The Resurgence of Radio in India

RADIO'S UNTAPPED POTENTIAL

The low advertisement costs and extensive reach of radio help advertisers quickly reach and appeal to their target customers. For advertisers targeting a small/niche audiences, radio worked out to be much more beneficial (Refer Exhibit IV for a summary of the advantages and disadvantages of major media types).

Gopinath Menon, Executive Director of the advertising agency, TBWA Anthem, said, “Radio advertising is aptly suited for local promotions, and once audiences can be targeted, it has tremendous potential to eat into local mediums.”

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 (Refer Table I).

TABLE I
RADIO ADVERTISNG STATISTICS (2001-2007)

Year	Radio Advertising (in Rs billion)	Radio advertising as percentage of total Indian advertising market
2001	1	1.1
2002	1.2	1
2003	2.3	2.1
2004	3.2	2.8
2005	5.1	3.9
2006	8.4	4.6
2007	11.6	5.2

Source: www.exchange4media

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 (TV ad spend grew at a CAGR of 30% during 1993-2001 and TV penetration doubled during 1996-2001).

Industry observers remarked that the greatest challenge before private FM channels was persuading the urban consumer to regard radio as a source of entertainment. To get the attention of the urban consumer, private players started developing programs tailored to meet the tastes of local listeners, with the help of advanced digital technologies and superior programming. As part of these efforts, private channels conducted intensive research to ascertain the demographic profiles of radio listeners in order to provide more targeted programming.

Identification of demographic profiles was also expected to help private players to attract more advertising revenues, as it would enable them to offer advertisers access their target audiences. AIR also revamped its programming during the late 1990s. As a result, it was able to increase its listener base and its advertising revenues by 2000^[4]. In 2000, AIR reported Rs 740 million as advertising revenues as against Rs 393 million in 1990. The restructuring efforts at AIR and the marketing strategies of private players raised the expectations of analysts about radio's growth.

Pal endorsed this belief saying, “Radio is a far more intrusive medium compared to television. There is great future for radio. Even worldwide, radio is becoming a very important medium. In the US, some $ 19 billion are spent on radio advertising (India's entire advertising market is worth $ 2.2 billion). I am certain that in a few years'time, here too radio will make a comeback. Now you have players like STAR, the Times Group, Mid-Day etc moving into the arena. Things will become more professional, monitoring will get better and advertising will increase.”

FM RADIO'S SUCCESS STORY

A BRIGHT FUTURE?

EXHIBIT I - WORKING OF A RADIO

EXHIBIT II - HISTORY OF RADIO WORLDWIDE

EXHIBIT III - INDIAN RADIO MARKET (1975-1998)

EXHIBIT V - PROJECTED MEDIA REVENUES

^[4] As a part of its restructuring program AIR launched an Internet site, which offered news, music, current affairs and links to other Indian sites. The site recorded 9 million hits by late 2000.