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Increase in ad rates: What's in store for radio?

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Increase in ad rates: What's in store for radio?

Radio broadcasters across India have increased their advertising rates in the last few months. All national broadcasters have increased their advertising rates by 20 to 30 per cent. A regional player such as My FM increased its advertising rate by 20 per cent.

Radio industry’s advertising rates witnessed a southward trend in 2008 due to high inflation and recession.

“I see this increase as not an increase but a correction in prices as demand increases. In fact, since 2008 -09 when prices went down due to recession, this is the first correction,” said Ashwin Padmanabhan, Business Head, Big FM.

The regional game has also been more or less the same. With the prices beings low, more retailers were seen coming on board, creating an inventory clutter. Price per 10 seconds for My FM is in the range of Rs 250 – Rs 450. Advertising rates for most national channels is between Rs 9000 – Rs 10,000 per 10 seconds.

Apart from dealing with inflation and inventory clutter, radio players from a very long time have also been dealing with the issue of low value for their advertising rate. Commenting on this debated topic, Prashant Panday, Director and CEO, ENIL said, “Prices are down almost 25 per cent from three years ago, thus the radio industry is not getting a fair value.”

While advertisers are now understanding and trying to exploit this medium further, according to experts, there is still a lot of potential that needs to be used. Padmanabhan explained that from a reach cost per thousand comparative prices, radio advertising is still undervalued. 
In terms of value for money, regional advertisers have their own set of woes. Harrish Bhatia, CEO, My FM explained that advertisers usually start with the top three stations and thus, hardly any revenues reach them, decreasing the value for money excessively.

“And unlike print media, which can be expanded and contracted to a certain extent as needed, radio advertising is finite and these fixed number of spots must be filled and thus, the prices also tend to fluctuate,” added Bhatia.

The advent of Phase III may or may not shake up the advertising rates and thus, increasing ad rates now seems to be a smart move on the broadcasters’ path. Also, retailers are now realising the potential of this medium, giving radio very strong grounds to increase their ad rates.

“Yes, the rates have been increased. Radio is also somewhere talking the language of ‘inventory getting filled/full, etc’, something which TV channels regularly talk. Also, radio is a big medium for retail advertisers. They rely on this medium and for them a rate increase, which is affordable, should not be an issue,” said Anilkumar Sathiraju, Associate Vice President and Head South, DDB Mudra Max.

With the hopes of Phase III being rolled out at the end of this financial year, radio industry seems to be on the right track by increasing ad rates. However, while Phase III will open up a number of gates for radio, the economy will more or less be the same, not giving a lot of opportunities to marketers to experiment on the medium. Also, broadcasters will have to even out the money invested in the new licenses and thus, high prices and limited inventory may not be the most suitable model then. Nonetheless, how does this decision pan out for the industry is a wait and watch game.

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