RADIO in Malaysia is 70 years old. And just like any other traditional media, it is not immune to disruption. Nevertheless, a majority of radio businesses are unfazed by this disruption, be it from music services such as Spotify or free internet radio stations (see “Is online radio an emerging trend?” on Page 77). Rather, they seem to be relishing it, going by the rising earnings.
Radio advertising expenditure hit RM478 million last year, growing 265% over the past 10 years, according to data from the Commercial Radio Malaysia (CRM). That accounts for 3% of the total advertising pie in Malaysia but advertising planners believe it has the potential to grow. This, they say, is because radio continues to maintain its unique strength as a highly efficient media platform that offers advertisers an avenue to react quickly to market opportunities (see “Adspend remains steady” on Page 76).
The radio business is lucrative, if managed well, say radio players. Ebitda margins can range from 40% to 60%.
The radio business of Astro Malaysia Holdings Bhd saw Ebitda margins expanding to 57% year on year for FY2016 ended Jan 31, compared with 54% before, while that of Media Prima Bhd held steady at 40% for FY2015 ended Dec 31.
Margins for unlisted Business FM (BFM) were also at 40%.
Meanwhile, Star Media Group Bhd’s radio unit is loss making but analysts expect it to turn around or its losses to narrow after it disposes of its loss-making channels — Capital FM and Red FM — to Astro for RM42 million cash. For 1H2016 ended June 30, Star’s radio business recorded a loss before tax of RM2.3 million, compared with a profit before tax of RM230,000 in 1H2015.
Analysts say Star will not be reinvesting in its radio segment but plans to utilise the RM42 million proceeds for general working capital purposes.
Interestingly, on the flip side, the contribution of the radio segment to the earnings of Astro and Media Prima are expanding.
For the first half ended June 30, 2016, Media Prima’s radio business saw gross revenue grow 12% y-o-y to RM33.4 million while its net profit expanded 57% to RM11.3 million. It contributed 27% to Media Prima’s earnings and was one of only three businesses in the group that saw bottom line growth.
“That puts me under a lot of pressure though,” Media Prima’s radio business CEO Seelan Paul says with a nervous laugh.
“We are looking at a very challenging operating environment today. I think we are doing well because we continue to evolve and the team is passionate about the business … but we need to keep looking at new initiatives and continue to be relevant.”
Seelan believes one of the reasons the radio business is seeing earnings growth is the initiatives taken a couple of years ago are starting to reap the rewards now. The initiatives, he says, include venturing into the digital space and the inclusion of value-added services such as offering on-the-ground events and access to talent to clients.
“That is the beauty of technology ... I feel that the more disruption happens, the more benefits we get. Disruption allows us to get a wider audience,” he says, adding that the company is using all the platforms it has apart from radio, including its social media platforms and videos.
According to CRM president Datuk Jake Abdullah, the reason radio is doing well is because it is agile and nimble.
“The radio business is alive and well. Radio today should not be construed as radio per se, but a content medium. It has expanded from being a straight linear medium to a 360° model. There are places where it will play a linear form, for example, in the rural areas. And another aspect is that radio can be more experiential. This gives us a lot of opportunities in the industry — the ability and chance to be across all platforms — and it opens up revenue with clients. There is brand content engagement and brand integration with clients,” he tells The Edge.
“Do we have a future? Definitely. Radio today is digital, online and mobile,” says Jake, who is also CEO of Astro Radio.
Astro chief operating officer Henry Tan says the radio business has contributed well to the group and he believes it will continue to do so.
“Radio will remain relevant and if the economy continues to be soft, I think it will probably be the biggest winner. When things are soft, and people are a bit more cautious about spending, radio is perfect, with high reach, low cost and speedy execution,” he says.
“Not everything that is new works, and not everything that is conventional is less appealing. In the last three years, year on year, we have been growing in radio listener and radex (radio advertising) trend. We think radio will continue to do well, in Malaysia in particular. This is fuelled by more cars on the road, a young population and traffic jams … radio has a bright future here.”
Tan says Astro’s proposal to acquire two radio stations from Star recently is because it believes radio will remain relevant and be a good business platform for the group. He thinks costs will not increase much with the additional stations as the back-end and systems are already in place, with Astro already having 18 stations.
“We don’t deny that you have to reinvent and do things to be relevant to your audience, but it also doesn’t mean that everything in digital works. The real issue to look at is the content and to make sure it is relevant and desirable,” he explains.
Astro’s earnings from its radio operations grew 17% y-o-y to RM89.4 million for the six months ended July 31, 2016, contributing 20% to the total earnings of the group. For its financial year ended Jan 31, 2016, Astro Radio’s advertising income grew 13% y-o-y, taking its share of the radio advertising pie to 70%.
As for BFM, the business radio station that turns eight this year, it is profitable, says CEO Malek Ali.
“We turned profitable after three years into full operation. Our Ebitda margin has been about 40% historically. Given that we’re a single radio station firm, we do not have the benefit of spreading the cost of shareable resources (for example, sales, news and production talent) across more than one radio station, otherwise our Ebitda margins would be higher.”
BFM, he says, dived into the digital space from day one and does about 800,000 monthly podcast downloads and streams today.
Evolve or become obsolete
Radio players agree that they have to evolve and offer a range of value-added services or risk going off air.
BFM’s Malek believes the challenge today is to continue to innovate while the business model is generating enough cash.
“Everyone is evolving. For radio stations that used to do predominantly songs, you now have a myriad of online music services for listeners. So, for those radio stations, the game has changed from providing the latest songs to providing what’s between the songs. And then there are others like BFM that put substantive talk content up, front and centre.
“The interesting thing is that digital monetising opportunities are already here. The advertising-serving technology is ready and hungry for customers,” he says.
For Seelan, radio players must continue to evolve and adapt with the times.
“The beauty of radio is its ability to evolve well with digital. Digital gives us a bigger reach and platform to do things today that we would never have thought radio would be doing. For example, we are doing a lot of videos. We are no longer just an audio medium. We have evolved to become an audio-video medium. If you ask me, I don’t see us and Media Prima Radio Network as radio per se, I see us as a brand that is curating or developing content for music, entertainment and lifestyle,” he says.
Says Astro’s Tan, “Radio is not music and music is not radio. If somebody makes the mistake thinking that the two are synonymous, they have missed the point. With digital today, people can easily find new ways to listen to music, but radio is about companionship and community. People need to connect more in this increasingly distracted world due to technology, and the best platform to connect is through radio.”
Jake says, “In terms of radio, localisation is the most pivotal thing. Everybody has video or music streaming services, but when they want local content, radio has the opportunity to go more local.”
And that is why he believes there is potential for the radio business going forward. “There is space for hybrid models such as localised state radio stations. For now, the majority of radio stations are national. There is demand for localised content.”
Vernacular – the pot of gold
Media and radio players are seeing a trend in the rising demand for vernacular radio content. “The focus today for a number of radio businesses is the vernacular segment. That is the changing demographic of Malaysia where Bahasa Malaysia and Chinese will play a bigger role on many platforms. We see changing patterns, which include the increasing number of vernacular listeners on radio,” says a senior executive at Star, who declined to be named.
A clear example of this is Star. Its vernacular radio stations such as Chinese-language 988 FM and Malay-language Suria FM are hits for the media group unlike its loss-making English channels — Capital FM and Red FM — which it is hiving off.
988 FM is the No 1 Chinese station in the northern region and has a listenership of 1.7 million nationwide while Suria FM has 2.3 million urban-centric Malay listeners weekly nationwide.
Media Prima expanded its radio footprint by acquiring two stations in the vernacular segment — Ultra FM and Pi Mai FM — in October last year for RM20 million.
Klang Valley-based Ultra FM broadcasts in Malay and English while Pi Mai FM is a Penang-based Malay-language station. Apart from that, Media Prima has four stations, mostly in the vernacular segment — Hot FM (Malay) with 3.2 million listeners, One FM (Chinese) with 904,000 listeners, Kool FM (Malay) with 696,000 listeners and Fly FM (English) with 938,000 listeners.
Astro currently has 18 radio stations and is building up its vernacular radio segment. Its Malay channel ERA fm has 5.8 million listeners; Chinese channel MY FM, 2.5 million; and Tamil channel THR Raaga, 1.7 million, according to GfK Research latest radio survey.
The data also reveals that Malay-language stations had the highest overall weekly reach of 64.5%, followed by Chinese (22.8%), English (15.8%) and Tamil (9.3%).
New players entering the market are aware of this trend. Kupi-Kupi FM, a new station launched in Sabah earlier this year, broadcasts in Malay and Kadazan Dusun Murut, with 80% local content from Sabah talent.
Those behind the new radio ventures are the same people behind the Centre for Strategic Engagement — Rita Sim, Fui Soong and Rose Ismail.
The Edge had reported in August that the trio is also looking to launch a new Chinese business station by year end.