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Radio's coming-of-age: Sector preps for massive growth in 2015

Radio's coming-of-age: Sector preps for massive growth in 2015

Author | Abhinn Shreshtha | Friday, Jan 02,2015 8:03 AM

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Radio's coming-of-age: Sector preps for massive growth in 2015

2014 has been an exciting year for the radio industry and one that might herald good things to come in the new year. The year started off with frenzied campaigning for the Lok Sabha and state assembly elections and radio proved why it is considered such a strong regional and local medium.

This was especially proven to be true during the Maharashtra state elections where, according to some planners, radio actually saw more revenue than even regional channels. The split among long standing political alliances further saw more spending, which eventually benefitted radio operators in the state.

Of course, speaking of elections, one cannot help talking about the landmark Lok Sabha elections.

“The ad spends on Lok Sabha and state elections helped the sector. The change in government at the centre helped improve the overall sentiment in the economy and it benefitted our industry as well. The medium has always been utilized by political parties for their campaigns however the medium has also gained lot of attention with PM of our country Mr Narendra Modi utilizing radio to address the nation through his show Mann Ki Baat,” said Harrish Bhatia, CEO of MY FM.

The radio industry has been generally happy with the new government’s approach towards  the radio sector. The paralysis that has affected decisions regarding the private FM industry, which have been a constant problem for years were taken up and though they were not completely satisfied, radio operators have been happy that the process of addressing these problems was at least begun.

One gripe though was the Union Budget announced in July.

“Budget 2014 came in with a bit of disappointment for radio industry as there were no major announcements for the private radio players,” says Nisha Narayanan, COO, 93.5 Red FM, encapsulating what many others felt. One of the primary demands of private FM operators was increase in FDI from the current 20 per cent, which was not done. The removal of 10 per cent TDS on discounts offered was also not addressed.

However, the following months were much better as progress was made on the long-pending issue of Phase III auctions and migration. This has been something that has been a constant thorn for FM operators, especially with the expiry date for licenses on March 31, 2015. Some progress was made towards the end of the year, with most of the major concerns and roadblocks been taken care of. But operators will be a bit disappointed that the auctions were not carried out in November-December as promised earlier. Still the announcement of remnant inventory auctions in early 2015 seems to have gone some way in allaying fears.

All said, from a government perspective, there were quite a few positives to take away for the industry, even though, not all expectations were fulfilled.

On the business side, it was definitely a good year.

“Ad revenue and rates have increased this year for most operators. This might not be true for all players but the general trend has been a movement in that direction,” Hitesh Sharma, Executive President of Radio Mirchi. Operators like Radio One showed an EBITDA margin of 35 per cent in H1’14 (as compared to H1’13), while RED FM also saw a 20 per cent YoY growth. Other operators like BIG FM and MY FM also hiked ad rates by 25-40 per cent, based on good advertiser response for inventory.

“Overall, the industry growth in the last two quarters has been quite satisfying with all major players reporting higher net profit for the quarter ended September 30, 2014. The credit for the overall growth goes to the advertising revenue and the versatility of the programming that radio channels are offering. Non-metro markets have equally contributed to the growth of radio industry during the last one year,” said Narayanan.

But it was not only the big players who had a good year. Smaller local stations also reported strong earnings and increase in listenership and advertiser interest. Stations like Radio Indigo, Radio Misty, Radio Choklate and others are willing to take the risk and expand to more cities in the state when the opportunity presents itself during the auctions. As Monica Nayyar Patnaik, MD of Eastern Media, which runs Orissa’s Radio Choklate, puts it, “It does not make sense to just be present in two cities. We are definitely going to take part in the bidding.” It seems 2015 will be see the emergence of stronger competition and more options to the listener.

One reason that could have contributed to the strong performance from most radio operators this year could be that we saw a lot of innovation coming from operators. These included branded shows, on-ground properties, better utilization of inventory and in some cases, a complete change in programming. This provided advertisers with better ways of using the medium. For example, certain parties used the radio as a way to survey the local population and get a grasp of the electorate.

“2014 has been a fantastic year. While there's the last quarter still pending, we are happy with our performance. Listeners endorsed our efforts by keeping us on the top of the table on listenership and from a revenue perspective, this year too, we anticipate, Radio City revenue growing much ahead of the industry and registering indiscriminate revenue growth,” said Ashit Kukian, President & COO of Radio City 91.1 FM.

Another major event that occurred during the latter half of the year was when Dainik Jagran bought controlling stakes in Radio City. With Phase III auctions looming and more than 800 frequencies in over 200 cities up for grabs, it might signal more consolidation in the market. “It is good that a large publisher like Dainik Jagran has pumped in so much money in the industry. Whenever money comes in, it always portends good things for the industry,” opined Sharma. He further said that the industry could have grown by as much as 15 per cent or even more in 2014.

Kukian also expressed that the acquisition would help Radio City expand further. “2015 is going to be a landmark year for Radio City as it ushers in growth through expansion and consolidation by virtue of Radio City becoming part of a larger entity,” he said.

Radio’s share in the advertising pie has always been much lower than other mediums but this year operators feel the performance has been better than other media this year. This might be true and we can definitely expect significant changes in the ad spend pie for 2014 when the final analysis comes in 2015. With the Phase III auctions set to take place in the January or February, we are in for surely exciting year as far as the radio industry is concerned.

 

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