Steep licence fee & govt control hampering profitability: Radio experts

The e4m Golden Mikes Radio & Audio Conference 2024 witnessed a fireside chat with Abe Thomas, Chief Executive Officer, BIG FM and Ramesh Menon, Chief Executive Officer, Fever Network (HT Media). The conversation was led by Kanchan Srivastava, Senior Assistant Editor, exchange4media.  

During the e4m Golden Mikes Conference panel, the industry experts discussed the opportunities and challenges that radio faces with the boom in digital. 

Thomas began the conversation with insights on the change in the revenue model for digital audio. “All the hype around digital audio is somehow not getting the revenues it requires. If you were to look at India, my estimate is that 80% of the revenue goes to AM and FM. Barely 20% goes to digital audio. The whole pie is under stress, radio used to be 4.5%, it’s now slightly over 2% because the rest of the mediums are growing faster but this pie is also growing. So, I don't think there is any basis to say that the radio pie is shrinking, or what is going to happen to radio and is digital going to take over radio?”

“Secondly, the composition of revenues in radio has changed. Earlier, 90 or 95% of the revenues were coming from FCT spots. Today, the amount of money, which comes beyond spots, is probably 25 to 30%. And we project that in another year's time, 40% of the total revenues will come from beyond radio. This huge opportunity, which has come up because of the whole growth in digital consumption, is the opportunity for Radio. While the core of 50 to 60% continues to grow at 10 and 12%, the balance 40% is growing at a fast pace,” Thomas added.

Menon discussed the change in user consumption habits with the need for content to be omnipresent, making sure it works across multiple touchpoints.

“All these businesses whether you're in television or radio or digital or anything are all about content. There is only one business and that's the business of content. The mediums can change, platforms can change, but it doesn't really matter. It's really about creating the kind of content that consumers want to listen to or watch,” Menon said. “Content consumption habits are changing, content is the only permanent thing. That's the way we need to rethink radio and let's look at ourselves as creators.”

Abe Thomas then shared his expertise on the change in audience demography over the years and the need for research on radio. He said, “Unfortunately we don't have much research on radio but whatever studies that individual radio networks are doing and more importantly the kind of insights we're getting from digital data shows a change in consumption. For example, if I were to go by digital download of music, the share of Bollywood music has dropped from 80-85% to about 60-65%. Independent music has gone up and so a lot of these changes are happening in terms of the taste itself.”

Agreeing with Thomas, Menon highlighted how the people doing the research are not creatives, which is leading to the lack of conversion from data to actionable insights.

“Most of them have no clue about what it is that consumers are listening to, what consumer interests are or how they are changing,” Menon shared, “Earlier you could go to an agency and they would create campaigns with you. All of that era is not there anymore. There is an entire ecosystem, which is unconnected with creativity and is telling you whether you're to advertise or you're part to be part of the advertising plan or not. That is the biggest challenge I think for the radio industry.”

The discussion then moved to programmatic advertising in digital audio.

Thomas discussed, “In India, specifically in audio, programmatic doesn't exist. If you look at all audio digital platforms, their money comes either from direct brand sponsorships and brand integrations, or it comes from some direct sales. But bid-based, platform-based, programmatic sales are small.”

“There are attempts and quite a few people are aggregating audiences. Currently, the size of the audience is very splintered. And therefore, when the size of the audience reaches a critical mass, there are these aggregators who can then execute large campaigns. Programmatic is just a concept that everybody throws around, but where's the volume?”

Menon agreed with the opinion. He highlighted, “I have failed, and I continue to fail every time I try to set something up on programmatic advertising. Multiple people have come into the country and said they're doing it, but that's failed. Spotify has been pitching its ad engine called Span for the last few months. That also has failed. So programmatic advertising on audio is going to be a big challenge. I don't think it's going to come that easily.”

“India will still survive on the equivalent of display advertising. You stitch in your ads, and you go to a sales call, ask the client for money, and he gives you the ad money, and then you stitch it in. Nothing is automatic. Nothing is personalized. So that's the way advertising will continue for some time in the digital audio space. It’s not changing anytime soon but there is hope.”

The session moved forward with the experts sharing the various challenges that radio is facing, in terms of an industry as well as with respect to digital audio.

Thomas discussed three key problems plaguing the industry and how unless they are resolved, radio will have a sad legacy. “We have seen the industry drop from 4% to 2% of the AdEx and yet we have not managed to create a measurement system, which creates some level of accountability. We all wax eloquently at forums such as this, how we have to be accountable, and we must do it. But we never agree on anything that comes close to measurement. We shy away from accountability, and therefore that's one.”

The second big challenge he mentions is the lack of compatible devices. “There have been attempts where we are trying to get devices, either get the FM activated on mobile phones, or make other devices available so that it's convenient to listen to FM. The third is obviously the whole music rights domain. Every other country has a mirror of the FM feed playing out on digital as well, and I'm talking about live radio. Here we only have on-demand audio. You go in and there's no live radio. So we need to find a solution where we can make this device constraint go away, and we need to find a solution where the music rights, at least on a live digital radio, becomes a workable solution,” Thomas highlighted.

In terms of challenges, Menon pointed how the significant licence fee that the industry pays, hampers profitability. “We are the only industry that pays such a huge licence fee, and unless that changes, the profitability of this industry will never be close to what any other industry has. If a person has a hundred crores and wants to invest in something, they will have far better options than the radio industry.”

“You're competing with people who have no controls at all. A digital guy can do whatever he wants, play whatever he wants, and create whatever he wants. Contrary to that, we pay for the licence while also getting controlled. That's the biggest challenge for us, and hopefully something will happen on that front soon.”