<span class="htext1">Market Transformation:</span> Radio

More number of players entered the FM Radio space, when government decided to do away with the payment of fixed licence fee in July 2005

Considering that it has become such an integral part of daily routine - whether it is in the car, at home or on the mobile - it might seem surprising that FM radio is just an eight-year-old phenomenon.

The still-nascent industry has its origins way back in 1993 actually when the Government of India allowed private interested parties such as Mid-Day and The Times of India to buy two-hour slots on AIR's channels. However, this practice was discontinued in June 1998 and it was in 1999 that the government announced its first FM policy. In the first phase of radio licensing, the government alloted 108 frequencies across 40 cities. Subsequently, 37 licences were taken up and 22 radio stations took off.

Radio City was the first private FM station in India, launched in 2001 in Bangalore (now Bengaluru). Many believe that the first phase of bidding was a flawed process - it encouraged speculative bidding resulting in serious players coughing up a much higher amount for the radio station he or she was bidding for. The government's decision to charge radio players a fixed license fee (which could run into crores) at the time of bidding was another unpopular regulation.

The matter was made worse by the fact that 50 per cent of the license fee had to be paid upfront by the players. However, the radio sector got a boost in July 2005 with Phase II of radio licensing. The most important policy decision of this phase was the government's decision to do away with the payment of fixed licence fee.

The changed laws scrapped the first phase's annual escalating fee of 15 per cent and instead replaced it with a revenue sharing model where radio operators were asked to share four per cent of their total revenue, thereby encouraging new stakeholders to enter the field.

The net result was that 330 new licences were issued and the number of players in the industry increased from five-seven radio operators to 43. The government, on its part, earned as much as Rs 1,160 crore from the auction of these new frequencies. The heightened competition resulted in increased listenership for radio stations. Listenership jumped from 20-30 per cent to almost 50 per cent of the total radio listenership. As per NRS 2003, and IRS 2009 R1 reports in 2003 there were 3.3 crore listeners and in 2009 the number has increased to 11.8 crore in the country.

As far as the revenues are concerned, radio's share in the advertising pie is anything between 4 and 5 per cent. At present private FM stations are earning revenues worth Rs 650 crore - another Rs 250 crore is pulled in by AIR and its FM stations. Worldwide, the share of radio industry ranges anywhere between 8 and 12 per cent as part of the total advertising pie. But the radio industry in India still needs government help to remove some of the roadblocks and pave way for its higher growth.