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News |  28 Apr 2009 09:06 |  By RnMTeam

Radio revenues poised to grow at 15% despite slowdown - GroupM

MUMBAI: Radio continues to sing a happy tune, even as industry pundits paint a grim picture for media in the country.

According to the just released Group M report, 2008 was another successful year for the radio industry which continued to grow at a rapid pace. Advertising spend on radio grew by a whopping 49 per cent it says, from Rs 5.9 billion in 2007 to Rs 8.8 billion in 2008.

Radio's contribution to the overall advertising expenditure rose from three per cent in 2007 to four per cent in 2008. The government-owned All India Radio (AIR) was the single largest contributor with revenue of Rs 2.9 billion, representing a growth of 30 per cent over 2007 primarily due to a hike in ad rates.

The opening up of several new markets in 2008 resulted in growth of 62 per cent for private FM (Frequency Modulation) players who contributed Rs 5.9 billion, the report says. The resultant increase in reach prompted advertisers to spend more on the medium.

National advertisers bought inventory across markets and are contributed to 70 per cent of total revenue. The remaining 30 per cent came from local advertising which in some cases accounted for 60 per cent in smaller towns. The main categories advertising on radio have been Media and Entertainment, Telecom, FMCG, Services, Retail, Education and Automobiles.

Financial Services and Real Estate, which were key contributors till 2007, have shown a decline in spends owing to the economic downturn, the report notes. The four cities of Mumbai, Delhi, Kolkata and Bangalore, which are covered by the Radio Audience Measurement system (RAM), accounted for 55 per cent of FM ad expenditure and Chennai, Hyderabad and Ahmedabad
contributed to another 20 per cent. Smaller and emerging markets are currently contributing about Rs 1.2 billion to Radio AdEx, it notes.

Though advertising volumes have risen in the top metros during the year there hasn't been any growth in value. Rather, there has been a slight decline in value by two per cent in the last quarter of 2008 in these cities, it says.

Stats

About 80 per cent of the FM stations licensed in January 2006 were on air by the end of 2008, the report notes. There are currently a total of 238 FM radio stations from 40 broadcasters across 90 cities in India. More than half are in towns of under a million. The players with the highest number of operational stations are Big FM with 44 stations, Radio Mirchi with 32 stations, Radio City and South Asia FM with 21 stations each and My FM with 17 stations. Due to a cap on the number of stations per broadcaster many large players have formed JVs with small regional owners in a bid to offer wider market coverage and to prompt national advertisers to spend more. Through these strategic alliances Big FM has 56 stations (the highest in the country) followed by Network 93.5 with 49 stations and Radio Mirchi with 42 stations.

The biggest revenue earners of 2008 are Radio Mirchi followed by Big FM, Radio City and Red FM in that order.

"With continued restrictions on content, the entry of many new players has not really given the radio audience much variety in terms of programming. Radio stations have tried to build loyalty by differentiating on the basis of kind of music played and Radio-Jockey (RJ) speak. With an eye on high-spending advertising categories, most stations aim programming at a mass audience, especially in prime bands" the report notes.

"Besides plain-vanilla advertising spots, radio now offers content integration, brand mentions in woven into RJ editorial and on-ground activation directly involving the listener. This year 75 per cent of total revenues came from spots; activations accounted for 10-12 per cent; and innovations brought in the balance 13-15 per cent.

The forecast

"The latest Indian Readership Survey (IRS) puts the reach of all radio in urban India at 24 per cent and that of FM at 20 per cent. The entry of private FM players has substantially boosted listenership especially in lower pop-strata towns. Listenership is largely skewed towards upmarket 15-30 year old men. The RAM system launched in October 2007 currently covers only the four cities Bangalore, Mumbai, Delhi and Kolkata and releases data weekly. Chennai and Hyderabad will soon join, giving advertisers metrics for the top six metros which account for the bulk of spends.

Given the limitations of available data, selection criteria for stations - especially in smaller markets ÔÇô have typically included network availability and preference, positioning (i.e. programming type), market fragmentation, advertising spot rates and listenership data from IRS. A long-awaited electronic measurement system is likely to be tested in the coming year," the report indicates.

The Future

The next licensing tender is likely to attract bidding for 700 new FM channels in 237 cities, several not presently served by FM. Telecom Regulatory Authority of India (TRAI), the regulatory body for radio in India, has proposed many reforms which could stimulate revenue growth. Bidding is likely to take place only after the General Elections of May 2009, so most of these new channels will be operational only from 2010.

2009 will still see a revenue growth of about 15 per cent which would have been a lot higher had it not been for the recession. Some argue that recession favors second-line media like radio and digital over more established media like TV and Print. The growth in Radio will be primarily driven by:

ÔÇ? Increased spends on radio from categories like Telecom, Media and FMCG who now have a more costeffective option compared to TV and Print to reach more markets

ÔÇ? Radio being an effective and efficient medium for local advertisements, smaller markets will gain from categories like retail and education

ÔÇ? Six-city coverage by RAM, plus AdEx tracking, increasing credibility of the medium

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