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Thursday, October 29, 2015

Radio advertising revenue may double to Rs3,900 crore in next 5 years: Crisil

Radio advertising revenue has the potential to almost double in the next five years, to an estimated Rs.3,900 crore from Rs.2,000 crore in 2015, rating agency Crisil said in a report released on Tuesday. Key drivers for growth include expansion of coverage area of radio stations across 294 cities, rise in local advertising spending, and an overall increase in advertising budgets for radio.
“Volume of advertising should get a fillip with Phase 3 regulations expected to take radio to 294 cities from 86 now, along with a proposed 839 new radio stations (also referred to as channels or frequencies). Phase 3 aims to increase the territorial coverage of radio to 85% of the population, including cities with a population of more than 1 lakh ,” the report stated. In addition, Phase 3 of FM radio auctions offers more flexibility to broadcasters compared with the previous two phases. Provisions such as a longer licence periods (15 years instead of 10 years in Phase 2), ownership of multiple frequencies in one city and sharing of network infrastructure for multiple frequencies will support profitability—and thus returns—for new frequencies. The first batch of Phase 3 auctions, with 135 frequencies, began on 27 July and ended on 16 September. Provisionally, 97 frequencies were won in the first batch. The remaining frequencies are likely to be auctioned in the second batch, dates for which are yet to be announced.

A total of 839 frequencies are proposed to be auctioned in batches during Phase 3 auctions. Due to deeper coverage, the share of local advertising is likely to increase, the report said. “As FM Phase 3 widens the coverage of radio to more Tier II/III cities, advertising volume will be driven by greater usage of radio by local advertisers. The share of local advertisements is expected to increase from the current 35-40%,” the report said. Even large advertisers now consider radio an integral part of their advertising strategy and not a complementary medium. “Better content and promotional spend by radio companies have helped create strong brands and draw more listeners,” the report added.

Crisil estimates that radio operators Entertainment Network India Ltd which runs Radio Mirchi , HT Media Ltd that owns Fever 104, Reliance Broadcast Network Ltd which runs Big FM, Music Broadcast Pvt. Ltd which operates Radio City and Digital Radio (Mumbai) Broadcasting Ltd and Digital Radio (Delhi) Broadcasting Ltd, owners of Red FM are the top spenders (at the auction of new frequencies and for migration of existing frequencies) in the first batch of Phase 3 auctions.  Nearly 64% of the upfront licence fee of Rs.3,000 crore would be contributed by these radio operators.

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