FM radio industry is upbeat about 2016

With the radio pie expected to grow this year, 2016 will see newer formats. Execution of the phase 3 licences is seen as an additional booster

Archit Ambekar | Mumbai | January 19, 2016

While last year promised a lot to the industry, it did not satisfy the needs of the radio industry. A fresh year brings a fresh new dawn, changes and positivity to the industry.

With the radio pie expected to grow this year, 2016 will see newer formats in radio and is expected to be a good year; just like last year. Here's what industry veterans told Bestmediainfo.com on the way forward.

The year gone by

Vineet Singh Hukmani

Vineet Singh Hukmani, MD & CEO, Radio One, said, “Our company has renewed its existing seven metro city licenses for 15 years and opted out of expensive new license bids as we did not want to sacrifice profitability for a speculative future. However, the radio pie will grow and we will gain from that momentum. Also, players who have paid expensive prices for new licenses will drive ad rates up which is good for the whole industry.”

Apurva Purohit

Apurva Purohit, President, Jagran Group, said, “Phase III has truly been instrumental this year and we are all looking forward for the rollout of the new stations. It suggests that the government is serious about the industry and that is definitely good news. Radio City would continue to have the most efficient footprint of markets it operates in. With the addition of the 11 cities we bid for in phase 3, our network presence would be in the important cities with high concentration of the right advertiser audience. Many of these cities are blossoming and adding significantly to the growth of the Indian economy. Developing businesses and industries are opening up newer opportunities, thereby leading to enhanced levels of affluence. With the Radio City and Radio Mantra combination, we have dominance in high potential markets and thus deliver the maximum impact for our national clients.”

Ashwin Padmanabhan

Ashwin Padmanabhan, COO, Reliance Broadcast Network Limited, said, “2015 was indeed a great year for the industry. It started with healthy ad revenue growth. The trend followed in the latter part of the year with announcements like the Phase III auctions and the hike in FDI cap for FM radio. But the biggest highlight for the year was definitely the Phase 3 auctions, since they were long awaited.”

2016: Expectations and more

Nisha Narayanan

On the expectations front, Nisha Narayanan, COO, Red FM, has high hopes for this year. She said, “We are sure to continue to see a healthy double-digit growth in 2016-17 as most of the new frequencies auctioned will be starting their operations this year. According to a recent CRISIL report, FM radio industry has the potential to double its revenue in the next five years. Given the special media-multiplying ability of radio, more brands with multiple stores as well as the big retail chains are likely to invest on radio advertising in the coming days. The diverse demography, geography, culture and community in India generate different needs which can be fulfilled only by expanding the reach of affordable FM services. So while FY2015 can be considered as the best year so for the radio industry, we expect the future turns out to be far brighter for the industry and its ecosystem.”

Prashant Pandey

On the other hand, Prashant Pandey, CEO, Radio Mirchi, said, “I think the economy will continue to struggle. And that generally means that the radio industry will do well! Radio has grown at about 13-14% year after year in the last three years. I expect the growth to remain around the same level this year as well. In addition, there will be growth coming from new Phase 3 stations, as and when they launch. Overall, the growth this year could be higher, but in the next 3-5 years, the growth rate can be expected to be between 18-20% per annum.”

Harrish Bhatia

Harrish M. Bhatia, CEO, 94.3 MY FM is upbeat. He pointed out five things that the industry will see this year. He said, “Radio will come out much stronger and better in 2016. I wish the following to happen in 2016. Firstly, DAVP rates needs to be revised; it's been almost five years since the last time it was revised. Secondly, a Copyright Board needs to be set up to resolve the music royalty issue. Thirdly, rollout of all the 98 licenses auctioned in 2015. Fourth, there should be a speedy auction of the remaining Phase 3 licenses. The government needs to act fast to maintain the momentum. Lastly, radio broadcasters should come together to set up a common currency for measurement – that would be beneficial to both advertisers and broadcasters.”

Trends this year

Hukmani cites a few trends he expects to see this year. He said, “The retro Hindi market in radio will grow by leaps and bounds. In fact, we see Big FM challenging Radio Mirchi's leadership in revenue this year. Radio players will have to demonstrate engagement as empty reach is not enough to raise rates. Radio advertising will reach 10% of the ad pie provided rate increases happen and are adhered to. More start-ups and e-tail companies will advertise on radio. P&L of companies who have invested in new expensive metro licenses will have huge pressure for the next five years unless they don't establish themselves in the mass formats.”

Elaborating on other trends, Purohit said, “The key trends that will be witnessed in the industry will distinctly be Expansion, Consolidation and Dominance. The emergence of a number of new stations, dual frequency, new geographies and new cities will come into play. One will witness new entrants in markets that they have never ventured before. Tailoring the content to suit sensibilities across varied geographies will be essential. Simultaneously, Phase 3 will also witness increase in the cost-effective options for advertising in small towns. It is a medium which delivers great ROI, has a very attractive CPT and is able to deliver not only frequency but a national reach for a brand builder. Effective utilisation of the medium will go a long way in attaining the larger share of the advertising pie that the industry had been vying for, since long.”

Padmanabhan added, “As per the trend of Advertiser's Funded Programming (AFPs) which picked up during 2015, brands now seek to integrate their brand messaging through innovative content. 2016 will see an upward trend on AFPs as more and more brands now seek integrated solutions where multiple mediums like radio, television and digital are all leveraged simultaneously. Riding the wave of providing integrated content, we have executed an interesting and engaging campaign for Hike Messenger with Chutki and Shopkeepaa across radio, TV, digital and on-ground. Another clutter-breaking campaign which was executed by us was 'India's first ever Children's Film Festival on Radio' in association with IDBI for their campaign Childsurance.'”

While Bhatia said that the dotcom category is a big spender on radio in the metro markets, they have started advertising in other markets also. He expects the dotcom category to become a big contributor in non-metro markets along with FMCG, automobile and consumer durable.

Gearing up for the changing industry

Speaking about a changing industry, Padmanabhan said, “We have been maintaining a consistent rating leadership position in Mumbai. We are the largest radio network in India and have had a successful FY2014-15 with topline growth of close to 30% YoY and 45% EBITDA margin for our radio business. We are also looking forward to migrating our existing presence in all metros, mini metros and all key states for a further period of 15 years.”

The industry needs to adapt with the changing ecosystem. Narayanan has plans in place to face the challenges from digital, which is likely to remain the fastest growing segment within the media industry. She said, “Besides, we have been already doing a lot on the brand extension side – events, concerts, 360 degree connect are a few things which have been helping us to grow our topline and they continue to feature in our plans.”

Lastly, Bhatia said, “My FM is a strong customer-centric organisation; we keep the customer at the centre of everything, whether it is listeners or advertisers. We invest a lot in understanding the taste and needs of our customer; this approach has helped us build a strong differentiated product. Radio is very dynamic medium and we are very agile and ready to adapt all the time.”

In conclusion, the radio industry is expecting a lot in terms of growth this year. While the move from analogue to digital will remain a huge challenge for the industry, there are other things to look forward to.

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