MUMBAI: With high expectations and wind beneath its wings, 2012 commenced with a ray of hope for the nascent FM radio industry in India. It all turned around in an instant with the struggling economic situation acting as a major deterrent of growth. Adding to the misery was the delay of the long awaited FM phase III auctions, which further hampered the industry. Even though it was a tough year for the medium, radio managed to prove its mettle by being ‘same yet quite different’ in the year that was.

Termed as the year of flat growth, as per industry veterans the medium grew by around 10-12 per cent, which was much below the Compound Annual Growth Rate (CAGR) of over 16 per cent achieved over the last four to five years.

In the midst of this, the Copyright Board ruling that radio companies need pay only two per cent of revenues as music royalty kept the running costs down. Earlier, royalty costs for radio stations were often as high as 50 per cent of revenue.

Stations also started experimenting with programming and content towards targeted SEC’s. Amongst the first ones to break the moulds of traditional programming was Radio One which switched to international format in the metros of Mumbai and Delhi, later moving to retro in Kolkata and Ahmedabad and a complete request station in Chennai.

While initially the move was met by negative feedback, the success amongst the audiences in terms of listenership and rise in consumption proved otherwise. Although other broadcasters could not afford to take such a big risk, the idea of experimenting with their format took birth across the country.

Suddenly a whiff of change came about with stations like Big FM turning to complete retro in Delhi, Fever FM and Red FM as complete bollywood stations in Bangalore and more. Audiences too were pretty receptive to the change even as bollywood music remained the dominant factor. FM radio managed to achieve 80-90 per cent penetration in the larger metros in the country, as per Radio Audience Measurement (RAM) data.

Advertising on radio opened up in a big way with the content offering on radio showcasing activations being leveraged to a large extent. The medium provided a lot of value addition to the campaigns which proved beneficial to the brands and advertisers.  Also with consumption on radio growing, more and more advertisers understood the power of the medium to create an affinity and engagement with the listeners.

The traditional vanilla FCT’s became passé and a varied spectrum of brands including real estate, retail, auto and finance advertising on the medium in a big way. But inspite of witnessing a whole new world of advertising open up in radio during the past year, many claim that it was still a year of ‘flat growth’ for the medium.

The success of radio in 2012 was earmarked by a blend of on-air and on-ground activations with a strong ATL (above the line) and BTL (below the line) combination. Creating a strong buzz, on-ground activations became the new success mantra for most broadcasters who failed to make profit through their content. Brands also used the channel’s programming fused with the RJ’s personality making the message more credible to consumers. It also moved forward by offering a plethora of new solutions including mobile activations, internet integrations, international marketing, multi-media solutions, film-star-integrations and flash mobs.

Digital too witnessed a sharp growth in terms of activations taking a new route. Social media too played an important role in promoting various initiatives, though digital radio remained restricted as a niche space with players like Radio City, Radio Whiskey and Radio Mirchi occupying a distinct area in the digital domain.

A major let down for radio broadcasters was the unforeseen delay of the FM phase III auctions which acted as a spoilsport in the high-aiming plans of major radio players. With the present FM radio policy being restrictive and regressive, Phase III promises to be the same old story put together with better packaging and hype.

Moreover, with the government announcing that the reserve price in a new city in Phase III will be the highest bid amount in that category in that region in Phase II; has acted as major setback to large players as well as the small ones who might find it difficult to exist in the same space. The government’s decision that AIR's news capsules can be re-broadcast in Phase III has also been met with disapproval.

As compared to earlier, a single operator will be able to operate upto 40 per cent of frequencies in a city (rounded to nearest whole number) subject of a minimum of three operators per city. With lock in period of existing operators over or getting over, a lot of mergers and acquisitions are said to be on the cards for radio.

Although the FM phase III policy is a mixed bag, the share of radio is expected to climb from 4.5 per cent today to nearly 7-8 per cent of all advertising in the next five years. In anticipation, the CII-E&Y report also predicts radio to be the fastest growing traditional medium in the next five years.

2012 was not a very good year for radio in terms of profit but innovation and programme diversity acted as the saving grace. But with stations no longer averse to taking risks in programming and with an economic recovery on the horizon, radio will continue to remain a feasible business opportunity in 2013 as well.