‘FM growth is here to stay'

Radio now reaches more than 30 per cent of the population and commands 5 per cent of the roughly Rs 30,000-crore total ad pie. With the third phase of private FM licensing for 700 more stations likely later this year, BrandLine spoke to one of the country's largest players — Big FM, part of ADA Group. Reliance Broadcast Network Ltd (RBNL), now a listed entity, has 45 stations and is into TV, out-of-home advertising and event management. “We are bullish on Phase III which will grow the radio business exponentially, taking it deeper into the country,” says Tarun Katial, CEO, RBNL. Excerpts from the interview:

How do you estimate the radio industry's performance in the last few years? Is it heading north? How has Big FM done?

The last few years have been very good for radio. Revenues are expected to post 20 per cent CAGR, faster than most other mediums, aided by increasing acceptability of radio among advertisers.

Our radio numbers have been excellent and very encouraging with year-on-year growth. The business has broken even over the last few quarters, is doing exceedingly well and the trend will continue, both in terms of volume and in terms of value. Our radio operations have turned EBITDA (earnings before interest, taxes, depreciation and amortisation) positive in the quarter ending December 2010. In that period, we also saw excellent inventory utilisation growth, 42 per cent over the previous year. This clearly highlights the medium's effectiveness. We also saw a 23 per cent growth in our radio sales from the tier-II markets over the previous year, which shows that growth is not merely restricted to the metros.

Don't you think the gestation period is too long?

On an average, media businesses take time to incubate and break even. Usually, it could be anywhere between three and five years. The gestation period is actually not high for the market leaders. However, fringe players might have a longer gestation period.

BIG FM is already in the black. This, in under five years of launch. We are growing at a steady speed and currently rank No. 2 in the country, by no means a small achievement for a late entrant.

What are the key revenue streams for the radio business other than ads? Have you explored any?

The radio business is well established and stable and the opportunity to grow the business lies in innovation in content as well as product offerings to clients.

One of the focus areas is offering integrated multimedia properties to clients as well as creating our own IPs, which will become a key part of the radio operating plan. These large-format properties not only provide the brand with the impetus to move forward, but also create significant revenue-generating opportunities. Radio as a category, despite its stupendous reach, has been undervalued by the market. A recent RAM baseline study shows a 50 per cent jump in listenership across Mumbai, Delhi, Chennai and Kolkata. This means advertisers are increasingly seeing the value, and radio should get the price it deserves.

We also look forward to Phase III of radio, which will grow it further.

What's radio's share of the total ad pie?

The current share stands at approximately 5 per cent. Radio has grown faster than other mediums. Its reach today covers 30 per cent of the population, a number which will only spiral upwards with Phase III.

Is it national advertisers or local advertisers who contribute the most to the business — both for the industry and for Big FM?

For Reliance Broadcast, it is a healthy mix of both advertisers. While the earlier trend was of national advertisers, it has now evened out, with more advertisers coming in from the tier-II and -III cities. Radio is a local medium, and with more and more advertisers understanding the strength and power of this medium, they are using it effectively. National advertisers too continue to increasingly integrate radio into their plans.

Would you focus more on metros or tier-II and tier-III cities to grow your radio business?

The metros are critical to growth, but there are key tier-II cities which are important markets from the revenue point of view.

We will not just focus on big cities, but also the adjoining cities, which share the same socio-cultural background. This will enable content innovation, localisation and the ability to offer advertisers focused and differentiated reach.

What would your game plan be for Phase III? Would Big FM prefer the Tier-II and Tier-III markets owing to their growing potential?

The radio industry is poised for exponential growth with Phase III and the opening up of around 700-odd new licences. We are already the largest player in the country with a 45-station penetration, and would like to take radio deeper into the country.

We are looking at increasing our reach significantly through focused network expansion and would also keenly look at inorganic growth and consolidation opportunities.

The FM growth story is here to stay. We have built excellent value and there is need for further geographical spread. We are seeing more and more sectors coming into this medium; education and auto, for instance, are using the medium very effectively. Our objective is to maximise inventory fills along with a geographical spread.

What would Big FM's strategy be this fiscal to improve top line?

Improved operating leverage and cost efficiencies, continued aggressive growth, de-risked and bottom line-driven strategy, improved ratings through product innovations, integrated offerings, thus increasing effective rate and ticket size.

You recently forayed into the TV segment. How is it shaping up?

Yes, in the last six months, we have launched four channels. The three BIG CBS Channels and there's BIG Magic, targeted at the core Hindi heartland.

BIG CBS Prime has been doing exceedingly well. It has been the undisputed No.3 now in the genre, climbing to No.2, and actually among young males we are clear No.2. For any GEC (general entertainment channel) which does not come on the back of spike programming but comes on the back of regular drama programming, it takes time for audiences to bite. Ours has done exceedingly well in just four months of launch. We have also got a large list of advertisers on it. So that is really showing confidence.

The second channel that we launched was ‘Love'. Oprah is actually the big face on that channel, but it is again for the urban and contemporary couple. It has some very big brands such as America's Next Top Model , Everybody Loves Raymond andKing of Queens , so that is actually taken up very well.

Big CBS Spark is primarily targeted at the youth and is positioned as the first ever youth entertainment channel, with international content. It opens new doors to the current entertainment space, where extremely limited international content targeted at the youth is available. Current youth channels cater to mass audiences beyond the metros, resulting in high spill-over and Spark, with its clearly defined programming and near live US entertainment mix, beckons advertisers as a single stop to address the youth.

With more than 30 per cent of the Indian population between the age of 15 and 24 years, and marketers meeting with the challenge to engage with these pressed-for-time, low-attention audiences who are well read, discerning and with high disposable incomes, Spark is poised to bite into a sizeable portion of this burgeoning market.

BIG Magic is already the No. 1 player in the Hindi heartland and now we are gearing up for our joint venture with RTL, a Germany-based media company, predominantly in the TV business.

Do channels of these genres have an advertiser base?

Of course! Advertisers today have options of television channels that do not have a clearly segregated audience, resulting in high audience spill-over. With our channels, we have a more focused and clearly identified audience base, which results in advertisers benefiting far more.

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