INDIA: Radio industry to see 32 percent growth

Analysts say easing of investment rules will foster robust growth over next few years

Times of India
Thursday, March 23, 2006

Mumbai --- India's radio industry is projected to post a robust growth of 32 per cent over the next few years to touch Rs.12 billion (nearly $270 million) in revenues by 2010 on the back of a robust economy and easing of stiff investment rules.

The size of the industry is currently estimated at Rs.3 billion, according to a study by the Federation of Indian Chambers of Commerce and Industry (FICCI) and consultancy firm PricewaterhouseCoopers.

Of the total amount spent on ads in India, radio is presently estimated to garner a share of about two per cent.

The study projects that the share would grow substantially over the next five to 10 years due to the explosive growth in the ad inventory as a result of commencement of operations of at least 300 stations over next couple of years.

"Even if we consider a conservative projection of five per cent share by 2010 of the growing ad spend, the radio industry is likely to achieve a growth of at least 32 per cent over the next five years," said the report.

According to the report, the radio industry has become the hottest sector for investment in the entertainment and media space due to the availability of as many as 338 FM radio licenses for bidding for the private players.

The new FM radio licences cover about 91 cities, most of which were till now serviced only by the state broadcaster.

The government's decision to move to a low revenue-share regime in contrast to the earlier stiff fixed licence fee regime, which was hurting the profitability of the players badly, has also helped the industry, said the report.

In a major boost to the industry, the government has allowed up to 20 per cent foreign direct investment in the sector.

Faced with slowing sales and dipping profits, foreign media houses are increasingly eyeing the Indian radio industry, one of the most attractive markets globally.

 The nimble-footed sector won a major vote of confidence earlier this year when BBC Worldwide, the British broadcaster's commercial arm, invested four million pounds in the unit's first move into overseas markets.

BBC Worldwide has bought a 20 per cent stake in Radio Mid-Day West, a subsidiary of Mid-Day Multimedia, a listed media group that publishes the popular Mid-Day afternoon newspaper in Mumbai.

This is the first major investment in radio business after the government said last year it would allow foreign firms to own as much as 20 per cent stake in an FM radio station with a view to giving a boost to this sector.

The liberalised norm has also attracted Malaysian pay-TV firm Astro All Asia, which has tied up with two other Indian companies to participate in the latest round of FM radio licence bidding process.

The FICCI-PricewaterhouseCoopers report said the opening up of the new radio channels was also providing a boost to creative content companies.

"Assuming an average requirement of about 5,000 content hours per annum per radio station, one can easily estimate the potential for content for the 300 channels that are being launched in the country," it said.

"The demand is clearly of a whopping 1.5 million hours of content per annum, if not more," the report said.