After the advent of TV in the '40s, media-pundits predicted the death of the radio. The rise of cable TV in the '90s spurred doomsayers to sound another death-knell for the radio. The humble medium staved-off the threats by adapting to evolving tastes. Today, the radio is under threat again, from online music streaming. The rise of Gaana, Saavn, and other similar apps, which offer on-demand music streaming, is posing a threat to the viability of the medium.
The absence of FM tuners in smartphones simply strengthens the case of "people don't want to listen to the radio, anymore". However, the reality is not that simple. In fact, if trends are to be believed, the humble radio might be looking at its best days, yet, in the country. Here's why the radio will survive another ominous prophecy.
It has a staggering reach
FM radio reaches 65% of the country's population
. Phase III auction of radio licenses has significantly increased the reach of radio, in India. In fact, radio has the upper-hand when it comes to rural audience, since internet penetration is still low in the country. Music streaming apps, on the other hand, have a lot of catching up to do in terms of numbers. Gaana, for instance, crossed 5 crore active listeners in 2017, the first streaming app to reach the milestone. That number is a long way from radio's reach, which is easily in excess of 50 crores, even by conservative estimates*.
Phase III auctions resulted in an increase of FM radio stations in India by 2/3rd. The auctions also led to an increase in the number of cities (by 1/3rd) that enjoy access to FM radio.
Radio adex is expected to grow
The Indian FM radio industry is expected to be worth USD 656 million by 2019
. Furthermore, according to a KPMG report, radio adex is expected to grow by 16% in 2018, the fastest among traditional mediums. The outlook on ad revenues in the radio industry remains very positive, driven mostly by an increase in ad inventory.
Furthermore, financial initiatives by the Indian government has meant that banks and other micro-lending institutions are now penetrating the rural belts of the country. FM radio can emerge as a strong advertising medium for the BFSI (banking, financial institutions, and insurance) sector, thus driving growth.
Radio can offer the whole advertising bouquet
Compared to digital streaming platforms, radio can offer a much more extensive advertising bouquet, covering terrestrial as well as digital. In fact, it isn't just about the reach. It is also about the advertising options that radio makes available. For instance, brands can opt for radio jockey mentions, thereby tapping into a loyal fanbase. This sort of activation isn't possible with online streaming, which isn't as interactive, relatively speaking.
Online streaming platforms are just beginning to experiment with more interactive ad formats, and it will take some time before they can catch up with the reach and engagement of radio.
Online streaming has its set of limitations, at least for now
Online streaming has still to find a viable business model. Spotify, which went public this year, and also announced its launch in India, is not profitable
, yet. Saavn, one of the biggest music streaming players in the country, in a 2017 interview, claimed to turn profitable by the end of 2018
. The challenge that the music streaming world faces is twofold: one, the internet consumers are used to free services. While Saavn has increased its paid user base
, it still makes for a fraction of the total revenues that the music streaming giant makes.
Convincing consumers to pay for music is a challenge, especially in tier II and tier III cities, and rural areas, where disposable incomes are not necessarily comparable to metro cities. To combat low subscription numbers, streaming services are betting on advertising. However, that will mean doing the balancing act between listener-experience and catering to advertisers. More ads on a platform can quickly disrupt user experience, and lead to ad fatigue. Online streaming also faces a risk from ad-blocking
, a trend that's on the rise.
Radio is a step-ahead in the game on the business model front. In order to combat ad fatigue, leading FM radio stations have capped their ad time
at 10 minutes per hour. Instead, they have hiked their ad rates by 5-10% to make up for the lost time, thereby improving listening experience. Radio stations have the advantage of justifying the hike with a proven track-record, something that online streaming lacks.
While online streaming players fine-tune their business models and content offerings, it will give radio time to adapt to changing user behaviour. In fact, major players of the FM radio industry are already doing so, by going digital. By allowing listeners to tune-in to their favourite radio shows online, they are expanding their audience, and in the process, offering 360-degree solutions to advertisers.
Then, there is the problem of technological literacy in the country, which is lacking. Despite Modi government's push for Digital India, a large part of the population remains technologically inept
, if not totally illiterate. The technology barrier has two direct implications on the online music streaming world. One, it limits the user base to mostly the urban population, for now. Two, even if streaming services were to penetrate into the interiors of the country, getting listeners to pay online is going to be a formidable challenge.
The problem of plenty might also work in radio's favour
Streaming platforms make tens of thousands of songs instantly accessible. In fact, that is one of their primary USPs. However, people in the US are actually turning to the humble FM radio
more than ever. Experts chalk-up the surprising trend to the tyranny of choice. In an age where users are constantly bombarded with information and made to choose from a plethora of options, most users find the task of 'music discovery' daunting. The success of community-radio Boxout FM is a case in point. The radio ropes in curators, DJs, and producers for weekly online radio shows. Listeners depend on the acuity of the curators, instead of a catalogue of songs they can flip through, to find good music.
Phase III norms a shot-in-the-arm for radio
Phase III auction norms have relaxed the lock-in period from five years to three years. Furthermore, licenses are now given for a period of 15 years, thus reducing the fixed cost of running a radio station. Radio stations are, now, also allowed full-scale networking and use of multiple frequencies, which eases logistical hassles.
Given all of those factors, radio is poised for some impressive growth in the very near future. While it may still face stiff competition from online streaming, the two will peacefully co-exist for quite some time. Meanwhile, the government of India should look at the problems plaguing the radio industry, if the medium is to survive. Private radio stations, for instance, aren't allowed to broadcast news. High reserve prices and bid prices are another bone of contention.
Radio stations, irrespective of the city they are auctioned in, have the same reserve price. Thus, a company will have to start the bidding for a radio station at the same price, be it in Chandigarh or Saharanpur. This is despite the fact that Saharanpur is likely to have lesser revenue potential compared to Chandigarh, or other more developed cities. Government policies need to be revised to make things easier for businesses in the country.
Despite the nagging issues, though, things look good for radio in the country.