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Radio ad spends to rise by 8 -12% post phase III

Radio ad spends to rise by 8 -12% post phase III

Author | Abhinn Shreshtha | Monday, Feb 02,2015 8:41 AM

Radio ad spends to rise by 8 -12% post phase III

The radio industry is upbeat and rightfully so. But what exactly will be the effect of Phase-3 in radio advertising?

With over 800 additional frequencies up for grabs in across 290-plus cities, in terms of reach, radio can now perhaps match the likes of print and TV. In fact, since most of the new frequencies are in tier 3 and 4 towns, it is safe to say that radio will become a significant medium for advertisers in reaching the media-dark regions.

However, whether operators will start seeing business gain in the near future is debatable. As many cities will get FM for the first time, a lot of evangelising will have to be done. It is akin, as one FM operator puts it, to the situation that existed in the early days of FM.

Tanaya Patnaik, Director at Kanak TV and Radio Choklate 104 FM, Eastern Media, agreed that though Phase-3 would ensure the reach of FM radio to grassroots, it might not be very attractive business-wise. “For a regional player like us, acquiring licences for smaller cities will help establish a wider presence in a state and we will be in a position to demand better rates. But individually, these smaller stations might not be a financially-viable outfit,” she said.

“The top 10 revenue markets are all in for a rate increase by all players averaging upwards of 20 per cent. This will ensure that pricing of smaller markets also goes up. Tier 3 cities will, therefore, have a great business foundation to start from. For this, the players must shift their thinking from commodity to value and implement rate increases quickly. The smaller the town, the better live local radio entertainment will be -- as the literacy rate drops so print loses its edge, digital does not engage in local regional language, television is not live. So once players play to the strength of the medium, tier 3 cities will be a boon,” opined Vineet Singh Hukmani, MD of Radio One.

There are challenges in terms of monetisation perhaps, but the opportunity is there as well -- of opening up a whole new segment of the population to radio.

“The growth in India is going to come from tier 2 or 3 towns more and more. Radio is perhaps the best medium to reach this audience and so for many brands this could increase the relevance of the medium,” says Ashish Bhasin, Chairman and CEO (South Asia) of Dentsu Aegis Network and Chairman of Posterscope and psLive (Asia Pacific).

He projects that radio advertising might grow in the range of 8-10 per cent in 2015. However, one thing to consider is that the sector broke all estimations by growing at 18 per cent in 2013, according to certain estimates, and post Phase 3, there is no reason why this growth rate cannot be sustained.

“It (growth) will be in the range of 12-14 per cent in the next three years. But thereafter, one will have to see that technology is changing fast and we are yet to migrate to digital broadcast and face the challenges that internet and mobile will put across to us,” said Nisha Narayanan, COO of Red FM.

According to her, Phase-3 will increase the market size and create new opportunities. “However, as the auctions are going in a batch-wise format and all these are Phase-2 leftover frequencies, these are the markets that have seen radio evolving. Hence, we expect a moderate growth in terms of industry size,” she added.

Hukmani also expects ad spends to shoot up to 9 per cent of the advertising pie as compared to current 5 per cent of the ad pie. He said clients, expecting better ROI are clubbing digital and radio spends as these are the only low-cost ‘live’ media. “Print and TV spends are reducing due to lower engagement and since content is not ‘live’,” he says

“The overall share of FM in the advertising pie will definitely go up by a considerable margin. More stations mean more spending. Also, Phase-3 will give an opportunity to small, local businesses to advertise on radio. For bigger cities, inventory is already an issue. So, newer and more creative ways of earning revenue like events and content marketing will play an important role,” said Patnaik.

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