Entertainment Network (India), leading private FM radio operator, under the Radio Mirchi brand, has decided to hike its airtime rates in select key markets with immediate effect. Radio is repeatedly proving its efficacy and its efforts towards evangelizing the medium. In the last two months, three leading radio stations have announced the hike with an aim to add more value to clients and innovate better for listeners. The industry also avers that the hike is a reflection of the changing market dynamics, with retail and national advertisers, realizing the effectiveness of the medium.

Radio Mirchi COO Hitesh Sharma puts it rationally as a rate correction' and not a rate hike'. In a conversation with Radioandmusic.com, Sharma enlightens readers on the evolving industry which is making its presence felt and hopes to touch the ten per cent benchmark in the next two years.

Excerpts:-

Why the move of increasing ad rates?

The hike is more likely to range between 15-20 per cent and increase varies in all the markets depending upon their market conditions and volumes.

After 2008 crash, the pricing got eroded by 20-30 percent. In the last couple of quarters, there has been a large demand for radio and the demand for the infant medium has out-stripped the supply. So we wanted to correct the price and demand situation. There are many clients now and radio is an established medium. There was no price correction in the last couple of years.

By when will it be in effect from? Is it across all 32 stations?

Only top 20 will see the price hike. We have already started talking with our clients about.

How have the clients responded to the hike?

Every time you go and sell a product, you have to establish a value equation in the mind of advertisers. And that is an on-going work. We are known in the market for providing best creative radio solutions. So pricing is not a determinant factor.

Pricing is a derived situation and not a starting point. When people buy a product they don’t see that they should be buying the cheapest product but in mind they set-out value equations. We are aware that certain brands are associated with price. We have a set of value equation and the customers will feel that the value it is deriving is good for this price and will end up paying the price.

Will the new price offer more deliverables in terms of reach and listener engagement ?

It will not affect the reach. We have 13-14 member strong national creative team who works on large national clients and locally, we invest hugely on copyrighters and sound engineers who make adverts to the client. That equation will continue as we believe what is important is that what kind of solutions you offer.

Does increasing ad rates empowers radio players to negotiate in a better way?

It is different in all categories. If there is a very large client or very large engagement with the client then definitely it will be of a different nature. If anyone is a first time client then the deal will be of different nature.

There are few advertisers who buy ten times in the year and there are some who buy once or twice a year so negotiations will be based on it. We continue to improve on the creative side so that helps in determining the price.

Will radio be less effective to advertisers after price rise?

Print is really an old medium while radio especially private FM stations are only 10 -12 years old. So it’s unfair to compare other mediums with radio. Most companies have adapted to multi-media solutions, they don’t depend on one solution. It is our job to establish a value in that eco-system. There are some features that are similar in radio, television and print. We have to go out and establish the equation. We have to set the value equation right.

Radio has a unique space and it shares four and half per cent of the total adverting pie. In next couple of years, we can easily double it.

Does the hike in a way explain the efficiency of the medium and its growing acceptability?

It is not a very huge hike but a minor one. There is a lot of demand for the radio advertising and it far out-stripped the supply. This forces the price correction. It is the simple market dynamics that is in play.

The fact that radio stations are announcing their hike from the past few days gives an impression that it is a collective move by the radio fraternity. Comment.

I have not spoken with any other station neither have they spoken with me.

About 70 per cent of the advertising comes from national players and even after the ad hike, radio still remains cost effective for local retailers compared to other advertising mediums. Will it still discourage advertisers from pumping in money?

There is no argument on how the local or national players will take this hike, as a buyer is the buyer and a seller is the seller. So whether, it is local or national client; or they buy one market and 20 markets the conclusion is that we have to satisfy all of them. We have to explain it to both of them.

How much percent increase would the ad hike contribute in the revenue of Radio Mirchi ?

We  have initiated price correction in the market. We are not looking at an incremental revenue.

Has the demand for on-air inventory in metro markets increased?

There is no new capacity that has been added in last seven years. Radio is an established medium and no longer needs to go out and make a case for itself.

Some players believe, “Distribution of inventory ‘all day long’ is a good strategy as radio is an ‘all day long medium’ as compared to print and TV. Currently most non-prime inventory is filled with ‘junk/free inventory’ from the ever increasing off-air activation deals which devalue the radio medium severely.Radio players must consciously oppose this trend. The era of ‘using volume’ to depict growth or leadership is over. On-air ‘yield’ is the only measure that will fuel further investment into improved content.”  Comment.

Radio is a medium that is consumed throughout the day since our inception. We have been working with our clients to advertise on  radio throughout the day.

This is what we have been doing for 10-11 years so it is nothing new. There are no free ads on our stations/ channels.

Where do you see the future of radio advertising?

It is a very robust medium growing at a very healthy rate.