NEW DELHI: The Empowered Group of Ministers have given the green signal to the auction of the 839 FM Radio Channels in Phase III.

It is learnt that the eGoM unanimously decided to refer some issues relating to fees to the Telecom Regulatory Authority of India (Trai) which will be asked to give its responses according to a fixed time frame.

Information and Broadcasting Ministry Secretary Uday Kumar Varma said that it was expected that the Government will earn revenue of Rs 15 billion from the auction. The auctions for all the channels are expected to be completed within one year, he said.

Finance Minister P Chidambaram in his Budget speech for 2013-14 had committed that the auction would commence in 2013-14.

He had said the government proposes to expand private FM radio services to 294 more cities.

He said after the auction, all cities having a population of more than 100,000 will be covered by private FM radio services.

NEW DELHI: The number of advertisers on FM radio has grown from 1,715 in 2005 to 5,581 in the period January to October 2012, while the number of brands has grown from 1,295 to 8,133 during the same period.

Furthermore, the number of categories has risen from 285 in 2005 to 379 in January-October 2012 and the volume of hours has grown from 5,273 to 41,202 in the same period.

According to the Ernst and Young Report ?Poised for Growth: FM radio in India? prepared for the Confederation of Indian Industry, the industry?s revenues have been estimated at Rs 14.2 billion for 2012-13 and have been growing at a CAGR of 14 per cent over the last three years.

However, the rate of growth is slowing down due to limited expansion opportunities and the overall economic slowdown affecting all segments of media.

Retail Advertising on FM radio

Advertiser revenues comprise more than 85 to 90 per cent of the total revenue generated by FM Radio companies. Unlike in international radio markets, in which local retail advertisers contribute as much as 75 per cent of a station?s ad revenues, retail advertisers account for only 40 per cent of the total ad revenues of Indian radio companies. Regional radio networks generate the higher proportion of their revenues (averaging between 60 to 80 per cent of their total ad revenues) from retail advertisers.

In the past three years, retail advertising on FM radio has grown twice as fast as national advertising. Overall, there is a 10 to 20 per cent growth in the number of ad campaigns using radio, which is now an integral part of around 50 per cent of all ad campaigns ? rising to as much as 70 per cent of ad campaigns during festive seasons.

Revenue growth in FM radio is driven by launch of new stations in the A+ and A category towns, allowing for more programming variety to emerge and for new listeners to be acquired. At present there are only 4 to 9 stations available in these towns. In contrast there are many more TV channels, newspapers, magazines, outdoor sites and websites available.

Ad rev expansion

Launch of stations across more tier II and tier III cities, which enables radio companies to provide advertisers with a bouquet of channels that can support brand launches across states or regions as a substitute for print or regional TV, retention of key sales talent and client relationships, extensive focus on events and activations to give more practical solutions to advertisers and enable them to experience the effectiveness of radio, and implementation of an accurate nationwide measurement mechanism that will evaluate returns across FM stations can also help revenue growth.

The largest categories on radio include retail, real estate, auto, FMCG, education, and so forth. Of the total media spends on radio, real estate alone contributes 10 to 15 per cent. Telecom, TV channels, Retail, and handsets contribute 6 to 10 per cent while auto, FMCG, durables, and financial services contribute less than 5 per cent.

Radio companies are witnessing increasing inventory utilization ratios, despite a subdued advertising environment, on the back of sustained, albeit falling, GDP growth and reduced effective rates. Utilization of inventory in the radio industry grew by 10 per cent in 2012 over 2011 accounting for the bulk of the industry?s revenue growth. Average utilization of ad inventory across radio players ranged between 65 to 75 per cent. The 10 largest Indian cities recorded high inventory utilization at around 85 per cent in FY12. These calculations assume a 13-minutes-per-hour, 17-hour day from 7 a.m to midnight.

Ad rates

Ad rates have been growing, but are still nearly 25 per cent below their pre-slowdown peak levels of 2008. Currently, the ad rates for a ten second slot vary from Rs 100 to a few thousand rupees, depending on the radio station, city and time-band. Ad rates are the highest in Delhi, Mumbai and Bengaluru, where city-specific advertising can go up to Rs 2000 for a ten-second slot. Rates for pan India advertising can vary from Rs 4000 to Rs 10000 for a ten-second slot, and there is still significant room for them to grow.

The average ad rates of a large radio network were Rs 9,800 in FY 12 ? substantially lower than the peak average rates of Rs 13,000 to Rs 14,000 witnessed in 2008. The dip is also the result of changes in the ad inventory mix, with higher utilization in non-metro stations where ad rates are lower than in the metros.

Innovating on campaigns

Radio companies have been experimenting with the medium and innovating over the years, trying to incorporate interactive elements that engage their audiences better and increase advertisers? ROI (generally referred to as non-FCT sales). Furthermore, innovative campaigns command a premium over plain vanilla ad-spot rates. Non-FCT sales can contribute up to 20 per cent of a radio company?s total revenue today.

Live and telecasted events, primarily centered round music awards, sports events, youth events, and so forth provide alternate sources of revenues, as do activations to help advertisers connect directly with their target audiences to demonstrate products, generate leads, create awareness, induce product trials, and so forth. Customer promotions through internet or mobile phone-based contests, ticketing agents for concerts and plays, mobile radio, which enables listeners to access niche content on their mobile phones, Internet radio, and international revenues also provide alternate sources of revenue.

Activations

Activations are a growing source of revenue for radio companies. Entertainment Networks (India) Ltd reports that activation revenues currently contribute around 17 per cent of its overall revenues, and that it seeks to grow this segment in coming years.

Activations have become an integral part of the revenue mix of radio stations, and account for five to ten per cent of the revenues of large companies. Moreover, since radio is a local medium and activation teams have a good understanding of the dynamics of a town, activations generally create a greater buzz (with on-air promotions) than other media.

FM radio stations have introduced internet radio services, which help them to reach a targeted audience with a taste for niche genres. Radio Mirchi and Radio City operate four and three online radio stations respectively that cater to diverse tastes, including modern Bollywood and retro Bollywood songs as well as club mix and international music in their offerings.

FM radio stations are also looking to generate revenues by selling programming software of certain popular programs to international radio players. Moreover, Radio Mirchi runs radio stations outside India as well. ENIL assists international radio companies to create programmes and stationality for stations targeted at non-resident Indians.

NEW DELHI: The Government has said it is not ruling out carriage of news by FM radio channels based on reports from recognised news agencies.

Information and Broadcasting Secretary Uday Kumar Varma said that news on ?as is where is? basis would be permitted from All India Radio in the FM Phase III. However, this can later be relaxed to introduce news from other sources.

?We begin with AIR and then we go and start allowing more and more news... I do foresee that in next five-seven years time, the things happening the way we expect them to happen, then there is nothing stopping radio to have news,? he said.

He was responding to a question as to why the government did not allow radio channels to use news feed of recognised agencies.

Varma said that though news was not currently allowed, radio channels still provided cricket scores and often radio jockeys also commented on current events.

He indicated that monitoring the news channels was the major reason for not permitting FM channels to broadcast their own news.

Expansion of radio through FM Phase III is on the top priority of the government and it had been decided that an ascending e-auction would be conducted.

Varma said that there were issues like choosing an auctioneer, a migration fee and a Telecom Regulatory Authority of India report which suggested reducing channel spacing for radio channels had to be resolved.

The government would also pursue expansion of FM radio in border areas and interiors as this was a priority area.

The Confederation of Indian Industry (CII) had organised a meeting of radio CEOs.

Reacting to some members of the radio industry that the industry was facing difficult times, he said this was not true and there was a consistent ten per cent CAGR growth in the sector.

Taking part in the discussions, several speakers like Indian Institute of Mass Communications Director General Sunit Tandon and Amit Khanna of Reliance Entertainment said shortage of trained manpower was a major hurdle to the growth of radio.

Khanna said that monitoring news on radio appeared to be the main concern of the government, as it was easier to monitor television news.

Tandon said that IIMC had the infrastructure to train personnel but needed industry collaboration for this purpose. He said IIMC had the mandate for training personnel for community radio, but funding was a problem where the industry could come in.

Radiowalla CEO and co-founder Anil Srivatsa said he was prepared to collaborate with institutions to train personnel in internet radio.