‘Digital auctions must be economically sustainable for broadcasters’
Despite stiff competition from visual media, FM radio channels have managed to retain an ad share of 2.3% in 2024, says Madison World in a report. But that’s not enough for viability, says the industry, with most players pivoting to non-traditional revenue streams to keep their heads above water. In this interview, Nisha Narayanan, COO & director, Red FM and Magic FM, talks to Alokananda Chakraborty about the reasons the industry doesn’t seem too enthusiastic about the rollout of digital radio announced by the government. Edited excerpts:
The Ministry of Information and Broadcasting has announced plans to roll out digital FM radio broadcasting in 13 major cities. Is Red FM excited?
We are definitely interested in expanding within the audio space. If the economics work out, we would be open to participating.
The shift to digital radio presents both challenges and opportunities, particularly in India. While traditional FM radio has a massive listener base, digital radio has the potential to significantly expand that reach, potentially doubling or tripling current numbers. However, the availability and affordability of digital receivers remain a major obstacle. Currently, the radio community across AIR and private FM stations has an average listenership of around 200 million. With the move to digital radio via mobile handsets and digital transmission, this number could potentially rise to 400 million. There is still uncertainty around the restoration of radio on mobile handsets and whether separate licensing fees will be required for digital transmissions.
Currently, all radio stations operate under terrestrial music licenses, and the industry is seeking clarity on whether additional fees will be imposed for digital broadcasting. The hope is that existing licences will remain valid without any extra cost. If we shift to digital radio, a key question arises: Will the licensing environment remain fair for all broadcasters? The cost of terrestrial radio licences has surged, particularly in cities like Mumbai and Delhi, making it more difficult for broadcasters to break even. Many stations are still struggling to recover from the financial impact of Covid-19, with some even shutting down or surrendering licences. Ishq FM recently made headlines for closing down. It is crucial that digital auctions are fair and economically sustainable for broadcasters.
What about the industry in general?
Many major radio brands are hesitant to participate due to economic uncertainties and regulatory concerns. The regulatory framework is ill-equipped for the modern digital age. While a Red FM can sustain operations in a region like the Northeast, smaller players who have heavily invested in such regions may not be able to. Every market needs to be profitable, and relying on economies of scale is not sustainable in the long term.
Radio advertising depends heavily on local advertising, says TAM. Can these advertisers help change the narrative?
TAM’s local advertising numbers show short-term growth; the industry has barely expanded in the last 15 years. The total size of the radio industry remains under `3,000 crore, making it one of the smallest sectors in media and entertainment. Even if percentage growth looks good, the actual revenue remains inadequate. For the industry to grow, we need major policy changes, such as lowering licence fees, opening up airwaves for more competition, and allowing news on radio.
If a media house like the TV Today Network has to shut down a radio station (Ishq FM), what does it say about the future of the industry?
About 80% of the radio business is concentrated among four or five major networks. Smaller players are struggling to survive. Local advertisers often delay payments, creating cash flow issues. We have policies in place, like upfront payments and blacklisting defaulters, to mitigate this risk.
Events have become a key revenue stream for FM stations. Where do you stand?
Our goal is a 50:50 revenue split between traditional advertising and non-traditional streams. Non-radio revenue was stagnant at 20% for years, but we have steadily increased it to 28-30%. We are working hard to reach 50% through digital initiatives, influencer marketing, and intellectual properties.
Community-led events are a major focus. We host Dugga Dugga during Durga Puja in Bengal, Our Connection in UP, the Premier League in Punjab and Chandigarh, and the Marathi Film Festival. Another key initiative is South Side Story, which celebrates South Indian culture. We plan to expand the Riders Music Festival to the Northeast and the South, where biking communities are strong. RMF started in 2017, took a break due to Covid, and made its return this year.