Rocking the airwaves

Standing here today, if one looks back, FM radio has truly come a long way as a medium, stepping into several modes since the privatization of radio began. From early days of general free public communication to a distinctly youthful and fresh entertainment as well as socially responsible medium, private FM radio has become a strong force to reckon with. From its start in the metros to making inroads into smaller cities and towns, radio has crept into the hearts and lives of the masses, rejuvenating the personal appeal of the medium and connecting with its audience in an intimate manner, adding much value and meaning to the lives of listeners. Radio has also established its worth as a credible and attractive advertising medium, owing to its high degree of interactivity and saleable content.

Today radio is at the threshold of stepping out of its infancy and, given the right support, can grow into an excellent medium that will benefit the society as well as the economy through a wider, more meaningful communication spectrum and excellent profits. Standing at the threshold of the third phase of privatization, wherein as many as 700 additional frequencies spread across 237 cities will be released, there are several issues that need to be resolved in order to maintain the viability and sustainability of the industry in the days to come.

The hanging swords

While strengthening its foothold in the extremely challenging media environment, private FM broadcasters have put their heart and soul into the medium, investing not only monetarily but also creatively in order to sustain themselves while grappling with the immense restrictions which have been kept on the medium. The industry is reeling under pressure of several policy-related issues, high royalty costs, limited license term, lack of credible metric system, lack of freedom of content.

Stepping into the New Year, there are positive energies and feelings regarding the resolution of several of these matters and the initiation of the third phase of licensing. The various bodies that deliberate on the issues of the industry have given many promising inputs regarding the measures to be taken for making the medium a competitive and economically viable business. The various propositions that have been made will go a long way in dissolving the obstacles that are blocking radio's road to success.

One of the prime concerns in the minds of the broadcasters is the issue of music royalty, which has been in debate for a considerable amount of time. The contentious issue of music royalties is a great challenge especially for radio in Tier II and III markets. Being a blanket cost, the royalty given by the radio industry currently ranges between 15 and 70 percent of the total revenue of the radio stations. On the other hand, in more advanced countries the royalty given to music labels is between 2 and 6 percent of the total revenue of radio channels and also keeps in consideration the size and listenership of the station.

Presently, with restrictions on airing news and current affairs, the content of radio is limited to entertainment genre. The diversification of content is also hampered by the regulation, limiting private broadcasters to run only a single frequency in a city. Had this not been the case, it would have been possible for radio stations to cater to different target groups with varied formats. The government seems keen on providing this facility to radio stations, and broadcasters are definitely looking forward to the change since the current scenario makes it imperative for radio stations to cater to popular tastes in order to survive. Niche formats in radio, although present in India, have a long way to go before they can harness advertising revenues and become a viable option. With multiple frequency broadcasting and allowance of news and current affairs, the medium will be able to attract wider and more mature audiences, thereby increasing the ambit of its impact and capabilities and reducing its dependence on music-based content.

The industry is also grappling with economic policies of the government. Though the FDI limits have been relaxed, there is scope for improved performance with increased inflow of investment capital. Current recommendations from ASSOCHAM suggest increasing FDI cap in radio to 49 percent which would definitely be a positive move for the industry. The pressures on the industry also need to be relaxed by increasing the license term from 10 years to 15 years, which will allow the industry to make better use of the investments made by the broadcasters. The private broadcasters took up the challenge of bringing a new dimension to the FM radio industry and have invested huge sums of money in their businesses. There is an urgent need to implement policies that will make these businesses viable in the long run and help broadcasters in bringing newer dimensions of the medium forward.

With its unique capabilities radio as a mass medium can bring about greater changes in society since the participation of audience is much higher and more direct than in any other media. To facilitate this role of the industry the government can provide the required economic incentives to FM stations, thereby making them more profitable. This in turn would motivate the industry to allocate more resources to connecting with its listeners on a diverse plane beyond that of pure popular entertainment.

Radio'the star

Despite the pending issues which require immediate attention, the radio industry has displayed exemplary performance in the past years and promises to grow into an even better medium with its wonderful benefits. In India, radio has the second highest penetration after television and manages to score brownie points due to its instant appeal and non-interference in daily activities. Radio not only is the medium which is most easily accessible, but is also the one that the common man can understand and enjoy. Besides, this appeal is more universal as the medium can cater to more urban lifestyles of homemakers and office-goers alike. Radio has a great influence over these two segments which are also the main targets of advertisers. Thus the medium is able to target a varied consumer base despite restrictions on content.

Advertisers have already begun to see the advantages of radio. Radio advertising rates are the most attractive on cost-per-thousand basis, yielding a much better return on investment (RoI). For a generic four-week Pan India Campaign on TV, print and radio, radio yields the lowest CPT (Rs. 18), vis-a-vis Rs. 44 and 34 for TV and print.

Apart from low costs, radio offers multiple options for promotional activities. Many cross-promotional activities are possible through the medium which helps optimize ad budgets. Considering these unique advantages, in coming times, we may even witness campaigns that break only on radio. Being an interactive medium, the listener engagement is also very high.

As a live and rapid medium, radio adds great value to the media mix by acting as a message frequency multiplier. As per the famous Millward Brown Study, redeployment of 10 percent of TV ad budget into radio increases brand awareness scores by 15 percent. Also, consumption of private FM radio is highest among the younger listeners (15-29) and SEC A listeners, an audience most sought by advertisers. And with 17 crore listeners, All India (source'IRS Round 1, 2009) Radio already has more than half the print audience. Lastly, the medium works the most during the shopping hours and is in fact the last medium consumed before a purchase is made rendering it pivotal in shifting brand favor.

Apart from these advantages, it is pertinent to note that international radio advertising benchmarks stand at around 5 percent in growing radio markets and around 10-12 percent in mature markets.

Take a look around

Having understood the problems, benefits and solutions that are intricately attached to the development of the industry, it is also vital to envision the future of radio in a more wholesome sense, unbounded by policy, sustainability and other issues. The radio industry is one of the few mediums that allows for such a high degree of personal contact between the audience and the medium. Internationally people associate with radio stations on several different levels including content, editorial bent, on-air personalities, etc. The medium can offer an excellent professional environment for individuals looking to associate with mass media. The amount of creative ambit that the medium can provide has been barely even explored. The medium has a long future to evolve into while adding to the growth of allied industry, foreign investments and opportunities for technological advancement as well. Looking on the softer side of things, the country has a premium opportunity in the form of radio to express itself.

The road ahead

Given the excellent opportunities within the industry, radio is definitely on a growth path that can lead it to newer heights. With the support from the government on policy issues and continuing excellent marketing of the medium, radio will be poised to attain its true potential in no time. Listeners, broadcasters and advertisers alike are positive that 2010 will make radio even more meaningful and as the third phase rolls out, the impact of the medium will be felt more strongly and widely than ever before.