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How FM stations are making profits

By Shuchi Bansal in New Delhi
September 27, 2007 14:29 IST
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Dainik Jagran's FM radio business head Rahul Gupta is excited, though a little cagey, about Radio Mantra's strategies for the coming festival season.

However, he hints at creating Dandiya (dance) events across cities like Agra, Bareilly, Karnal and Hisar where Jagran's FM radio stations have been launched. "The events are ours, but we're getting big sponsors. The brands which associate with these events will get promoted on Radio Mantra," he explains.

Last month, Radio City, the Music Broadcast FM radio brand, seized upon "rakshabandhan" to push a confectionery brand. In an activation exercise for Cadbury chocolates, it held SMS-driven on-air contests for brothers and sisters across six radio stations (Mumbai, Delhi, Ahmedabad, Vadodara, Jaipur and Lucknow).

The contests were accompanied by on-ground activity in these cities where Radio City set up the "Celebrations Bandhan Wall of Fame" at prominent malls. The brand activation exercise allowed brother-sister duos to write messages to each other and win gift hampers from Cadbury.

"The SMSes and calls ensured unparalleled top-of-mind recall for Cadbury and the stations created a great buzz around the brand," says Apurva Purohit, CEO, Radio City.

Big FM CEO Tarun Katial says that many of his 23 radio stations across the country have already worked on similar promotions for brands like Britannia, ITC and Lotte. Suddenly, brand activation is big business for India's Rs 300 crore (Rs 3 billion) FM radio industry.

For Times group's Radio Mirchi, it already generates 15 per cent of total revenue. "That's because we were pioneers in the business and Radio Mirchi has been around for five years," says Prashant Panday, deputy CEO, Entertainment Network India Limited.

It's not difficult to fathom why FM radio companies are entering the brand activation business. "Brand marketers are increasingly looking at consumer touch points and experiential marketing. They find traditional media (read print and television) cluttered and expensive. So, today they are not buying FCT (free commercial time) on radio, they are buying solutions," says Panday.

Hence, radio broadcasters are doing what an events company would typically do, but the brand promotion is amplified through their FM stations.

The radio companies' solution offers activation-cum-media. For instance, if a stand-alone event touched 5,000 people, through radio it reaches a few lakhs. Says Rahul Gupta: "We promote brands on air, through 'live' links, interaction with consumers, it works."

Other than working for individual brands, Big FM also takes on activations for events such health melas and recruitment fairs. Katial says that the company offers a 360 degrees solution, especially, now that it has launched an out-of-home division, Big Street, and an events division, Big Events.

From the radio stations' point of view, too, activations are critical to augment their incomes. Radio advertising is growing below expectations, an estimated 15 to 20 per cent in the first few months of the current financial year.

"While that may not be bad, it's not great either," says Apurva Purohit. Panday says. He says that though advertising volumes in most cities have exploded, price erosion (in spot rates) has kept the value growth in check.

Needless to say, FM radio companies are exploring activation plus other non-traditional options to generate revenues.

Reliance ADAG's Big FM, for instance, has started supplying pre-packaged content (humour content, celebrity packages) to ITV Gold, a US-based radio station that caters to the Indian diaspora. Several other stations have re-purposed their content for mobile subscribers.

And though Gupta puts up a brave front and says that Radio Mantra's markets (read small cities) have just tasted FM radio and that advertising is bound to boom, he honestly admits that profitability in the radio business, with or without "dandiya", is a good three to four years away if costs are kept under control.

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Shuchi Bansal in New Delhi
Source: source