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CII-EY: Radio market size to be Rs 14 bn in 2012-13

21-December-2012
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CII-EY: Radio market size to be Rs 14 bn in 2012-13

Like any other industry radio too had an eventful year but the absence of Phase III rollout was sorely missed. Where was the industry, how much did it grow and how it was affected by the delay of the auctions is still a blurred picture.

India’s FM radio industry forms around four per cent of India’s total advertising industry. The market size of the sector has been estimated to be at Rs 14 billion in 2012-13 with almost 40 radio broadcasters providing services in 245 stations in 86 cities. FM radio industry has been growing at a CAGR of 14 per cent annually over the last three years, and will grow at around 18 per cent during the three years immediately following Phase III auctions.

Advertising revenues comprise more than 85-90 per cent of the total revenues generated by FM radio companies. Radio stations in major cities make 40 per cent of the total advertising revenues from retail advertisers. Regional radio industry pools almost 60-80 per cent of their total advertising revenues from retail advertisers. Overall there is a 10-20 per cent growth in the number of advertising campaigns using radio this year.

In terms of listenership, more than 50 per cent of FM radio consumption is in homes, followed by people listening in transit (on mobile phones and in-car listening) and out-of-home listening at restaurants, offices, shops and so forth. Around 25 per cent of total radio listenership is now on mobile phones, fuelled by handset manufacturers that have made FM radio a standard feature in most of their models. Some radio companies claimed that their research indicates that mobile phone listenership in metros comprises more than 75 per cent of their total listenership.

According to research, the major challenges faced by the radio industry currently are limited inventory, inability to demonstrate return on investment (RoI) in a universally acceptable manner, slow ER growth rate, talent requisition and retention, high competition level, cumbersome tax structure and a few others.

Phase III of FM radio licensing promises further growth opportunities for the Indian FM radio industry, since it covers 294 cities and 839 licenses.  However, only 52 of these licenses are in high revenue-generating category A+, A and B cities.

Phase III is also likely to make the industry more conducive to merger and acquisitions due to proposals such as reduction of the license lock-in period from five to three years; increase in the license period from 10 to 15 years; significantly more networking between all the stations to enable cost optimisation; ownership of multiple frequencies in a city and an increase in the foreign investment limit to 26 per cent from the current 20 per cent.  The industry needs to push for parity with the FDI norms of other media segments such as broadcast TV.  

In long term, significant growth for the private FM radio industry will only be possible if several thousand stations are operationalised, burden of high license fees is removed by increasing the variable component and reducing fixed costs, and news dissemination is equated with other media.

The facts are shared in the ‘Poised for Growth: FM radio in India’ report published by CII-Ernst &Young Study at CII’s CEO Roundtable on Radio.

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