Radio: Picking up the growth frequency

Music Broadcast | Qualified institutional buyer bought 4.42% stake during Q4FY20. (Image: Wikimedia Commons)

Girish Menon

From being ‘just another platform’ for advertising, radio, over the years has emerged as one of the most sought after advertising platforms in India. Advertisers have started to consider radio as an integral part of their media strategy. Radio players have continued to penetrate into the tier II and tier III markets, giving rise to new consumption pockets and with rising disposable incomes coupled with volume enhancements, advertisers too, have shifted their focus from a general nationwide brand-building to a more tactical, region specific and focused promotional strategy.

According to the FICCI Frames - KPMG Media and Entertainment Industry Report 2017, the radio industry grew by an estimated 14.5 percent in 2016 – to reach Rs 22.67 billion, faster than other traditional media segments such as television, print and films. Key drivers of growth were the partial roll out of Batch 1 stations and a marginal increase in effective ad rates.

Inventory utilization demonstrated growth in the pre demonetization period, with A+ and A category cities like Mumbai, Bengaluru and Delhi seeing utilisation as high as 90-95 percent and even above 100 percent during peak hours. Another key trend was content differentiation with increasing focus on original content, local affairs, emphasis on genres like ‘retro’ or ‘love’ to carve out a niche and thereby maintain audience loyalty.

Though, the industry had many things to cheer about in 2016, there were a few concerns such as weak uptake in Batch 2 auctions of Phase 3, delays in the roll out of majority of Batch 1 stations and an adverse impact of demonetization.

The second batch of Phase 3 auctions, which commenced on 26 October 2016, received a mixed response, with many stakeholders deciding not to participate in the auctions. The issue was two-fold – while the auctions saw very high bidding owing to limited number of remaining licenses in the major cities while the reserve prices of the stations in the smaller cities established basis the size of the population didn’t find many takers particularly in reference to their market size. For example, the industry was not in the favor of looking at towns such as Muzaffarnagar, Shahjahanpur and Saharanpur with the same lens as Chandigarh.

Radio also suffered as business sentiment reduced in the months post demonetization as annual revenues were adversely impacted by around 200 to 300 basis points. The only solace came from spends by the government and digital wallet companies during this period. The effects of demonetization continued to be felt in Q1 of 2017, though activity levels are largely back on track now.

Measurement continues to be a challenge. The current data available for measurement is restricted to Delhi, Mumbai, Bengaluru and Kolkata, despite the industry shifting focus to exclusive genre stations, B category cities and beyond.

A key growth driver going forward, would revolve around the effective rollout of new stations especially in the BCD category towns for which a key dependency would be completion of the Phase 3 auctions. It would be imperative for players to realign the focus to emerging cities and the smaller towns as the major metros get saturated.

Tailoring the content to suit sensibilities across varied geographies will be essential. Simultaneously, Phase 3 will also witness increase in the cost-effective options for advertising in small towns. Effective utilisation of the medium will go a long way in attaining the larger share of the advertising pie that the industry had been vying for, since long.

Also, over the last few years, advertisers and brands have understood the importance of creating localized and regional content for their listeners. With content designed to suit the local needs, radio has become an attractive medium for advertisers as they look to increase their customer engagement especially at a local level.

Radio campaigns now incorporate far more region specific and customized content. With expansion into tier 3 cities and beyond, radio now provides advertisers the opportunity to engage with rural audiences who are increasingly becoming a focal point for advertisers and brands.

Radio is expected to grow at a CAGR of 16.1 percent over the next five years as it expands into new geographies with the launch of new stations coupled with increased content differentiation. This will enable radio to transition to a ‘reach’ medium while retaining the ability to target local audiences thereby, increasing the attractiveness of radio for advertisers.

However, resolving the measurement models will be critical for the long term growth of the sector. Further, with the evolution and growth of digital music consumption, radio will also need to evolve their models to integrate digital opportunities.

Read more: KPMG India – FICCI media and entertainment (M&E) report

(The writer is Partner of KPMG in India

The views and opinions expressed herein are those of the authors and do not reflect the views and opinions of KPMG in India.)