As an increasing number of companies look to get the word across to consumers in small towns and to non-English speaking audiences, radio is emerging as the new advertising star. A recent report by research firm Crisil shows that with the latest round of auctions, which brings 294 cities across the country under the FM bandwidth, the medium will see a near doubling of revenues over the next five years. From Rs 2,000 crore in 2015, the industry will grow to Rs 3,900 crore primarily on the back of advertising revenues.
Advertisers have already caught on to the growing power of radio. A survey by S-Group, TAM Media Research shows that between January and September 2015, ad volumes for online shopping companies increased 126 per cent for radio over the same period in 2014. For print it was 62 per cent and television, 78 per cent.
Not just cost, even reach is radio's strength. After the recently concluded auctions, radio is expected to reach 85 per cent of India's population. Also, broadcasters get greater flexibility this time because the new rules allow ownership of multiple frequencies (or channels/radio stations) in one city and sharing of network infrastructure. A longer licence period also supports profitability.
"In large advertisement markets such as Mumbai and Delhi, the top players are operating at peak utilisation of 90-100 per cent. Therefore, an addition of one or two frequencies would keep their ad inventory utilisation as high as 60-65 per cent during the first year. Moreover, given a low set-up cost for players with already established operations, any new frequency will be Ebitda positive from the very first year," says the report.
Even as radio hopes to reap the advertising bounty, the government has also gained from the entire auction process. Sudip Sural, senior director, CRISIL Ratings says, "We estimate an overall bounty of around Rs 5,000 crore for the government. This includes Rs 1,150 crore through auction proceeds, another Rs 2,000 crore from migration of existing frequencies from Phase II to Phase III, and an estimated Rs 2,000-2,300 crore from licence fees collected through revenues sharing over 15 years."