With the economic downturn hitting national ad budgets, FM radio stations are tuning in to local advertisers to stay on air.
When you talk to Tarun Goyal, promoter-director of Radio Chaska, a private FM station in Gwalior, you don’t get the impression that the growth of the Rs 800-crore radio industry (both AIR and private FM channels) has plummeted from a robust 30 per cent a year ago to a mere 10 to 12 per cent today. Goyal is cheerful and if he’s nervous about the shrinking advertising spends on radio, he certainly doesn’t show it. As the owner of a single FM station with no prior experience in the media business (the family owns a real estate business in Madhya Pradesh), you’d think his poise is misplaced. But as he explains, advertising spends may have slowed at the national level, but he’s now tapping local advertisers to grow revenues.
Unlike Goyal who looks after one station, Himanshu Shekhar, senior vice-president (North and West) at Big FM, the Reliance-ADAG radio network, has to look after 26 radio channels — Big FM operates 44 FM stations in as many cities, including the metros. But instead of looking at national advertisement campaigns, he too is focussed on the local advertiser. As he puts it, for the past six months, the network has been investing its energies in its smaller stations. In the non-metro markets, according to him, between 40-50 per cent of advertising comes from local brands.
That’s a big change from a year ago, when 75 per cent of advertising on the fledgling FM radio networks came from national campaigns and just a fourth from local advertising — the ratio is the reverse in markets like the UK and the US. “When the going was good, everybody focused on national corporate advertising which was, probably, a low-hanging fruit”, as Shekhar puts it. Now, with the low-hanging fruit no longer available, given how the advertising and marketing budgets of big national brands are under pressure, FM networks have no option but to look beyond Delhi and Mumbai-based media planners for advertisements.
To get local advertising, local sales teams have been strengthened. The argument is that even smaller towns will have at least 10-15 business organisations which aren’t advertising right now. In Jalandhar, Chandigarh and Patiala, for instance, Big FM has got the region’s booming food processing industry to start advertising on it. Other local manufacturing industries, like vanaspati, have also been lured. Interestingly, some advertiser categories are peculiar to a particular region. Since a lot of Punjabis like to migrate overseas, there are a host of agencies which have come up to service this demand — they’ve now turned out to be big advertisers on radio. Education services, similarly, have become big spenders in several cities across states like Punjab, Uttar Pradesh and Rajasthan. The category includes schools, professional training institutes as well as booming coaching classes (for engineering and medical entrance tests). In Gorakhpur, according to Rahul Gupta, the director of Radio Mantra, an 8-city FM network owned by the the Dainik Jagran newspaper group, even private tutors are advertising on radio.
To ramp up their revenue, even the metro-centric players like Red FM are eyeing local retail brands. Abraham Thomas, the COO of Red FM which has a presence in Delhi, Mumbai and Kolkata, says that the company is focusing on real estate, retail and education brands in the local market. The growth in metros, he says, is flat while ‘smaller cities are growing’.
Radio City CEO Apurva Purohit does not, however, agree that local advertising is the only way to go. According to her, typically just 20-30 per cent of advertising on radio is local. But in Radio City’s case, the skew towards national advertising is higher than the industry average since 14 of its stations are in the top 15 advertising markets.
It’s not difficult to see why radio is firing the imagination of the small-town advertiser. For a start, FM channels are meant to be city-specific, and their reach is very high. As radio consultant Sunil Kumar puts it, “It is a medium which is local in the true sense of the term. It reflects the character or culture of the city”. Secondly, radio advertising is pretty cheap. Cheaper than local print, local cable or even outdoor advertisement. In a small town, a 10-second ad spot for the morning prime-time show can be bought for between Rs 50 and Rs 350, depending on the popularity of the station.
However, price is not the only reason why brands may be testing out radio. The station-owners are also offering creative solutions to brand owners and agree to make their jingles for a small fee. That’s not all. Radio seems to be getting integrated with the below-the-line industry and ground activities are often carried on-air. Interestingly, in Tamil Nadu, the radio industry benefited hugely from the blanket ban on hoardings.
Little surprise, then, that local advertisers are keen to pick up sponsorship of various radio shows. As Rajeev Nambiar, the CEO of Hello FM puts it, “Local retails brands want to take properties … we have inventory but not so many properties.” Nambiar, who runs seven Hello FM stations, claims that the channels are targeting a 25 per cent growth this year. His stations have already achieved a 50:50 ratio of national versus local advertising.
To further accommodate the small spender, Big FM has created a “classifieds” concept on its channels in Tier II and Tier III towns. Small retailers are offered a special time band at very special rates to advertise their product or services’ brands. The spot size is smaller, as is the spot rate. Advertiser budgets in these towns vary from Rs 10,000 to Rs 50,000 a month. “While there is no denying that local advertising is growing, there are two issues you need to keep in mind: One, it could have grown faster in the absence of a slowdown. And, two, since the base is very small, the growth looks very impressive,” is how Radio Mantra’s Rahul Gupta puts it.
But it’s not all smooth going. According to Gupta, there is a lot of competition from outdoor (where it is not banned), print and cable TV. “Advertisers like to be seen and not just heard. Print, outdoor and TV fulfil that need,” he says.
Secondly, it will take some time before private FM channels start breaking even. Tarun Goyal in Gwalior says that recovering his investment will take a while; Hello FM’s Nambiar says it will take around six years to break-even on a project cost of Rs 60 crore. Most channels complain the high royalty rates on music make cost control difficult, apart from the other infrastructure costs. Goyal, for instance, says he has to deal with eight hour power cuts — so, even though he shares a generator with two other FM stations in the city, he ends up spending a lakh rupees each month on just fuel for the generator.
Goyal of Radio Chaska and Gupta of Radio Mantra have tied up with Bennett, Coleman’s radio company Entertainment Network India Ltd (ENIL) for ad sales. “Mirchi sells Chaska quite well. The national brands that they bring on board are also important to us,” is how Goyal puts it. But while he waits for the national growth rates to pick up and return to earlier levels, he’s not staking his life on it. For now, big FM channels are relying on advertisers in small-town India.
