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AIR must tap ad potential of FM radio

LiveMint logoLiveMint 31-05-2017 Shuchi Bansal

All India Radio (AIR), run by public broadcaster Prasar Bharati, earned close to Rs80 crore from its FM radio stations in 2016-17, down from Rs110 crore in 2015-16. AIR’s FM network includes 25 FM Gold and FM Rainbow channels as well as a number of local FM stations. AIR Gold and Rainbow have a presence in cities like Bengaluru, Delhi, Chandigarh, Jalandhar, Chennai, Lucknow, Kolkata, Cuttack and Hyderabad. Overall though, the state-owned broadcaster recorded revenue of Rs455 crore in the year ended 31 March, surpassing its annual target of Rs450 crore.

The amount which AIR’s FM channels made is, sadly, small when compared to what some of the private FM channels earned during the same period even though the number of stations they own may vary. Although private FM broadcasters do not share their specific city-wise revenue from stations, according to the latest financial results of Times Group’s Entertainment Network India Ltd, the company that runs Radio Mirchi, the total revenue of the network was close to Rs556 crore. Music Broadcast Ltd (MBL) owned by the Jagran Group, too, reported revenue of Rs271 crore in the year ended 31 March 2017, reflecting a 20% rise. HT Media Ltd’s revenue from the radio business grew by 35.7% to Rs158.7 crore in the full year to 31 March, driven by news radio stations.

To be sure, the estimated size of the radio advertising market is close to Rs2,000 crore and the sector is growing at between 13% and 15% a year. It has been the fastest growing traditional medium for the last few years.

With AIR’s penetration and reach, the broadcaster should have been ideally placed to exploit its FM channels commercially. It has stations in smaller places too where private FM may not have penetrated. But unfortunately, although it gets all the government ads, it does not make much money from private sector advertisers. The reason for apathy from private advertisers is not hard to find. Executives in private FM radio channels say that in today’s demanding environment, advertisers are not looking for plain vanilla free commercial time but seeking solutions for which AIR seems ill-prepared.

Solutions here refer to a range of advertising-related services that FM channels now offer to their clients. This could include programme integrations, Radio Jockey mentions, activations and much else.

Although commercial spots or regular advertising continues to be their primary source of income, most radio stations have started providing services that go beyond traditional jingles. The purpose is to drive higher consumer engagement. For instance, radio broadcasters provide off-air solutions that involve using Radio Jockeys to promote the brands on-ground, at events where even the consumers can participate.

Advertisers seek both programming and promotion innovations. Brands work in close association with radio channels which offer brand integration solutions where a brand’s message to consumers of radio is offered as content rather than a commercial. That is not all. Some stations also allow radio jockeys to mention the names of the brands in their conversations.

Interestingly, while the ad rates for commercial spots on radio have not really gone up in the last few years, radio operators are able to charge a premium for such unique solutions to advertisers, helping them shore up their revenues. Currently, depending on the city, the station and the time, radio firms charge anywhere between Rs100 and Rs1,600 for a 10-second commercial.

Gopinath Menon, a media buying expert who runs his own consultancy, says that AIR’s income from FM channels is low as no one is really marketing or selling its channels. “It should allow programming innovations and other marketing solutions for advertisers,” he says, recalling his own experience with AIR FM channels that did not agree to any innovations, pushing him to move his brand’s entire business to a private channel. “Someone has to see AIR as a profit centre as brands are looking for solutions,” he says, adding that radio is a flexible and creative medium. “It delivers better than news channels since it is a localized medium,” he says. Clearly, the medium delivers reach both in small and big towns. It also lends weight to TV and print campaigns. “In short, what makes FM stations attractive to advertisers is the fact that they provide huge reach in important markets (such as Delhi and Mumbai), creative solutions, a young and wealthy audience and attractive brand images for clients to associate with,” says Prashant Panday, chief executive Radio Mirchi.

In future, AIR has plans to extend the coverage of its FM channels to about 65% of India’s population. Currently, FM operations cover 24.94% of the area and 36.81% of the population. It will be great if it can exploit its commercial potential too. Unless, of course, it wants to get out of commercial broadcasting and focus only on public service broadcasting. But that is another debate.

HT Media which publishes Mint, owns Fever 104 FM and Radio Nasha, which compete with other FM radio brands.

Shuchi Bansal is Mint’s media, marketing and advertising editor. Ordinary Post will look at pressing issues related to all three. Or just fun stuff. Respond to this column at shuchi.b@livemint.com.

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