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FM radio players upbeat about growth, says Ernst & Young survey

FM radio players upbeat about growth, says Ernst & Young survey

Author | exchange4media Mumbai Bureau | Thursday, Jun 05,2008 9:05 AM

FM radio players upbeat about growth, says Ernst & Young survey

Ernst & Young recently conducted a survey among industry leaders in the radio sector across 10 companies, which constitute over 70 per cent of the private FM radio market in India, to investigate the challenges and understand the future strategies in the Indian media and entertainment industry. The survey found that the FM stations were optimistic about growth despite hurdles.

The respondents of the survey recorded an average revenue growth of over 30 per cent over the last year and expect to maintain that growth over the next two years. Nearly 80 per cent of the surveyed companies expect to achieve a turnover of over Rs 500 million within the next two years. The survey further found that they expect the share of advertising revenues from radio to increase from 3-5 per cent in 2007-08 to about 5-7 per cent in 2009-10. The survey claims that the radio sector seems to be generating a keen interest not only amongst domestic media companies but also foreign investors and global media conglomerates.

Farokh Balsara, National Sector Leader, Media and Entertainment Practice, Ernst & Young, said, “Indian FM radio sector has been through a series of ups and downs. The sector would be highly benefited by the regulator liaising on issues such as multiple frequencies per city, tradability of licenses and content sharing. Moreover, the universal acceptance of the nationwide listenership measurement mechanism would help in increasing advertiser confidence in the sector.”

However, despite the growth, the industry also faces huge challenges like the absence of universally acceptable measurement metric, where 50 per cent of the respondents favoured the diary method of measurement and 20 per cent favoured day after recall.

Regulatory issues like restrictions on FDI, the inability to trade radio licenses purchased are also a huge challenge set before the industry. Royalty for radio companies comprises a significant portion of costs, varying between 7 per cent and 43 per cent of total costs, which excludes the license fees.

Several respondents were apprehensive about the growth in stations as it indicated an impending shortage of staff, particularly in the case of on-air talent, support talent, and sales. In order to counter this, companies have resorted to tie-ups with training institutes, setting up of intensive in-house training programmes, and hiring experts from India and abroad to train new recruits, among others.

Balsara further said, “TRAI’s recommendations to the I&B ministry to allow FM radio operators to broadcast news is a welcome move, and with easing of regulatory norms in future, the true potential of FM radio sector will be realised. In addition to this, companies need to align their existing business plans and strategies based on the expected regulatory changes. They also need to improve processes, controls and availability of timely information for decision-making, particularly in large multi-location operations.”

As per the survey, the average composition of an hour of radio programming during prime time comprised 40 minutes of music, nine minutes of advertisements and five minutes of radio jockey talk. The ratio of advertisements to promotions is 3:1 on average. Also, over 75 per cent of the genres across stations were common. The most commonly used genre were Bollywood shows, countdown shows, talk shows and housewife-themed shows, which together accounted for nearly 40 per cent of the content shown during the day. These were followed by regional music, local event information, game shows, campus shows and drive time shows, which together accounted for a further 38 per cent.

The survey also found that the least used genre was English music, news, radio shopping and quiz shows, while some uncommon genres used were relationship-based shows and contemporary adult shows.

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