Radio strikes back, with all essen-tial ingredients to attract the masses. The recent deregulation of the FM licenses across India has received tremendous response from media bigwigs. The previous policy regime of FM radio failed to bring adequate reforms and consequently, FM players ended up with huge losses due to high annual license fee which was significantly above their earning capacity. But, this time the government has come up with a 4% revenue sharing agreement with one-time licence fee. Given the favorable regulations and Indians' propensity towards entertainment, the new players would propagate FM waves with variety of content programming across the nation.
The phase II policy, which has sold 338 frequencies across 91 cities, is expected to cover 350-400 million people in the months ahead. The entire process of this massive deregulation drive has brought in around Rs. 1100 cr to the government coffers. Almost all the big multimedia players, such as the Reliance controlled Ad labs, Sun TV, Radio Mirchi (Times group), Radio city, Mid-day, Dainik Bhaskar and Hindustan Times took part in the drive. Besides, the foreign broadcasters like BBC and Britain's Virgin Radio are partnering with local players. After more than a month of hectic bidding, Sun and Reliance emerged as largest operators, taking all-India perspective.
Radio, having a distinguished history of more than 75 years, with private FM channels in existence since 5 years, has a listeners' penetration of 30% in spite of 90% of our population having access to radio. Lack of listening options for various segments is a major reason. With ad revenues being the only source of income, the commercialization of radio is still at a nascent stage. As a pubic-broadcaster, All India Radio (AIR) is committed towards socio-economic aspects of broadcasting rather than purely concentrating on the commercial aspects. In contrast, to survive in a highly commercialized and competitive environment, private FM channels have to mostly focus on mass entertainment. Though the first phase of deregulation of FM stations had started in 1999, the Industry has failed to realize its true potential with ad revenues being a mere 3% while the world average is 8-9%. For the past three years, the Indian radio industry has been growing at a rapid pace with revenues reaching more than Rs. 3 bn in the current fiscal. As revenues increased by 45% in the last year, the advertisers are steadily recognizing the cost-effectiveness of FM radio. Projections indicate that the industry has the potential to reach the Rs. 8 bn mark by 2010.
With small towns and cities expected to contribute significantly to revenues, local advertising is set to become the future growth driver for FM radio. A CII-KPMG report titled "Focus 2010- Dreams to reality" says, "Advertising through radio costs 15% of what it costs for television and achieves 60% of results, make the radio more cost-effective than TV. Presently, the advertiser base of the radio is highly skewed with 11% clients contributing 60% of revenues. It has to be changed over time with broad based clientele of local advertisers. As opposed to the global average of 70% of ad revenues that come from local retailers, India boasts a mere 8% of revenues from retailers." Nisha Narayanan, a Media consultant says, "Radio's share of the ad pie will definitely go up from 2% to something like 8% in the next couple of years, and a lot of this will come from local and retail advertising. It will be interesting to see how this affects the print medium, especially since there is a great deal of cross-media ownership in India." The FM players themselves have diversified business interests and are associated with large media groups. Having their own FM stations, Reliance, Sun and Times group are ready to reap the latent benefits of cross-media synergies. Cross media promotions would be added incentive for potential advertisers too. |
