http://www.business-standard.

com/india/news/does-it-make-sense-to-be-infm-radiobusiness/364537/
NDUSTRY & SERVICES

MEDIA AND ENTERTAINMENT

The Indian Media & Entertainment Industry grew by US$ 12.9 billion in 2009 to US$ 14.4
billion in 2010, a growth of 11 per cent, according to a report by the Federation of Indian
Chambers of Commerce and Industry (FICCI) and research firm KPMG. The report also states
that backed by positive industry sentiment and growing media consumption, the industry is
estimated to achieve growth of 13 per cent in 2011 to touch US$ 16.2 billion. As the industry
braces for exciting times ahead, the sector is projected to grow at a CAGR of 14 percent to
reach US$ 28.1 billion by 2015.
Key Trends and Drivers for Growth
Focus on Profitable Growth: Indian M&E companies implemented cost reduction strategies to
weather the economic slowdown of 2008-09. In order to sustain profitable growth, several cost
control initiatives implemented during the slowdown have continued to prevail despite the
industry resuming its double digit growth rate. Incorporation of technology across key business
performance areas such as planning, budgeting, CRM, strategic outsourcing, etc. could enable
more consistent and profitable growth given the technological advancement in these areas.
Increasing Media Penetration and Per Capita Consumption: Low media penetration particularly
across SEC B, C and D segments offers significant headroom for growth. With increase in per
capita consumption, discretionary spends are expected to grow and entertainment and leisure
platforms are likely to beneficiaries of this trend. Moreover, as metros and tier 1 markets get
saturated, media companies are looking to penetrate the tier 2 - tier 3 towns and rural markets.
For e.g. multiplexes have expanded across tier 2 towns, while DTH players have helped achieve
greater C&S penetration across rural India.
Power of Digitisation: Digitisation continues to be a key growth driver for the Indian M&E
Industry and this trend was even more pronounced in 2010. Film studios saw greater adoption
of digital prints over physical and it was the first time in India that digital music sales surpassed
that of physical units' sales.
Consumer Understanding: With increasing fragmentation and increase in competition, a deeper
understanding of cultural and social references through focused study groups would enable
players to target their consumers specifically and build loyalty.
Other factors: Regional media channels gaining popularity, different tastes of the audience and
thereby different content, growth of the importance of the media are also few factors due to
which the Media and Entertainment Sector is growing.

Broadcasting Scenario in India

The CAGR for television industry is estimated to be 16 per cent and the CAGR for the radio
industry is estimated to be 20 per cent from 2010 to 2015.
India has 138 million TV house hold and is behind only China and USA in the world TV
market. India had 600 million TV viewers in 2010, adding almost 140 million viewers from 460
million in 2009.
Film Industry
The Indian Film Industry stood US$ 1.9 billion in overall industry revenues in 2010, indicating
a decline of 6.7 per cent with respect to 2009. The industry is expected to grow at a CAGR of
9.6 per cent and reach US$ 2.6 billion in 2014. The key growth drivers for the sector would
include expansion of multiplex screens resulting in better realisations, an increase in the number
of digital screens facilitating wider releases, higher cable and satellite revenues, improving
collections from the overseas markets and ancillary revenue streams like DTH, digital
downloads, etc, which are expected to emerge in future.
Television Sector in India
Television Industry in India has gained new momentum due to liberalization and enhanced
enthusiasm shown by the broadcasters to seize a huge share of the entertainment and media
industry. In 2010, the television industry stood at a staggering US$ 6.5 billion, a rise of 15.6 per
cent over 2009 estimate of US$ 5.7 billion. The industry is projected to grow at a CAGR of 16
per cent to US$ 13.9 billion by 2015.
Growth of TV channels: The total number of TV channels (both private and government owned)
grew from 461 in 2009 to 626 in January 2011. The number of News and Current Affairs
channels was 312 and that of Non-News and Current Affairs channels was 314 up till January
2011.
Foreign Broadcasters: A total of 75 channels have been down-linked till January 2011 by a
number of foreign broadcasters.
Direct To Home (DTH) Service: DD DIRECT+ is India's first and only FTA Direct-To-Home
(DTH) service being provided by Prasar Bharati (a public service broadcaster). Apart from
Prasar Bharati, Dish TV India Ltd., Tata Sky Ltd, and Sun Direct TV Pvt. Ltd., Reliance Big TV
Pvt. Ltd., Bharti Telemedia Ltd and Bharat Business Channel Ltd have also been granted license
for operating DTH services.
The eligibility conditions provide for total foreign equity holding, including FDI/ NRI/ OCB/
FII, in the applicant company not to exceed 49 per cent, and within the foreign equity, the FDI
component not to exceed 20 per cent. It also provides that Applicant Company must have Indian
management control with the majority representatives on the board as well as the chief

executive of the company being a resident Indian.

HD Growth Wave: Another trend witnessed in 2010 was the entry of HD channels. Apart from
'Food First', India's first HD food channel, 'Movies Now' was also launched in HD. Doordarshan
broadcasted the Commonwealth Games (CWG) in HD format. Sports, Movies and Events are
expected to be the key demand drivers for HD content. India currently has channels like NGC
HD, Discovery World HD, Star Plus HD, Zee TV HD, and two Tamil HD channels and others
are expected. DTH operators like SUN Direct, Tata Sky, Dish TV and Reliance BIG TV are
heavily promoting their HD services in India .
Radio Sector
In 2010, the total size of the Radio Sector was estimated to be about US$ 0.22 billion. It is
expected to grow at a CAGR of about 20 per cent to US$ 0.44 billion.
FM radio: In 2010, total 245 Channels are operational including the 25 channels operationalised
in the phase I.
Satellite Radio: At present Worldspace India Private Ltd, a wholly owned subsidiary of
Worldspace Asia Pvt. Ltd. Singapore is providing services under Foreign Investment Promotion
Board (FIPB) approval.
Community Radio: The policy on community radio was liberalized during the year 2008 to
bring in the civil society and voluntary organizations working on not -for-profit basis under its
ambit. Earlier only educational institutions were permitted to set up a community radio.
Presently, 29 community radio stations are operational.

NDUSTRY & SERVICES

Policy Initiatives
DTH Service: Direct To Home (DTH) service is a comparatively recent entrant as compared to
cable transmission. DTH is an addressable system and covers the entire country. The
programmes transmitted through DTH can be directly be received at homes by installing small
dish antennas at convenient locations in the building .DTH transmission does not require any
intermediary, since an individual user is directly served by the DTH operator.
Policy on IPTV : The government has put in place the policy on IPTV enabling another mode of
distribution of close to 550 permitted satellite TV channels til date through the Telecom and
Cable Networks. This is bound to give not only a new digital visual experience to the Indian
viewer with various value added and interactive services to cater to the persisting demand of the

subscriber for new and interactive services but also for the platform service providers. The
policy on IPTV now offers greater clsrity on the issues involved and both the telecom operators
as well as the cable operators will be able to provide IPTV services and will be regulated as per
their respective licensing conditions.
Head-end In The Sky (HITS) : To speed up the process of digitilisation of cable services located
in non-CAS areas of the country, the Government is in the process of taking a view on the
recommendations of TRAI on the issue of the proposed policy framework on the Head-end In
The Sky (HITS) mode of delivery of content to the cable operators. This system will enable the
packaging of content in digital form at the level of HITS operator who will uplink it to a
satellite to be received by the cable operators and thereafter distributed in digital mode through
cable network.
Mobile TV : Mobile TV is another mode of distribution of TV channels. A joint group of
Ministry of Information & Broadcasting (MIB) and Department of Telecommunications (DoT)
has considered the regulatory and licensing issues of mobile TV and held that if mobile TV
services are to be provided in the broadcasting mode using transmission of terrestrial or satellite
broadcast signals, they will come under the domain of MIB and will be governed by the
applicable laws. If they are provided by using the infrastructure of telecom service provider,
they will fall in the domain of Ministry of Communication and Information Technology
(MCIT).
Policy Framework
Television Sector
Segment

Existing Limit

Teleport (Hub)

49 per cent

DTH

49 per cent

HITS

74 per cent (49 per cent in automatic route)

Cable Networks-MSOs

49 per cent

Cable Networks-Local Cable operators

49 per cent

FM Radio

20 per cent

Downlinking of TV channels

100 per cent

Uplinking of TV News and Current Affairs

Channels

26 per cent

Uplinking of TV Non-nes and Current Affairs

Channels

100 per cent

Mobile TV

No policy

Source: FICCI-KPMG Indian Media and Entertainment Industry Report 2011

Print Media
As per the master circular from RBI on Foreign Investment in India and the Ministry of
Information and Broadcasting, Foreign Direct Investment (FDI) in print media is capped as
follows:

Publications of newspaper and periodicals dealing with news and current affairs:
FDI/NRI investment in Indian company up to 26 percent with prior approval from FIPB.

Publications of Indian editions of foreign magazines dealing with news and current
affairs: FDI/NRI investment in Indian company up to 26 percent with prior approval
from FIPB.

Publications of scientific and technical magazines/ specialty journals/ periodicals: Upto

100 percent FDI with approvals from FIPB .

Future Outlook

It is expected to reach a size of US$ 13.9 billion in next five years i.e. by 2015 at a
CAGR of 17 percent. The growth estimates till 2015 are due to a rapid growth in the
subscriber base for DTH.

Indian Film Industry is one of the world's largest with more than 1000 movie releases
and over 3 million movie goers annually.

In 2009, the print media industry stood at US$ 3.8 billion and showed a moderate

growth of 2 per cent. The industry is projected to grow at a CAGR of 9 per cent and
reach around US$ 5.9 billion by 2014.
Other Policies

Broadcasting Bill

Foreign Investment Policy

Advertisement Policy

Useful Web links

Ministry of Information and Broadcasting:www.mib.nic.in

The case examines the entry of private players in the FM radio market in India in the
early 21st century.
It discusses in detail the growth and decline of the radio industry in India.
The case explores the reasons for the downfall of radio as a medium of
communication and entertainment during the 1990s and discusses the future of
radio broadcasting in the country in view of the entry of private players into the FM
segment of the industry.

Issues:
Examine the future of Indian players in the radio industry in view of impending competition
from satellite radio companies

Contents:
The Re-Entry of Private Players
Background Note
Radio's Untapped Potential
FM Radio's Success Story
A Bright Future?
Exhibits

Keywords:

Page No.
1
2
4
5
7
9

Entry, private players, FM, radio market, India, 21st century, growth, radio industry, India,
downfall, medium, communication,entertainment,1990, radio broadcasting, country, private
players, FM

The Resurgence of Radio in India

"Nobody asks for radio and nobody gives a damn."
- Prasoon Joshi, Creative Director of leading advertising agency, O&M, in September 2001.
"Radio won't die; even today, the reach of radio is more than that of television. In rural India,
every individual has a transistor. And you can listen to the radio even when you are tilling the
soil. You can't do that with TV."
- Vinod Sharma, founding member and Ex-President, RAPA, 1 September 10, 2001.

The Re-Entry of Private Players

In July 1999, the Government of India decided to allow private players to enter the FM radiobroadcasting 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 entertainmentbased programs, not news or current affairs
programs.
Hailing the government's decision as a historic
one, analysts said this would change the future of
Indian radio broadcasting.
They added that with this development, private
companies would have better control of their
respective radio stations, unlike in the mid-1990s,
when the private players were allowed to offer
only programming content to the FM stations
owned by the government operated All India
Radio (AIR).
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.

Some of these were Entertainment Network, India

FM Radio, Vertex Broadcasting, Radio Today,
Sun TV, Music Broadcast, Millennium Broadcast,
Hitz FM Radio India, Udaya TV, Radio Mid-Day
West India, Mid-day Broadcasting South, and
Mid-Day Radio North. However, many industry
observers were skeptical about the survival of all
these private players. They said that radio
broadcasts were not popular and that industry ad
revenues had been very low throughout the 1990s.
Advertising revenues were as low as Rs 740
million in the financial year 2000-01, amounting
to less than 1% of the total advertising
expenditure. According to Prasoon Joshi, "The
quality of radio advertising here is pathetic.
Today, when an agency plans spends, the bulk of
the money goes to television. Then come outdoor
media, print, and maybe mailers. Radio comes
last."

Background Note
Radio has had a tremendous impact on society in the 20th century. Though radio was invented
during the late 1890s, public radio services offering information and entertainment content
started only in the mid 1910s, first in the US and then in European countries (See Exhibit I for a
note on how a radio works).
World War I hampered public radio services to
some extent, but at the end of the war, the
business picked up momentum. Advertising on the
radio started first in the US in 1920; this marked
the beginning of commercial radio services. Radio
broadcasting stations provided scheduled
programs of lectures, news bulletins and other
recreational and informative material. On account
of the growing popularity of such radio programs,
the demand for commercial airtime increased
heavily by 1923, making radio broadcasting a
profitable business. The far-reaching capability
and immediacy of radio made it very popular
across the world by the late 1920s (Refer Exhibit
II for a brief note on the history of radio

worldwide). In India, radio broadcasting started in

1927 at Mumbai and Kolkata with two privately
owned transmission stations.
In 1930, the government acquired these stations and started operating them under the Indian
Broadcasting Service. This service was later renamed AIR in 1936 and has since been operated
as an independent Government department. From 1957, the radio service also came to be
referred to as 'Akashvani.'2 Vividh Bharati, AIR's 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 (from sponsorship fees and commercial
advertisements). AIR also operated an External
Services Division (ESD) that broadcasted
programs in 24 languages (16 foreign and 8
Indian, languages). These programs generally
consisted of commentaries on current affairs;
review of Indian press coverage; news bulletins;
talk shows on socio-economic, cultural, historical
and political subjects; and classical, folk and
popular music from all corners of the country...

EXCERPTS
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)...
Fm Radio's Success Story

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 (licensees were required to invest a
minimum of $ 690,000 as capital and $ 460,000 as working capital for every station).
Prasar Bharati had als
Prasar Bharati had also imposed certain strict conditions that created resentment
among the private players. 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 (Refer Table II for the key
private players in the Indian radio industry). 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...

A Bright Future?
Though private companies obtained licenses to set up 37 FM stations in 19 cities by December
2001, only a few channels became operational. This was due to difficulties in setting up radio
towers and the lack of basic infrastructure facilities.
As a result, in December 2001, Prasar Bharati

extended the deadline to April 30, 2002, and

signed a memorandum of understanding (MoU)
for a period of 10 years. This MoU allowed
private FM operators in five cities to use AIR
resources against payment. In spite of these
developments and the 'bright future' predictions
for radio broadcasting, there were some doubts
regarding the industry's future. Given the huge
amount of money spent on acquiring licenses and
setting up stations, analysts pointed that it would
take four to five years for the companies just to
break even. Moreover, radio was not very popular
in the media market and its revenues accounted
for a negligible percentage of total media
revenues (Refer Exhibit V For Projected Media
Revenues). Thus, it seemed rather difficult for all
the players to sustain the competition for long
without earning any profits...

Exhibits
Exhibit I: Working of a Radio
Exhibit II: History of Radio Worldwide
Exhibit III: Indian Radio Market (1975-1998)
Exhibit IV: Advantages and Disadvantages of Major Media Types
Exhibit V: Projected Media Revenues