The Resurgence of Radio in India

<< Previous

Background Note Contd...

By late 2000, AIR had established a network of 283 broadcasting centers (including over 180 full-fledged stations, four relay centers, three Vividh Bharati commercial centers and one auxiliary center) and 146 medium frequency (MW), 50 high frequency (SW) and 87 FM transmitters. In spite of the advent of new communication media such as satellite and cable TV and the Internet, radio broadcasting sustained its popularity through the years. FM, the most popular channel, had the largest reach of over 60%. With the entry of private players in the mid-1990s, FM radio became more popular, attracting huge ad revenues.

According to a survey conducted in February 2000, radio was still popular with over 58% of the rural and 48% of the urban population in India. With such a huge listener base, analysts felt that radio was still one of the primary mass communication mediums in the country. 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).

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.

Next >>

---

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.