Private FM phase III: Will share of regional advertising on radio go up?

A CII and EY study ‘Poised for Growth: FM radio in India’ says that the private FM radio sector is expected to grow to Rs 23 billion, at a CAGR of 18 per cent, within three years of phase III being rolled out. Meanwhile, the industry awaits the rollout of 839 frequencies in 227 cities (in addition to the existing 86 cities), under phase III.

Campaign India delved into the impact this would have on the share of regional (local) advertising, which is estimated to be between 40 and 50 per cent today (the rest being national advertisers). The CII EY predicts that the regional advertising will rise to over 50 per cent of the total revenues generated.

Ashwin Padmanabhan, national business head, Big FM and Ashit Kukian, president and chief operating officer, Radio City put the current national and regional advertisement ratio at 60:40 in favour of national for their radio stations, while for ENIL’s Radio Mirchi, the ratio stands at 55:45 (favouring national advertisements).

NP Sathyamurthy, president and head, DDB Mudra Max observed that the current ratio between national and regional advertising would be ‘roughly equal’, in terms of ad volumes.

Padmanabhan added that in the Hindi-speaking markets, where Big FM has a presence, ratio between regional and national advertisers is currently equal. He is hopeful that expansion of FM network in more cities will give rise to more local and regional advertisers coming on-board.

Foreseeable ad trends in regional FM radio market

“Advertisers interested in regional ad campaigns prefer using regional print (which can enable them to reach several more cities and towns than radio currently can) or regional TV, which has grown significantly since 2005. Therefore, radio is only used as a back up medium for most ad campaigns,” says the report CII EY report.

Sanjay Tripathy, senior EVP and head marketing, products, and direct channels, HDFC Life, feels that the ad rates offered to brands will be beneficial post phase III rollout.

Elaborating on the benefit, he said, “At the back of the expansion across 250-plus cities, FM will offer significantly wider reach nationwide. This will also move stations from offering city-specific deals to nationwide media solutions bringing in media efficiencies.”

Tripathy added, “Globally, 70 to 80 per cent of the radio advertising expenditure comes from the retail (regional) market segment while in India it is about 40 to 45 per cent. But with phase III expansion to smaller cities, retail will get a boost. The ad rates are bound to benefit both national as well as retail players, as entry level prices will get competitive to sell off expanded ad inventory by stations.”

There are issues beyond the regional versus national advertising mix. Tripathy added that while phase III will offer radio stations an opportunity to bid for multiple frequencies for a given market, that would lead to marketers getting well-segmented environments (niche or popular) to deliver contextual brand communication.