Nisha Narayanan, COO of Red FM, takes a look back at 2015 and highlights the expectation a newly resurgent radio industry has for 2016.
With commencement of Phase III auctions, the year 2015 was really a good year for the radio industry. On completion of phase III, India will see 839 radio channels in 227 new cities in addition to existing 86 cities, most of them being Tier-II and Tier-III cities. Private channels would also be allowed to carry news bulletins of the All India Radio (AIR) and info-entertainment format is being introduced to add variety to the platform. Due to the expansion, radio would reach out to smaller towns and cities thereby providing quality information to the audiences and more penetration to marketers.
Today, the FM radio sector in India has come a long way and the road ahead is equally exciting. Going by the numbers, the entire industry is registering over 12-15 per cent YoY growth. The radio industry has been growing at a compounded annual growth rate (CAGR) of 18 per cent. Also, according to the media and entertainment industry report 2015, presented by the Federation of Indian Chambers of Commerce and Industry and KPMG, the radio industry is expected to touch revenue of Rs 3,950 crore in 2019.
After seeing 2014 as a robust year in terms of ad share, the radio industry saw an increase this year with the radio auctions, which is enhancing the industry scenario in the country by reaching out to smaller towns and cities. Currently, the advertising revenues comprise more than 85-90 per cent of the total revenue generated by FM radio companies.
The overall advertising, especially spending in the festive season were 15-20 per cent higher than last year. This sharp spurt can be attributed to factors like change in government, positive advertiser sentiment and favourable macro-economic outlook. Along with other media, we are hopeful that radio industry too will get its share in the bigger-than-ever ad spend pie.
Along with mainline advertisers, local advertising is also very important for our industry. It contributes to more than 50 per cent and it has been growing year on year. In fact the increase is not only in volumes but also in yield which has also seen around 10% growth over last year. As for new frequencies, there is space for everyone in a free market economy and every player that is added, brings more clients to the eco-system. Hence we do feel that over the period of time, these new frequencies will definitely bring lot many new advertisers to the industry and all will be benefitted.
While the transparent e-auction fetched good revenue for government, it is also expected to help government in many other ways as well. With The emergence of a number of new stations, one will witness new entrants in market, which in turn will generate employment opportunity in the media and entertainment sector. The FM service, as a medium which delivers great ROI, fetched Rs 11.57 billion to the government while it may generate more revenue till the completion of the phase III. With more business, the FM service sector will generate more revenue in terms of taxes. We have witnessed that radio is now part of all media plans and client have realized the potential of the medium.
With growth and expansion, challenges continue to hound the industry with smaller and standalone stations feeling the pressure of rising cost structures, measurement and royalty fee issues and the rising threat of the digital media eating into the radio ad budget pie. Some of the cities did not find bidders which suggest that the demand can be different depending upon the demographics, geography and cultural positioning of a city. Government needs to look at the loopholes in the first batch of phase III auction to make the phase III developments more efficient.
Despite the challenges, we are very optimistic that in the coming year, the expansion of radio in the region is bound to get a boost .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.