Radio industry eyes recovery in next quarter, says return of government ads must

Already feeling the pressure of reduced government ad spending, the struggling radio industry was one of the hardest hit by the Covid-19 pandemic. Though listenership surged during the lockdown months, advertising revenues coming from other sources vanished. But now with the unlocking, and most businesses up and running, can the industry be hopeful about ad revenues returning to normalcy?

Government advertising must return 

Nisha Narayanan

According to Nisha Narayanan, Director and COO, Red FM and Magic FM, sentiments for the industry had been slow since last year itself and with Covid wreaking havoc, it entirely disrupted the situation.

“Government business has to come back on radio and it is a critical part. 30- 35% of our overall revenue was coming from across central and state government businesses. If the government's spending increases, radio should be able to stabilise,” she said.

Asheesh Chatterjee

Asheesh Chatterjee, Chief Financial Officer and Chief Business Officer, Big FM, said, “The advertising bucket has been going down ever since Modi 2.0. They have been spending pretty less now on any medium for that matter. However, with Covid, advertising buckets from non-government sources were also affected.”

“Government advertising should stage a comeback as various state elections are happening, and so is the farmer crisis. I think the lack of appropriate advertising by various government departments is really showing in the absence of which people are only exposed to half-informed information on social media and TV news rhetoric,” he said.

Impact and recovery from 2020 crisis 

Preeti Nihalani

Preeti Nihalani, CRO, Mirchi, said radio was down by 80% in Q1 and by 60% in Q2. Mirchi reported 72% de-growth in Q1 and 57% in Q2.

“The festive period was quite encouraging in terms of volume. However, the revenue growth was short. We are positive that this momentum in volume will continue and pricing will be corrected as there is more consistency in demand. Growth in volumes, however, is not consistent across categories — FMCG, auto, real estate, BFI, e-com. OTT players have led the growth while some of the traditional categories in retail business did not advertise to their fullest,” she said.

Narayanan said revenues from the top three metros dropped considerably and most of the moolah is coming from tier two and three towns. “Overall volumes have been hit, the traditional bread and butter coming from FCT business is down. However, from September onwards, we have seen considerable growth on the FCT front. Most of this growth has come from tier two and three towns and a lot of stability has set in. Except for the top three metro markets, we are back to our last year’s baseline figures in other places,” she said.

“For us, the challenge is coming from the metro markets. We need to sustain the high licence fee stations in the metro markets. Both in the metro and mini-metro markets, the fragmentations are higher and advertisers are looking for choosing the lowest cost media. Now it’s a run for who offers the cheapest rates. It has become a complete rate game but I see it stabilising,” she said.

Narayanan said as radio is a very local platform, the cost of operation is very high. “If we are talking about 68 market networks, we are talking about 68 cities with 68 separate offices. The running cost, employee cost, etc., have really soared. It has been a difficult time and, of course, revenues have been hit,” she said.

Chatterjee said that while April, May, and June were bad, there was an upbeat after that. He said many brands started with tactical campaigning by focusing on health, hygiene and immunity.

“By August-September, it was unlocking so the natural advertisers such as SMEs, retail started to bounce back. The agriculture-led advertisers also started to bounce back higher in tier two and three stations. During the unlocking, people started traveling in their own vehicles, which meant radio was being used significantly. The listenership increased and that’s what brought back faith in the medium. By the festive season, October, November, and December, we saw brands starting to advertise across the board. In terms of volumes, we are roughly back to the pre- Covid levels,” he explained. He said that while radio platforms did provide discounts to advertisers during the lockdown months, they are back to commanding the market prices.

Radio industry relying on non-FCT revenue

Even though radio platforms were investing in digital earlier as well, the pandemic accelerated the growth of digital in every aspect. Narayanan said one of their strategic moves was to stop relying on FCT revenue and focus on non-traditional revenue.

“By non-traditional, we’re talking about content monetisation, idea selling, and digital IPs. All of these have done phenomenally well for us. Pre-Covid whatever we had done as far as non-traditional revenue is concerned, it did better than last year for us. The FCT business has come down and one of the performing factors has been the non-traditional space. If we continue this momentum, hopefully, we will be able to pick up at a better speed,” she said.

“From a content point of view, we need to be cognizant of the fact that we are not just a radio station but a content creating platform. When we create that content, we need to put it out on radio and also on digital. That’s the focus going forward. It’s not a short-term view at all. Pure FCT selling is not enough, if you really need to grow a business, the vision needs to be developed strongly around digital,” she said.

“I think business for clients is already seeing recovery. I expect to see complete recovery for most categories in Q3 and Q4 of FY21. I am positive of the radio industry’s recovery in FY22,” said Nihalani.

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