Radio Mirchi recently announced that it would be capping the total amount of ads it airs to 12-14 mintues per hour. The plan is to cut ad volume by 30 per cent while increasing ad rates by 20 per cent.
"Every research we do with consumers tells us that listeners are fed up with the ad volumes on radio. In fact, it’s one of the major reasons for them to turn away from the FM radio brand, and in some cases the medium itself. Listeners love FM, but they hate the excess ads. Our research tells us that ad breaks of 2.5-3 minutes are fine," said Prashant Panday, MD and CEO of ENIL, which runs Radio Mirchi.
According to Vineet Singh Hukmani, MD of Radio One, most large network players are selling ad inventory at discounted rates or bundling new or small stations free, while some are even giving free radio inventory with their newspapers in a combo deal.
"This fills up their ad time, making the stations impossible to listen to as that leaves no room for content or music. So by reducing inventory, they want to signal rate increase and also play more songs. The radio industry is not like ecommerce companies who can burn without earning. It is a fixed license fee business, which needs to raise prices to receive and recover high license fee costs and mass radio station listeners flip the station when they hear an ad, unlike for us where the listener is more loyal because the content is more sticky," he explained.
Despite the fact that demonetisation has led to a slow start to the year for the radio sector, the industry is expecting things to look up after Q1. In fact, a number of radio stations have already announced ad hikes in the first quarter itself. For instance, Fever FM announced last week that is is hiking its ad rate by 20 per cent
Speaking at that time, Harshad Jain, CEO (Radio and Entertainment) at HT Media, said, "The increase in the price is in backdrop of continued growth in listenership and in line with our constant endeavour of keeping advertising inventory under control. We are ever committed to deliver innovative content and better creative solutions.”
Radio stations are increasingly feeling the pressure to retain listeners who are put off by excessive advertising.
"We had announced price hike beginning of April, so that we are able to maintain healthy ratio of ad to content. MY FM is a strong customer centric organisation and we do not compromise on the listener experience. Our ad rates hike will be in range of 15 to 25% depending on the city. The price hike is received well by the advertiser because they get better value for the investment they make with us. We have norms basis the geography and seasonality but advertising stays capped at around 16 to 18 min depending upon the season," informed Harrish Bhatia, CEO of MY FM.
However, he also mentioned that it is important for the industry to come together to create a measurement system so that prIce increase can be done keeping into account the brand status in each of the markets.
Tarun Katial, CEO at RBNL, which runs Big FM, informed us that Big FM usually caps ads to 15 minutes during the non-prime segment and 20 minutes during prime time.
"We have always been disciplined and we are happy that the industry is also moving towards it. There has been strong consumer and advertiser feedback to it (ad capping)," he said. Speaking about ad rates, Katial said that ad rates were performance-linked.