In July 1999, the Government of India decided to allow private players to enter the FM radio-broadcasting sector. It planned to offer ten-year licenses to private players in 40 cities across India. These private broadcasters would be permitted to offer only music, education and entertainment-based programs, not news or current affairs programs. Following the announcement, many companies bid for licenses to operate in various cities. The first private FM radio station Radio City began functioning in July 2001 in Bangalore, Karnataka. By October 2001, sixteen companies were issued licenses to operate private FM radio stations. Vividh Bharati, All India Radio’s (AIR) main entertainment channel, was started in the 1960s. Commercial broadcasting was first introduced on Indian radio in 1967. In the mid-1970s, AIR started offering sponsored programs. Radio’s commercials started during the early 1980s on its primary channel Vividh Bharati and were extended to other channels by the mid-1980s. All these initiatives increased the popularity of radio in the country and also generated huge revenues for AIR. By the 1980s, radio had become a part of almost every household in India, enjoying the patronage of millions of people across the country. Due to its immense popularity, extensive reach, easy accessibility and cost effectiveness, radio became a primary communication and entertainment medium during the 1970s and 1980s attracting listeners as well as advertisers. However, from the mid-1980s, television (TV) began to lure away radio listeners. As a result, the industry spend on radio advertising has come down to less than 1 %. Analysts felt that the government’s restrictive policies also contributed to radio’s downfall to some extent. They felt that even with an extensive reach of over 98%, the penetration of the radio network remained stagnant in the 1990s, as the government failed to reform its broadcasting policies. Lack of good scripts and innovation in programming were also affected the quality of radio programs. Analysts also blamed the Indian advertising agencies for the decreasing ad spends on radio. They felt that the advertising agencies failed in exploiting the potential of radio to its fullest and simply treated it as a remainder medium. In 1993, the government allowed private players in the FM sector by permitting them to take blocks (i.e. time slots to offer their programming content) on AIR, for FM transmissions. The purpose of this move was to earn revenues for AIR (by way of license fees) and provide more variety for listeners. The major players in the private FM market during that period were Times FM (of the media giant Bennett Coleman & Co) and Radio Mid-Day (of the Midday Multimedia group). The programs offered by these private stations were much more listener-friendly and innovative than AIR’s programs. As a result, the channels became very successful (in the mid-1990s) and attracted high advertising revenues. By 1997-98, the private FM business in India had grown to Rs. 930 million. The growing popularity of private FM channels resulted in decreasing revenues for AIR as these FM channels attracted most of the ad revenues. In June 1998, Prasar Bharati stopped the operations of private FM channels, reportedly in an attempt to improve AIR’s revenues. But in July 1999, the government again decided to privatize FM broadcasts and came out with a ten-year license deal. The government refused to allow any foreign ownership in the sector. In 2000, the government called for bids for FM licenses. Reportedly, there are more than 150 million radio sets in India – three times more than the number of TV sets in the country. On the basis of this data, private radio broadcasters claimed that radio had vast potential just waiting to be exploited. They aimed at duplicating the success of satellite television (which transformed the television industry in the 1990s) in the radio sector, with the help of latest digital technologies and innovative programming. According to estimates, radio’s share in the total advertising budgets of corporates was likely to grow to 5% by 2007 as against less than 1% in 2001. Thus, radio ad spend was expected to grow by an estimated CAGR of 45% between 2002-2007 as compared to an estimated 15% growth for total ad spend. Analysts claimed that the radio industry would follow the path of the television industry, which grew rapidly during the 1990s, with the entry of private players. Though the government’s invitation to private players resulted in an initial rush for licenses, many companies decided to stay away from the sector because of the high license fees demanded by Prasar Bharati and the risk involved in investing heavily. These players were not allowed to offer news or current affair programs, and they were given only a fixed number of slots per city. As a result, only a few players remained in the race. They were given licenses to set up 37 stations that would operate across 19 cities in India. With the launch of ‘Radio City FM91’ in July 2001, in Bangalore, by STAR and Music Broadcast Private Ltd. (MBPL), the industry began its second innings. Besides Bangalore, MBPL had FM radio licenses for five other cities: Delhi, Mumbai, Patna, Nagpur and Lucknow. The Lucknow and Mumbai stations began operations in the next few months. The other three stations were yet to become operational. STAR functioned as a content supplier and provided sales and marketing support to Radio City. Radio City achieved significant success in Bangalore and Lucknow, registering high listenership ratings. With the launch of Radio City, overall FM radio listenership increased by 56% while the time spent on listening to radio tripled (from 1 hour to 3 hours). Home listening increased to 85%, with listenership at the workplace also growing at a rapid pace. Similar trends were observed after the launch of Radio City in Lucknow. By late 2001, FM transmission reached 21% of India’s population and covered over 17% of the country’s area. The strategies followed by the players varied from one radio channel to another. Radio City’s market strategy was developed after six months of intensive research conducted in Bangalore. As part of this strategy, the company focused on creating brand name and brand awareness, before moving on to specific target programming. Sumantra Dutta, COO, Radio Division, STAR, said, “What we are looking at is the first mover advantage. We are the first private FM radio station in India, and we plan to cash in on this.” The company identified music as a universal theme appealing to all sectors of the community. It therefore offered music-based programs in both English and local languages. In order to broaden its appeal, the channel also offered programs such as the ‘11 o’ Clock Show’ on beauty tips and the ‘Breakfast Show’ offering the day’s horoscopes. Apart from these, the channel offered a range of entertainment programs 24 hours a day. These programs were customized to the needs and tastes of local listeners on the basis of customer research. Radio City also signed a contract with Newscorp to leverage the best international talent in the fields of technology, research, engineering, sales, marketing and programming. The target audience for Radio Mid-Day was however, car owners. The channel’s programs targeted car owners, who had to spend hours stuck in the traffic. For the afternoon slot, Mid-Day focused on offering programs that appealed to housewives. Rajesh Tahil, Head of Radio Mid-Day, said, “In the afternoon slot, we will have to compete with television for the attention of housewives. What we are aiming at is the top 20% of the radio audience. Thus we have decided to choose an audience, and go with it.” The increasing popularity of FM resulted in considerable growth in the advertising revenues earned by radio companies. Seeing the growing listener base of FM radio, many companies increased the share of radio in their total advertising budgets. Many leading brands such as Kwality-Walls, Spice, Tanishq and Airtel advertised heavily.

1. Discuss the growth and decline of radio broadcasting in India and examine the reasons for the fall in the medium’s popularity during the 1990s. 2. Analyze the changes in the Indian radio market with the entry of private players into the FM sector. Critically evaluate the private players’ strategies to leverage the potential of radio. Do you suggest the new entrants might follow similar strategies to expand the market and ensure success?