A recent analysis by EY showed the radio sector would take the longest time to recover from the impact of the pandemic; even by 2023, estimated revenues of Rs 2,750 crore would be smaller than the Rs 3,110 crore earned in 2019. The unfortunate truth is that this space was faring poorly even before pandemic struck; revenues had plummetted 7.5% in 2019 largely because advertisers felt they were getting better reach on regional television even if advertising rates on radio were just about Rs 100 for a 10 second spot. The trend was exacerbated by the pandemic and sent advertising revenues plunging 54% in 2020 to Rs 1,430 crore.
Even if advertising revenues recover, which they are, given how the digital segment of media and entertainment (M&E) is becoming more popular by the day, radio operators will need to re-invent themselves if they want to survive.
Already, the absence of a third party audit on the reach of the medium is a big disadvantage at a time when every page view can be counted. If a Mumbai-based advertiser was to pay Rs 1,000 for a per 10 second ad slot on radio, he would have no way of knowing what kind of response the advertisement generated, explains Ashish Pherwani, partner at EY.
Even otherwise, digital is turning out to be cheaper medium, and, increasingly smaller advertisers — who contribute about half of radio advertising — are beginning to experiment with it especially on Facebook. “Youngsters running small shops or businesses are advertising on Google,” Pherwani points out, adding that it makes sense for anyone offering a localised service to advertise on Google.
In fact, local advertising is slowly but surely going digital, primarily because it offers the benefit of targeted local advertising. If a group of people want to set up a coaching centre in their locality, they would today rather opt for an advertisement on Google than radio. Visibility on digital mediums like Google is way higher and it allows users to narrow down their search to the community level. “Advertising services are becoming hyperlocal,” says Pherwani.
Jehil Thakkar, partner Deloitte, believes radio operators will need to pivot into more streaming and online products. “They should create live feeds and market them more aggressively,” Thakkar suggested “besides diversifying formats and experimenting more with podcasts on radio and varied entertainment products”. As he points out, streaming is going to impact listening habits given the same music is playing everywhere.
Experts believe that star radio jockeys with a fan following can persuade audiences to listen to the radio on their phones. Entertainment Network India (ENIL) is focusing on live events — as many as 500 in a normal year — and also on content production creating original short video series for OTT (over-the-top) players. Besides, ENIL is also helping brands to market their products by creating specific audio/video content for them. “We have found that clients love solutions. For us, solutions are a third of our total revenues while FM is two-thirds. We see this becoming a 50:50 share in the coming two to three years,” says Prashant Panday, MD & CEO at ENIL.
Meanwhile, Reliance Broadcast that owns Big FM says it is strategically exploring various digital audio opportunities such as online concerts, influencer marketing, brand advocacy, podcasts and audio solutions in smart speakers.
Analysts estimate non-advertising businesses could make up 40% of company revenues by 2023-24. Given that ad rates continue to be weak, around 20-40% lower than pre-Covid levels, this is a fair assumption. Some advertisers are still negotiating hard on prices, says Nisha Narayanan, COO at Red FM and Magic FM. In Q4FY21, Red FM booked 5%-15% higher revenues in some cities.
Abraham Thomas, CEO at Reliance Broadcast says advertising revenues grew by over 21% year-on-year in March. “The second wave is starting to hurt. We lost some business since Mumbai went under night curfew and weekend-lockdown. With Delhi also going under night curfew and other cities like those in Gujarat there is a worry that business might be hit,” says Panday. Business models of most radio operators remain viable as of now, thanks to some massive cost cuts; and stations are unlikely to shut down in the near future. Players like ENIL undertook cuts in payroll (head-count and pay cuts), infrastructure (reduced office space, lower electricity usage), overheads (travel, all other expenses). But the sector must re-invent itself quickly. Financial Express