Radio advertising looks forward to a bright 2017

The Pitch Madison Advertising Outlook 2017 forecasts a growth of 15 per cent to take radio ad spends close to Rs 2,000 crore. We spoke to heads of radio stations to understand what is driving this growth

e4m by Abhinn Shreshtha
Updated: Mar 20, 2017 7:53 AM
Radio advertising looks forward to a bright 2017

As per the Pitch Madison Advertising Outlook 2017, Radio forms 3.6 per cent of the total advertising pie in India, with ad spends on the medium clocking up Rs 1,545 crore. However, in terms of growth rate, radio showed the best growth rate (13.2 per cent) after digital (42.9 per cent).

For 2017, the report forecasts a growth of 15 per cent to take radio ad spends close to Rs 2,000 crore. We spoke to heads of radio stations to understand what is driving this growth. One of the major reasons that came out was the expansion of private FM due to Phase III, which is set to turn radio into a truly pan-India medium.

“Our estimate is in sync with the Pitch Madison Report. Today, radio has become an integral part of all media plans. The top growth factors according to us are Phase III implementations, which are starting broadcast now, government spending on radio, which has increased, and increased advertising by e-commerce, especially digital wallets,” said Harrish Bhatia, CEO of My FM.

Satyanarayana Murthy, CEO of Radio Indigo, also agreed that a 15 per cent growth was quite possible and pointed out that markets have enough elasticity to not just foster additional inventories of the new stations, but also sustain growth. “With the GDP growth sustaining at 7 per cent and a projection of 7.5 per cent, and enough indices showing robust growth, we are confident that radio would grow at a 12-15 per cent CAGR,” he said.

Factors Fuelling Growth
According to Prashant Panday, MD & CEO of Radio Mirchi, one of the major reasons for growth are the new stations coming up under Phase III.  He also stated that the generally poor economic conditions (despite claims of 7 per cent+ GDP growth) was a reason as this resulted in advertisers spending more on promotions than brand building, helping radio growth. “Other reasons include fast growth in population that is out of home (car population rising, more traffic on roads, no entertainment on public transport, etc) leading to a captive audience for radio and radio being the best way to reach rich audiences (car listenership, long hours) and those actually interested in shopping (last medium consumed before entering a shop). There are other reasons as well. However, the radio industry has managed growth by increasing advertising inventory, not by increasing prices. That will now reverse in the years ahead,” he opined.

Tarun Katial, CEO of Reliance Broadcast Network Limited (RBNL), which runs 92.7 Big FM, also said expansion into new geographies with launch of new stations will help radio. “Radio advertising growth will be driven by increasing spends from FMCG, BFSI, auto, media, and retail. The launch of new stations will expand the target audience while resulting in a wider reach. Lastly, a push towards measurement across more markets will only add to the growing radio ad spends for the year,” he said.

Demonetization Effects Fading
Like all mediums, radio also suffered as business sentiment reduced in the months post demonetization. Though there was some relief as digital wallets, government, BFSI, etc., increased spending on the medium, but the effects of demonetization continued to be felt in Q1 of 2017. However, the general feeling is that this is now a thing of the past.

“Radio has always been a spontaneous, engaging medium with instant results, be it with listeners, products, or the radio station itself. 2017 looks to be a very good year for radio, with more channels in the offering, retail opening up spends after demonetization, 360-degree solutions becoming the norm, it’s a very positive outlook; moreover, digital growing leaps is very beneficial to the growth of radio in terms of innovation and engagement on the digital sphere,” said Jimmy Tangree, Head of 91.9 Friends FM.

“The impact of demonetization has been very high on media companies. November 2016 was a terrible month, of course. But the impact of demonetization is being felt in Jan-March also. Only December 2016 was good, because payment apps, banks, and the government itself spent a lot on advertising. Since December, even they have stopped advertising. Our belief is that advertisers are cutting ad spends in Jan-March 2017 to manage their profit goals. They’ll be back in April 2017,” opined Panday.

The Road Ahead in 2017
Though the year might be looking positive from Q2 onwards, there are still a number of issues that the radio industry would like to see the back of. Most of these relate to ongoing tussles with the government regarding news broadcast, high license costs, etc.

“The biggest challenge remains the viability of smaller radio stations. If we really want Phase III to be successful and radio to reach all corners of the nation, we simply cannot ignore this issue. Talking about Odisha, we have been waiting for Phase III to happen for the last eight years now. How do we keep growing without enhancing our reach? And the government has been consistently ignoring all our demands, be it about news on radio, reasonable base price, etc. I feel this is the right time for us to come together as an industry to establish radio as an affordable, effective, and creative mass medium by creating more awareness among advertisers, designing creative content, and engaging with events. These are really simple things that we have always talked about but are extremely essential,” explained Tanaya Patnaik, Executive Director, Radio Choklate 104FM.

Apart from this, the radio industry will need to realign its focus to emerging cities and the smaller towns as the major metros get saturated. For example, Vineet Singh Hukmani, MD & CEO of 94.3 Radio One, opined that the top 10 metros will not see more than 3-4 per cent growth.

“While radio revenues may grow about 12 per cent if the market improves, this revenue will come from the newer 100+ stations, which are cheaper priced stations in the BCD category towns. On a total inventory increase of over 60 per cent on an all-India basis, the revenue growth will only be 13 per cent. The cost of acquiring this revenue has gone up significantly as radio companies burn rate of cost due to new stations has gone much higher than their earn rate. What is needed is an upward price revision in the older established Phase II stations to bring back profitable growth versus topline growth at increased losses,” he said.

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