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

Hit by the double whammy of the absence of government advertising and then the pandemic, industry leaders are hopeful of radio ad revenues stabilising and returning to pre-Covid levels by next quarter

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 

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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.

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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.

According to Nihalani, their new identity helped them through the situation. She said while the revenues were hit badly, their belief in their core strategy pillars wasn’t hit. “The pandemic led to a total shutdown of our activities and events business. However, we found an opportunity in the digital space, and we launched multiple digital properties."

“Our largest growth trajectory was the launch of our new brand identity. Taking from the advertising trends of clients who were seeking hyper-local, multimedia solutions for their marketing objectives, rather than buying pure FCT, we at Mirchi embarked on our transformation journey around two years ago. This led to a brand transformation as Radio Mirchi dropped ‘radio’ from its logo, going beyond radio. As we embarked on a journey of providing ultimate entertainment across formats, platforms, and languages, we equipped ourselves with providing unique and customised solutions to our clients,” she said.

“We evolved in the way we deliver and produce content; the content today is platform-agnostic. We could also be looking at partnerships with other video or audio platforms so that the message can be delivered from an omnipresent perspective,” Chatterjee said.

Expectations from 2021

Despite the slowdown, the players are confident about the next year. “I think we are closing the year at 60% less than last year’s revenue. But we do hope that in the next quarter, we can at least reach last year’s base numbers so that we can start the new year on an upbeat note. I don’t know how we’re doing this but in the next fiscal, we will have to show aggressive growth to bounce back,” said Narayanan.

Chatterjee said the 2021 festive season will be the biggest. “I think a clear demarcation is happening in the minds of consumers, they are now able to realise their wants and demands. You will see far more stability when it comes to consumer durables, real estate, fitness, etc., which will be the focus area. Once consumer sentiment and job sentiment are stabilised, we'll see a very huge uptick,” he 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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