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Radio industry: An overview - Views on News from Equitymaster
 
 
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  • Dec 17, 2007

    Radio industry: An overview

    In this article, we shall provide an overview of the radio industry in India. We shall look at the key characteristics of this media segment and the factors that differentiate it from the other media segments such as television and print media.

    History
    In India radio broadcasting began in 1935 by AIR. In 1999, the privatization of FM through the Phase I policy was undertaken. However, the phase I policy failed due to a high license fee structure. Of the 108 licenses issued, only 22 operated and one was closed down.

    Phase II policy
    The Phase II Policy enabled the industry to enter a high growth trajectory. Before the Phase II policy, there were 22 stations and by the end of 2007, 266 stations are expected to go on air.

    This was possible due to a more favorable fee structure. In the phase II policy, annual license fees are 4% of gross revenues or 10% of reserve OTEF (One time Entry Fee) whichever is higher.

    Key players
    The key players operating the FM radio stations in India are Adlabs, South Asia, ENIL, Radio city and Dainik Bhaskar.

    Share of radio in the total ad spends
    The share of radio in the overall advertising pie at approximately 3% is much lower than various developed and developing countries worldwide. Globally, the share of radio in the advertising pie is around 5% in countries where the medium is still in a growth phase and around 10-12% of the advertising pie when the medium reaches a mature phase.

    Source: ENIL IPO prospectus

    Characteristics of the radio industry

    Low advertisement rates
    Radio is a cost effective medium for the advertisers. Radio advertising rates are low on cost-per-thousand basis as compared to other media.

    Low content costs
    Radio does not require any commissioned original content unlike other media such as print and television. Royalty fees have to be paid for the music content to Phonographic Performance Limited (PPL) and Indian Performing Rights Society (IPRS) and certain music companies.

    Prime time differs from television
    The prime time for radio listenership differs from prime time television viewing. Radio listenership peaks in the morning, afternoon and late nighttime slots, while for television the prime time is the night slot.

    Reaches the required audience
    Listenership of radio as indicated by the Indian Listenership Track (ILT) survey is the highest among the younger audiences (15-29) and the SEC A audiences. The research indicates that almost 70% of SEC A (higher socio economic class) audiences listens to radio everyday. This is the audience most sought by advertisers.

    Audio medium
    Radio is not a visual medium like television and thus people prefer television to radio. Besides this, the only source of revenue for the FM radio operators is advertisement revenues and they do not receive any subscription revenues from the listeners.

    Thus, radio has its advantages as well as disadvantages. In the next article, we shall outline the growth drivers for the radio industry.

     

     

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