MUMBAI: The radio industry is estimated to have reached a size of Rs 8.4 billion by the end of 2008, a growth rate of 13.5 per cent over the previous year, according to a KPMG report released at the inaugural session of Ficci Frames 2009 in Mumbai on Tuesday.

However, the size of the Indian music industry was estimated at around Rs 7.3 billion in 2008, down from Rs 8.3 billion in 2005, implying a degrowth of 4.8 per cent during the period, the report says.

Radio ad spends account for about four per cent of the total advertising spends in India today, having grown from just two per cent in 2004. Consequently, the radio industry is estimated to have grown at an impressive CAGR of 19.7 per cent over 2006-08. It is expected to grow at a CAGR of 14.2 per cent over 2009-13 and reach a size of Rs 16.3 billion by 2013, the report says.

Increase in the number of radio stations – around 700 new licenses expected to be issued to private FM stations in Phase 3, expected regulatory reforms that are likely to improve profitability and stimulate foreign investments, emergence of robust audience measurement tools which could further catalyze growth in radio ad spends and growth in locally targeted advertising on radio are some of the growth drivers for the radio industry in the country.

In the music sector, one of the primary reasons for the degrowth has been the erosion of sales of physical formats, a trend which is expected to continue well into the future. Physical formats such as audio cassettes and compact discs, which accounted for approximately 87 per cent of industry revenues in 2005 currently account for just fewer than 60 per cent in 2008, the report indicates.

Physical revenues are expected to decline at a CAGR of nine per cent between 2008 and 2013. While the actual degrowth of formats such as audio cassettes is expected to be much higher, this is likely to be partially offset by initiatives taken by some leading music companies such as Sony BMG, T-Series and Saregama to release MP3 music on compact discs at price points similar to that of the ubiquitous audio cassette. Overall, the music industry is expected to grow at a modest CAGR of eight per cent over 2009-13 to reach Rs 10.7 billion.