The FM radio market in India was estimated at around Rs 13 billion in 2011, with more than 19 radio-broadcasting companies providing services in more than 290 stations in around 90 cities. The sector has been growing at 8 per cent – 10 per cent annually and is set on a new growth trajectory. It is expected to grow at CAGR of 20.2 per cent in the period 2012-20171. However, radio continues to be the most underpriced medium among all media in India.
There have been several developments that have been beneficial for radio companies. The Government has implemented the Copyright (Amendment) Bill, which ensures easy availability of content at 2 per cent of adjusted revenues. The FDI limit in FM radio has been increased from 20 per cent to 26 per cent. Furthermore, Radio Audience Measurement (RAM) has expanded its measurement purview from four metros at present to include nine other cities.
Key trends and drivers
Phase III of radio licensing:
The Union Cabinet approved Phase III of FM radio expansion in July 2011. Around 227 cities (each with a population of 0.1 million or more) will be added during this phase, up from 86 cities FM radio currently reaches. With the process now expected to be kicked off around December 2012, the sector is gearing for expansion into small towns — with 839 stations across the country. Radio licenses will be allocated through e-auction bids in Phase III.
The Phase III FM policy is expected to drive the growth of the radio sector, bring down costs — both operational expenditures and capex — in the long term, mitigate funding issues and improve the viability of the sector in general. Furthermore, following the phase III auctions, broadcasters are expected to own multiple frequencies, with additional genres and specialised channels being initiated in the future.
Currently, the majority of people tuning in to large radio stations live in metros and collectively contribute 80 per cent of the total listenership. However, major expansion is expected to be in tier II and tier III cities during Phase III. Currently, national advertisers account for the larger share of the revenues generated by radio companies that have a strong presence in metros and Tier1 cities. It will therefore be more lucrative for national advertisers to use radio as a medium to reach the masses once the medium expands to tier II and tier III cities.
Radio companies that bid in phase III will depend on the following:
• Their focus on strengthening regions where radio companies have a strong presence
• Expanding their operations to new regions to provide improved coverage to advertisers
• Bid values and break-even periods
• Networking between stations to reduce cost of content
• Ability to leverage the resources and infrastructure of existing stations
Increase in differentiated content
Radio companies are increasingly trying to differentiate their content and sound from that of other radio stations to attract listeners and provide advertisers with the opportunity to target specific audience. In February 2012, Radio One overhauled its content and programming in certain markets to go international and target English-speaking audience.
Several radio stations, including Big FM and Fever FM, have also experimented with content — Big FM has launched a travelogue format on its stations, which will provide interesting details about various tourist destinations in India, while Fever FM has launched radio dramas such as the Ramayana, Gandhi, Bose and Bal Gopal.