Radio industry seeks increase in ad rates

By: | Published: January 30, 2019 3:04 AM

Pherwani says that many smaller stations have come online and there is lot of room to grow the ad rates in the smaller markets.

Purohit estimates radio industry to grow at 12%-14% in the coming years.

Music Broadcast, which runs the Radio City FM stations, on Tuesday said the radio industry has written to the government seeking an increase in ad rates.

The hike in rates was requested following the government’s move to increase the print media ad rates by 25% earlier this month, Apurva Purohit, president, Jagran Prakashan and director, Music Broadcast told investors during Q3 FY19 earnings call.

“We are hopeful of a positive response,” Purohit said. Music Broadcast on Monday reported 14% revenue growth year-on-year to `87.02 crore for the three months ending December 2018. Ebitda margin was up 223 bps y-o-y to 32.9%. The company incurred a one-time marketing expense of about `5 crore towards increasing consumer engagement in Q3 FY19, Purohit stated. The firm has zero debt and has net cash of around `150-200 crore, RK Agarwal, group CFO, Jagran Prakashan said. The stock closed the Tuesday’s session at `283.60 apiece, up by 1.52% on the BSE.

“Any increase in ad rate helps the media. Especially for a sector like radio where there is no subscription income, ad rate is the most important revenue. Government spending is expected to go up in 2019 because it is an election year,” said Ashish Pherwani, partner at EY.

Radio’s share in the overall advertising pie is currently at 4-5%, which is much lower than many other developed countries. Globally the share of radio in overall ad spends is between 7-10%, analysts say.
The radio industry’s growth, that had fallen to 8%-9% in the last couple of years, will see a revival in the next two to three years, aided by economic recovery that started in the second half of FY19, Purohit said.

Pick up in advertising volumes after a subdued first half and increased government spending due to elections will further help the sector, she added. Purohit estimates radio industry to grow at 12%-14% in the coming years.

Pherwani says that many smaller stations have come online and there is lot of room to grow the ad rates in the smaller markets.

“Also, radio when it gets bundled with digital, there is a large opportunity to increase the total revenue that they can charge advertisers. There will be volume in growth driven by smaller businesses and retail businesses and there should be growth in rates also.”

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