Radio Industry An Overview
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Radio Industry
An Overview
Agenda• Indian Economic Outlook
• Media & Entertainment Industry
• Radio Industry
• Background
• Phase I- Highlights
• Phase II-Highlights
• Key Players
• Phase III
• Future Drivers
• Cost Breakup for Radio
• BIG 92.7 FM
Strong, positive economic outlook
0
2
4
6
8
10
12
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2007A 2008A 2009A 2010E 2011E 2012E 2013E 2014E 2015E
GDP US$ Bn
GDP Growth Rate
• GDP and disposable income to grow rapidly
• Growing Middle class: 32.8 Mn HHs (25% share)
• Youth constitutes 38% of population
•Increasing disposable income
315 364 421
283 332
384 95 142
164 67
70 81
83 121
140
-
200
400
600
800
1,000
1,200
1,400
1991 2001 2010
0-14 15-34 35-44 45-54 55& Above
Source: Indian Media and Entertainment Industry-Ambit Report Oct 2010
101.174.1
49.9
91.3106
93.1
10.9 55.194.9
2.45.5
33.11.2
3.3
9.5
0
50
100
150
200
250
300
2005 2015E 2025E
HH Mlns
Deprived (<90) Aspirers (90-200) Seekers (200-500)
Strivers (500-1000) Globals(>1000)
Changing Income Groups Young India
Non-Metros matching up to the
metros!• Non-Metros account for 73% of Urban India’s Consumption of Rs. 12390bn
• Healthy rate of rising incomes fuelling high-value consumption in smaller towns
YoY Growth : 2008-
2009
Metros KUT Rest of
Urban
DVD Player
Ownership
19% 33% 28%% of HH Income Growth 2004-2008
(NCAER/FCR)
Computer at home -
Ownership
6% 21% 21%
Digital Camera -
Ownership
16% 37% 26%
Car/Van/Jeep -
Ownership
6% 11% 12%
Ernst & Young – ‘The New Market Shehers’ Report
Rural India Shining!
4498 60939688
16701
26383
0
5000
10000
15000
20000
25000
30000
1985 1995 2005 2015F 2025F
Billion (INR)
Govt. Expenditure on Rural Development almost
• Rural India accounts for 70% of India’s population
and 58% of total disposable Income
• Rising disposable incomes in rural India leading to
robust growth in consumer market
• Govt schemes like NREGA stimulating rural growth
Aggregate Rural Consumption – Consistent
Projected Growth`
Govt. Expenditure on Rural Development almost
doubled in FY2009Diversification of Rural jobs driving the
rural economy
Source : ENAM Securities Report ‘Rural – Opportunities from Resurgence’ June 2009, Published Business Reports
0.6
3.3
0
0.5
1
1.5
2
2.5
3
3.5
Agri Non Agri
CAGR %
Indian M&E expected to reach ~$24 bn
by 2014 from existing $13 bn
15.00
20.00
25.00
US$ Bn
11.4 12.8 13.014.5 16.5
18.621.2
24.3
Source: FICCI PWC Report 2010
-
5.00
10.00
2007A 2008A 2009E 2010P 2011P 2012P 2013P 2014P
Films Television Print
Radio Music Animation & VFX
Gaming Internet Outdoor
US$ Bn
2469028130
32270
37070
42690
30000
40000
50000 INR CrADVT. CAGR 14%
Advertising sector grows
ahead of economy across media platforms
CAGR(%)
Media and Entertainment
13.0
Advertising 14.0
Television 13.0
Source : FICCI Frames 2010 Report
0
10000
20000
2010P 2011P 2012P 2013P 2014P
Television 13.0
OOH 11.0
Radio 12.0
Internet 20.0
Source : *PWC India Entertainment & Media Outlook, July 2010
Radio Industry
• Business model is mainly advertising driven
• Impacted by the global recession, growth in the last two quarters of 2009 was slow because of slowdown in the advertising industry
• A cost effective medium for advertisers as it has more penetration and reach compared to the traditional print and television
• Controlled by few business groups having sizable stake in different media properties
• Mainly an act of diversification from existing media players as an risk mitigation
88
• Mainly an act of diversification from existing media players as an risk mitigation exercise with slowdown experienced in traditional media outlets such as print.
• Regulated and recently privatized
• Phase II licensing made the business viable
• Has huge infrastructure setup costs
• Oligopolic and witnesses price wars
• Overall growth rate is impressive
The metro market phenomenon
• 18% of all private FM stations in metro markets
• Metro markets contribute maximum revenue to the industry
• No room for expansion in metro markets –metro markets already have maximum number of permitted stations in operation.
• Witness fierce competition
Radio Market Phenomenon
Size of Indian Advertising Industry – INR 221 bn (2008)9
Advertiser driven
• Radio globally is optimized for local advertisers but Indian Radio industry mix currently is in favor of National advertisers.
• Advertisers who provide big business are largely based out of metro markets.
• Advertisers give maximum business to players who have large presence
• Radio commands 4% of total advertising revenue.
• Industry expert opine that small players distort market by virtue of their inability to support large advertisers.
Radio TraitsMass
EffectivePersonal
Relatively Inexpensiv
e
High Reach
High Target ability
Theater of Mind
MASS LOCALIZED REACH Medium
Category strengths with TV
Radio
Incremental reach
Frequency Daypart
+ TVFrequency Builder
Matching Audience Profiles
DaypartSynergies
Radio used with TV translates into a more impactful media solution.
Key Milestones
1935 Radio Broadcast begins with AIR
1977 First FM Service begins in Chennai
1993 AIR Sells time slots to Private FM players
1999 Privatization of FM = Phase I1999 Privatization of FM = Phase I
2001 Licenses given to Private Radio Broadcasters
2005 Phase II of privatization policy announced
2010 Phase III policy cleared by Empowered Group of Ministers
Radio Background
Before 1999 1999-2005 2006-2007 Going forward
No Privatization Phase – I licensing Completion of Phase –
II Licensing
Multiple frequency
Government run
channel
Private Participation
– Limited
Increase competition License Tradability
“Radio a dead
industry”
Strict regulatory
norms
Improving profitability Networking
industry” norms
Introduction of
revenue sharing in
2005
Growth in radio ad
spend
Radio ad spend
share – 8.5%
“Radio in infancy” “Radio in growth
phase”
News & Current
Affairs; Technology
developments
FM Radio is fast moving out of its adolescence
Radio Industry – Phase I
In 1999, 32 circles were opened up, for private players to broadcast.
Eventually 22 stations were set up across 12 cities.
Key players who entered the fray were:
ENIL (Radio Mirchi) , Music Broadcasting Co. (Radio City)
Mid Day (GO), India Today (Red FM), South Asia Radio (SUN)
Key Issues
High license fee structure
Listenership improved but remained stagnant beyond a point
No industry standard for ‘reach’ measurement.
Music rights issues, forced channels to limit play-Lists.
PHASE II - Highlights
Salient points
338 frequencies in 91 cities
Revenue sharing model
License valid for 10 years
Highlights Radio
Phase II
Restrictions
Only 1 channel per city, per applicant.
15% cap of the total operational stations per player
FDI limit of not more than 20% of paid up equity capital
News and current affairs still not permitted
No automatic renewal of license permitted
Evolution post privatization
Post Phase II, has witnessed significant change in the category.
Programming & promotion
More competition has bred better quality and more innovation in programming.
Increased category promotion has led to consumption increase
Improved Investment options for advertisers
From vanilla spots to Content integrations, activations, events, digital solutions etc From vanilla spots to Content integrations, activations, events, digital solutions etc
Pan India FM networks now attracts multi city campaigns for major brands in India.
Measurement
Advent of RAM- a measurement instrument introduced by TAM/AC NIELSEN.
Measurement has resulted in better yields growth in the overall Radio pie.
Industry Integration
Formation of AROI (Association of Radio Operators of India), Radio Investors’ Forum
Championing the category with Govt & legislative bodies
Regulatory Challenges
Prohibition on FDI (permitted only 20% of the paid up equity capital)
Prohibition on Live sports, News & current affairs by Pvt Players
Prohibition on Multiple frequency ownership, even in A+ markets
Non tradable licenses for 5 years from date of operationalisation
10 year tenure of the licenses puts pressure on cost recovery
Lower number of FM radio frequencies due to large gap in unused spectrums (800 khzagainst 200 khz in US)
Limitations on networking of stations.
High rentals payable for Govt owned infrastructure - transmission towers
Revenue ChallengesCategory still nascent and requires investment specifically in educating
advertisers.
Retail Advertising growth can be driven only through
adoption of more “feet on the street”, which requires
investments.
Greater measurement system coverage would enable better yields Greater measurement system coverage would enable better yields
Prohibition of Multiple frequencies in one city, prevents players from
offering platforms that cater to niche but monetisable segments.
Continued prohibition on Private FM players in News & Current Affairs
Top Players – Phase II
Successful Bidders StationsFees
(Rs Bn)
South Asia + Kal + Red FM
(incl acquisition cost of RED FM)
48 3.10
Adlabs Films Ltd 45 1.60Adlabs Films Ltd 45 1.60
ENIL 32 1.35
MBPL 20 0.51
Synergy Media 17 0.51
Key Players with City Categorisation
Key Players GroupNo of Licenses Granted
A + A B C D Total
Adlabs Films Ltd.- BIG 92.7 FM Reliance ADA 4 4 10 24 3 45
Kal Radio Pvt. Ltd. Sun TV 1 2 4 14 0 21
South Asia FM Sun TV 0 6 9 5 3 23
ENIL - Radio Mirchi Times Group 4 9 11 7 1 32
Radio Mid Day - Radio OneMid Day Multimedia &
BBC4 2 0 0 0 6
HT Music HT Media & Virgin Radio 3 1 0 0 0 4
MBPL - Radio CityGW Capital
(Ambit Group)3 8 3 6 0 20
Synergy Media Dainik Bhaskar 0 4 4 9 0 17
Radio Today Broadcasting India Today 3 0 1 2 1 7
Red FMValue Labs, Astro
Broadcast & NDTV3 0 0 0 0 3
Population In Million � 2 2 1 – 2 0.3 -1 0.1– 0..3
BIG FM is the largest FM radio operator in India
� 21 FM licenses
� Operational cities 12
Phase II Phase III
� New Licenses 700+
� New cities 277
Phase I
� 245 FM licenses
� Operational cities 87
FM Radio Revenues
20% CAGR
16% CAGR
Source: FICCI-KPMG Media & Entertainment Industry Report 2010
INR Bn
~60% of the radio advertising revenue comes from the Pvt. FM &
the balance from All India Radio (AIR)
Recommendations on Phase III
The main features of the FM Phase III policy cleared by GOM are:
� License period extended from the current 10 to 15 years
� Multiple licenses per city
� Limited news allowed
� Current affairs and sports allowed
� Networking across all stations allowed
� Lowering of Prasar Bharti rentals/ CTI costs
E- Auction model to be adopted for the tender
Minimum Bid Price per city basis the highest Bid price for the city category of the
region.
FDI Limit proposed to be increased from 20% to 26%.
Relaxation of Annual Fees to North East and Jammu and Kashmir.
Source:Exchange4medianewsservice,21 Jan 2011
Operational IssuesMusic Royalties
Copyright Board ruling of royalty @ 2% of Net revenues still to gain acceptance from music labels
Operating processes and controlsCredit Control mechanism currently absent for Radio
Growing number of music right owners
Lack of trained Personnel
Shortage of talent for on-air talent, programming and RJ – New careers.
Future Drivers
Phase III licensing to bring in more players (more than 600 stations in 250 cities across the country)
FDI to ease niche programming with more money for developing targeted content.
Tradability of licenses to allow for consolidation in the industry through mergers and acquisition.
Differentiation to come in the form of weather, sports, news bulletins, news
2424
Differentiation to come in the form of weather, sports, news bulletins, news broadcast.
Industry to improve its share from ~4% to more than 5% of the advertising revenue in next five years.
Growth to come from locally targeted advertising
More awareness about the medium and its potential to result in better utilization with the advertisers.
Set Up Costs
Average investment to set up a radio station is around Rs.15 to Rs.25 million for a
smaller station and Rs.40 to Rs.50 million for a metro / large city station.
Set up costs comprises of – Transmission and studio equipment, Leasehold
improvements, office equipments and network infrastructure.
The number of studios required by type of station;
Category of license / station Average number of studios
A+, A 3-5
B 2-3
C,D 2
Operating CostMajor cost for a radio station comprises of Staff Costs, Marketing, Music Royalties, License fees, and other administration cost.
Cost composition varies significantly across stations in larger and smaller cities, particularly with respect to royalty and marketing expenses.
Cost ComponentMetro
Cities
A&B
Category
Cities
C&D
Category
Cities
Marketing 33% 10% 7%
Payroll 31% 34% 28%
Music Royalty 7% 25% 43%
Rentals 7% 10% 8%
Others 22% 21% 14%
Source: E&Y
Music royalties cost for most stations, around Rs.5 to 7 million per year
License fees are 4% of Gross Revenues
Approx Average Annual Operating Cost Per City Category :
A+ : Rs 80 mln A : Rs.45 mln B : Rs.15 mln C : Rs.12 mln D: Rs.8mln
BIGBIG 92.7 FM92.7 FM
Our Vision-
To be the first choice of listeners as we not only entertain To be the first choice of listeners as we not only entertain To be the first choice of listeners as we not only entertain To be the first choice of listeners as we not only entertain
“Suno Sunao, Life Banao”
To be the first choice of listeners as we not only entertain To be the first choice of listeners as we not only entertain To be the first choice of listeners as we not only entertain To be the first choice of listeners as we not only entertain but positively impact and transform their livesbut positively impact and transform their livesbut positively impact and transform their livesbut positively impact and transform their lives
92.7 BIG FM Network
Srinagar
Jammu
AmritsarChandigarh
Shimla
PatialaHissar
Delhi BareillyAligarh
Bikaner
AjmerJodhpur
Udaipur Kota
AgraKanpur
AllahabadJhansi
Gwalior Guwahati
•45 Stations Network
•Leadership in key Metros & a
strong No. 2 nationally
•Weekly reach.
*Source: IRS 2010 Q3 & RAM 2011**Based on FICCI 2010 Report :2009 Estimate
BhopalIndore
RajkotBaroda
Surat
Mumbai
Sholapur
Panaji
Hyderabad
BangaloreMangalore
MysoreChennai
Pondicherry
Thiruvananthapuram
Tirupati
Visakhapatnam
Bhubaneshwar
RourkelaJamshedpur
KolkataAsansol
Ranchi
•Weekly reach.
• Over 3.57 crore* listeners
•Coverage
• 1,200 + towns
• 50,000 + villages
•Market Share : 19.4%**
Operates FM Radio in 45 cities and
Experiential marketing
platforms for brands
Acquires and
markets of out-of-
An initiative in digital space to leverage
Network of 3 Premium
International entertainment
A Hindi music channel combining
An integrated sales team, with 250+ associates
cities and reaches 1200 towns and 52,000
villages and over 200
million Indians
brands activation, events, intellect
ual properties &
rural marketing
of out-of-home assets
leverage Content & Digital
Marketing Services.
entertainment televisions
channels, in JV with CBS Studios.
combining popular
music along with
Bollywoodcontent and
humor
associates across 52 offices
servicing 1000+ clients each
month
RBNL is one of India’s largest media owners offering brands the opportunity to reach & engage the 206 million consumers across the Reliance ADA group.
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