer factors to build their brands. This has increasingly extended to as much as having an American Independence Day Sale on 4 July.
ENIL chief executive officer Prashant Panday says, “Whenever advertisers spend more on promotions, radio gains. It is the most local of all mediums and is also the last medium consumed before a customer enters a shop. Retail share in radio advertising has consequently risen to upwards of 50 per cent for the first time in the last two years.”
But Dentsu India executive chairman Rohit Ohri begs to differ by stating that retail advertisers which mainly include brands like Shoppers Stop, Pantaloons, etc. are primarily metro-centric targeting only a specific segment. He says that while retail is doing its job, it is truly FMCG that is driving the big change in listenership.
With more audiences now catching up, advertisers want to reach that segment largely. As a result, the FMCG sector is penetrating deeper into SEC as markets are opening.
My FM CEO Harrish Bhatia adds, “Retail has grown much better than other segments on radio. In retail, FMCG, healthcare, education, electronics and real estate have performed well for us in the quarter.”
Festive season: The small fry
Earlier, radio in the third quarter mainly commanded good revenue growth during the festive season which would bring heavy advertising.
However, this is a trend that is slowly changing because the promos, especially in retail outlets, can now be heard on radio well before the approach of the festivals of Diwali, Christmas and New Year.
Kukian opines, “Though a bit slow, radio surely seems to be getting its rightful share in the advertising pie. The growth in the festive spends has certainly been a major factor, though not the only one. It is good to see that the clients are open to experiments and innovations, and are engaging with the consumer on air and on the ground through many differentiated properties.”
Other sectors in the pie
Speaking exclusively of the third quarter, other sectors that have performed well and increased spends on radio include real estate (by 26 per cent), media and entertainment (by 16–20 per cent), health and pharma (by 40–50 per cent), and travel and hospitality (by 18 per cent).
On the other hand, some sectors also witnessed de-growth and fared poorly in the quarter. These include BFSI (-13 per cent), auto (-13 per cent), jewellery (-3 per cent), and telecom (-20 per cent).
Shift from TV
With the television industry going through times of struggle due to issues like ad regulation, industry experts believed there would be a shift of monies to radio. Although radio gained in perspective, the money did not change hands.
Panday claims that radio does not compete with print and TV, but rather adds to them. “Clients may have diverted some money from these two big daddies to radio. I think both print and TV have been growing slowly at 7–8 per cent over the last couple of years. But I wouldn’t say that money has shifted from them to radio.”
Media planners claim that radio has its inherent strengths and is not linked to the de-growth of TV. Advertising could have increased spends on radio, but that does not mean it will substantially eat into another medium.
Keswani further adds that radio revenue gains were not at the cost of television; in fact, television was actually a reason for radio revenue growth. This was driven by the fact that stations sold TV-cum-radio events such as Radio Mirchi Awards to Colors and the Annu Kapoor show to Mastiii.
Narayanan believes that the good performance was driven by two factors – a good festive season and political and government advertising. A lot of clients also looked at radio to expand their reach and optimise budgets in the wake of the 12-minute ad cap on TV, resulting in optimum utilisation of our limited inventory.
The year ahead
Based on their strong Q3 performance, radio players have found encouragement to perform better and attain good results in the year ahead. With Phase III auctions being scheduled after the elections, the industry is expected to get a further boost to its progress.
According to Radio Mirchi and Radio City estimates, the radio industry is expected to grow by around 12–15 per cent this year, which will be faster than TV and print which are stated to grow at less than 10 per cent each.
Kukian states, “One of the most important aspects would be to tap the high potential markets and at the same time tailor the content to suit the sensibilities of the specific geographical location. Consolidated advertising is the need of the hour. We do not approach our clients with plans of vanilla advertising. They come to us with the idea of getting an all-round exposure for their brand which does not only include on air but also covers various touch-points on ground as well as on the digital platform.”
He concludes by saying that a proper foray into newer towns and cities will go a long way in attaining the coveted 8–10 per cent of the advertising pie that the radio industry has been aiming at for a long time now.