Brands are looking at radio far more seriously: Girish Menon

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Growing at a compound annual growth rate of 16.1 percent, radio will be the fastest-growing among the traditional mediums, states a Ficci-KPMG Media and Entertainment Industry Report 2017 released earlier this week. Girish Menon, director, media and entertainment, KPMG in India, speaks to Forbes India about what helps the radio industry grow despite the digital boom, factors which caused a weak uptake in Batch 2 auctions of Phase 3 and the growth of community radio and podcasts. Edited excerpts:

What is really working in favour of radio?
Over the last few years, advertisers and brands are looking for more local messaging. If you look at television or print, fundamentally they are a reach medium. You don’t target specific audiences there. At best, you can target language. Radio never had the reach. But brands have realised that they need to be far more customised. Hence they are looking at radio far more seriously. The radio campaigns are now evolving. That change has happened over the past 2-3 years. Coupled with that is the growth in the number of radio stations itself. Plus what’s more interesting is the Phase 3 auctions. The theory of it is that it will make radio a reach medium. You will be able to balance ‘going local’ with ‘going all India’. But, in practice, the auctions haven’t really gone as well as the government wanted them to. But still there have been new stations that have got launched, bigger networks have 50-plus stations and can speak to a brand saying, ‘I can give you a reach to X number of cities’. Advertisers are more interested in tier 2 cities and beyond and that’s where radio is growing. That’s why we believe radio should grow at a relatively faster pace. It would have been faster. We were looking at 18 percent-plus last year. But that was based on the auctions being at least semi successful.

What were the primary reasons for the auctions not doing as well as expected?
Auctions were a simple game of economics. If you look back to two years, at the same forum, everyone was excited. Operators also want more stations. The problem is economics… the reserve prices have been significantly high. There were severe abrasions. That’s the only reason the auctions didn’t do well. If the government fixes the auction prices, makes it far more palatable and in line with market size and in line with the economics it takes to operate a station, you will see interest from operators.

Is relaxation of a few norms and allowing foreign direct investment in radio required for faster growth?
I think for the auctions to work, the reserve prices is the primary thing the government has to look at. The other restrictions on radio, which if relaxed, will make things much friendlier for operators. But operators were keen enough even with restrictions till reserve prices were announced. FDI coming in will definitely help. But the key challenge is how you deal with news and current affairs. That is the government’s key concern.

What are some of the restrictions which hinder growth?
The primary concern is around news and current affairs. Why it becomes so critical is because radio is best placed to disseminate news and current affairs and it is a good way to offer differentiation. There are also concerns around licenses, three-year window before you can do M&A. That is holding back investments. There are also complexities around sharing of infrastructure – both with government setups as also internally.

Are community radios being more experimental?
They are. I feel the potential for their growth is significant. But honestly, it is not a mass medium yet. It is very niche. Access is not the easiest. That is a bit of a challenge. Their growth will be a little bit similar to what is happening online where you have talk shows, devotional, political and more topical shows.

There has been an increase in the number of podcasters in India in recent times. But do they have a sustainable revenue model?
Podcasts are not covered in any specific detail in our report, but from what I have seen, they are very niche in India and have not seen as much traction. I think they will take time to evolve. You need to be able to target your audience. It is a bit of a chicken and egg situation right now. Only when digital reach increases will these elements become stronger. Revenue models, even in the US, have always been tricky and I don’t see India being different. At best, you will end up with branded sponsored content for the podcasts.