December 30 2007

Private sector FM radio stations are expected to mop up
ASHISH SINHA New Delhi
Business Standard
(c) 2007 Business Standard Ltd.

Private sector FM radio stations are expected to mop up over Rs 2,000 crore in advertising revenues over the next three years. The share of radio in the overall advertising pie will more than double to six per cent by 2010. With more than 300 FM channels readying to go on air by 2008-09, the competition will be intense.

Currently, the 170-odd FM stations that are on air generate about Rs 700 crore advertising revenue between them and command less than four per cent share of the Rs 17,700 crore advertising industry.

According to a report by international media research agency-Media Partners Asia (MPA), India's FM radio market will triple in the next three years in terms of advertising revenue, generating over Rs 2,200 crore.

Also, over 50 per cent of the FM radio stations will belong to five large radio companies giving advertisers a critical mass of audience to reach. Besides, the companies can use the scale to boost efficiencies and cost savings, says Vivek Couto, Executive Director, Media Partners Asia.

These companies include Reliance Unicom (Big 92.7 FM), ENIL (Radio Mirchi), South Asia FM (Sun TV network) and MBPL (Radio City), the MPA report says.

This is significant on two accounts. One, earlier projections made by several research firms indicated 2012 as the year in which the FM radio sector was likely to cross the Rs 2,000 crore advertising revenue mark. And second, despite competition among the new entrants in the radio business, advertisers will see it as a significant medium to reach the consumers.

The private FM radio sector got a boost two years ago after the Government announced a shift in its radio policy from licence fee to revenue sharing. Now the radio companies have to share four per cent of their annual revenues with the government after paying a one-time entry fees for the licence to operate a FM station.

But it will not be a smooth sailing for the private FM radio in the near future, experts say. The FM radio sector may also witness a slowdown in the next couple of years due to its low penetration among the listeners.

Despite over 200 active FM stations today the radio penetration has gone marginally up from 45 per cent (2002) to 53 per cent (2007), says a report from the Ficci's Radio Forum, an association of all major private FM radio operators.

This, according to the `Radio Forum', will cause a slowdown in the private FM radio sector that is currently growing at an annual rate of 28 per cent. The Ficci Radio Forum attributes the low FM radio penetration to the lack of diversity in content on FM channels, which are mainly dishing out bollywood music.

The forum has called for release of additional FM radio frequencies in all markets along with allowing multiple frequency ownership in order to sustain the current growth in the FM radio sector.