Global Radio Industry
After a sluggish growth in radio advertising in 2001, the radio market has been witnessing steady growth in the last 5 years. The radio market on an aggregate basis has grown consistently by 4.4 per cent in the last 2 years. United States has been leading the growth and has demonstrated growth exceeding the growth in the last year.

The global radio industry is projected to increase from $44.6 billion in 2005 to an estimated $58.8 billion in 2010, averaging 5.7 per cent compound annual growth. Slow-growing public radio license fees will hold down increases in EMEA (Europe, Middle East & Africa) and Asia Pacific to 3.3 per cent and 4.2 per cent respectively. Digital broadcasting will play a key role in improving radio advertising but its positive impact will be partially offset by the growing audience fragmentation that will dampen ad rates. Satellite radio is projected to boost spending in the United States and Canada, and provide modest incremental revenue in Asia Pacific.

Radio industry in India
After the second FM radio policy, India is growing towards 300 radio stations as compared to 21 stations earlier. 91 cities will be covered by the new radio stations, compared to 21 cities earlier. Thus, listeners in over 70 cities, largely in the B.C and D categories, will be listening to private FM radio stations, earlier serviced only by the State broadcaster. Over 40 companies will be operating in the industry as compared to 7 earlier.

Of the total advertising spend in India the radio industry’s share is about 2 per cent. This share is expected to rise substantially over the next ten years, going by the explosive growth in the ad inventory and the wide reach, especially the lower segment markets that the radio industry can now offer.

Based on these factors, coupled with other regulatory corrections such as migration to a revenue-share regime and allowing Foreign Direct Investment (FDI) up to 20 per cent, the sector is emerging for tremendous growth over the coming years.

KEY TRENDS

Consolidation of advertising inventory
The Indian radio industry today comprises a large number of players, making it difficult for advertisers to reach the sellers. Consolidation could enable the radio group owners to package radio stations and sell them to advertisers as a group. The consolidated group would then also have the ability to provide the advertiser a national reach and command a higher price for its inventory.

However, consolidation may not be successful owing to regulatory factors, attempts to consolidate advertising inventory could result in stations garnering an effective premium to otherwise falling advertising rates.


Clearinghouse services
A concept tested in US, the emergence of clearinghouse services that sell unused airtime has provided a modest incremental revenue stream to radio companies. The services act in a similar manner to those that sell unused seats on airlines or unused hotel rooms. In effect, participating radio stations auction unsold inventory to the highest bidder. Advertisers get inventory at a discount and radio stations get additional revenue that otherwise could not be made up. Emergence of such clearinghouse services in India, independent of the Indian radio companies or the Indian advertisers, could work well.

Digital radio
Globally, many countries are moving towards digital radio with standards ranging from digital audio broadcasting (DAB), digital radio mondiale (DRM) and others. Digital radio not only provides near-CD quality audio, radio stations can also transmit information on songs, artists and sales information to woo advertisers.

In India, digital radio will require the radio companies to install digital broadcasting equipment and for the consumers to purchase receivers. As has been witnessed in other sectors like television distribution, where attempts have been made to move towards digitisation, it seems unlikely that the radio industry can move towards digital broadcasting suo moto. As is the case in several countries, regulatory authorities in India will be required to intervene. The regulatory push will be required for not only drawing up the digitisation plan but also effectively monitoring the same and examining the possibilities of providing incentives for all stake holders to adopt the digital standards.

Advertising clutter
Advertising avoidance continues to remain the key challenge for all media companies including radio. In India, radio stations not only have to fight competition from other media but also with other radio companies operating in the same network. Securing command over local advertisers is the key focus area for radio stations as they reach local people. However, the emergence of other local media players such as the out-of-home segment, cable television, local film theatres and local print media, is providing a further challenge to radio.

Some radio stations, especially in America, have attempted to reduce the advertising inventory with the hope that it will be appreciated by the listener, increasing the listenership and enabling them to command a higher advertising rate and reduce the inventory. Though this attempt has succeeded in some cases for limited periods, the challenge remains that all radio stations in the network do not adopt this mode, leaving a gap for the advertiser to tap into. Targeted advertiser-driven programming formats, niche programming such as sports updates, celebrity hosts etc are some of the ways that radio stations globally are combating this challenge.

Source:Global Radio Industry: Key Trends and Outlook, FICCI-PriceWaterhouse Coopers, 2006