MUMBAI: The radio industry grew 15% in CY 2011 to reach Rs 11.5 billion, compared to Rs 10 billion in CY 2010, according to Ficci-KPMG report. Volume increases in certain markets and rate increases for the leaders in metros drove the growth.

While 2010 was the year of structural shift from physical formats to digital ones, the Indian music industry achieved revenues of Rs 9 billion in 2011, registering a growth of 5 percent over 2010. 2011 provided users viable options of music consumption through different digital platforms.

As per the report, the Radio industry is expected to display a healthy growth rate after the advent of Phase 3. The report will be formally released on 14 March at the inaugural session of media trade event Ficci Frames 2012.

The report states that India's media and entertainment (M&E) industry has posted a double-digit growth in 2011, but is lower than earlier forecasts due to the global economic slowdown. In 2011, the Indian Media & Entertainment (M&E) industry registered a growth of 12 percent over 2010, to reach Rs 728 billon. Overall, the industry is expected to register a CAGR of 15 percent to touch Rs 1,457 billion by 2016.

While television continues to be the dominant medium, sectors such as animation & VFX, digital advertising, and gaming are fast increasing their share in the overall pie. Print, while witnessing a decline in growth rate, will continue to be the second largest medium in the Indian M&E industry. Also, the film industry had reason to cheer, with multiple movies crossing the 1 billion mark in domestic theatrical collections, and 300 million mark in C&S rights.

Advertising spends across all media accounted for Rs 300 billion in 2011, contributing to 41 percent of the overall M&E industry’s revenues. Advertising revenues witnessed a growth of 13 percent in 2011, as against 17% observed in 2010.

FICCI secretary general Dr. Rajiv Kumar said, “The key highlights are rise in digital content consumption, launch of diverse content delivery platforms, strong consumption in Tier 2 and 3 cities, rising footprint of the players in the regional media, rapidly increasing new media business and regulatory shifts.”

KPMG head of Media and Entertainment Jehil Thakkar said, “The Media & Entertainment industry landscape is undergoing a significant shift. Cable digitization, the promise of wireless broadband, increasing DTH penetration, digitization of film distribution, growing internet use are all prompting strategic shifts in the way companies work. Traditional business models are evolving for the better as a host of new opportunities emerge.”

In the New Media sector Digital advertising is expected to grow at a CAGR of 30% from 2011-16; digital ad spend reached approximately 5% of total M&E industry advertising revenue in 2011. Growth is largely driven by increase in internet penetration and proliferation of new devices.

In terms of performance, 2011 proved to be a year with mixed results in terms of growth across different sub sectors. The traditional media businesses experienced a slow down compared to last year, especially in the second half of the year. However, the new media segments like Animation and VFX, Online and Gaming businesses witnessed phenomenal growth rates.

Key trends and industry drivers

Growth in digital content consumption across media

Digital technology continues to revolutionize media distribution – be it the rapid growth of DTH and the promise of digital cable, or increased digitization of film exhibition - and has enabled wider and cost effective reach across diverse and regional markets, and the development of targeted media content.

There has been increased proliferation and consumption of digital media content – be it newspapers and magazines, digital film prints, and online video and music or entirely new categories such as social media. Accordingly, online advertising spends have seen a spurt in growth vis a vis spends on traditional media.

Rise of new age user devices

Smart phones, tablets, PCs, gaming devices, etc. all form the foundation of a new wave in media usage.This is gradually impacting the way content is being created and distributed as well. Multiple media including TV, films, news, radio, music etc are being impacted with this change.

New age consumers adapting themselves to the newer technologies

As Indian consumers evolve, there is a heightened need to engage them across platforms and experiences. There is a greater need for integration and innovation across traditional and new media, with changing media consumption habits and preferences for niche content. Media companies today have no choice but to provide more touch points to engage with audiences.

Regionalisation

Regional television and print continued its strong growth trajectory owing to growth in incomes and consumption in the regional markets. National advertisers are looking at these markets as the next consumption hubs and the local advertisers are learning the benefits of marketing their products aggressively.

An advertising revenue dependant industry

The ARPU (Average Revenue Per User) for television, average Newspaper cost for print and Average ticket price for films continue to be low on account of hyper competition in these industries. Segments like Radio and a significant portion of online content are available free of cost to consumers. Owing to this, the Indian consumer is still not used to paying for content and hence the industry players are sensitive to the impact of the slowdown which affects the budgets of advertisers.

Awaited regulatory shifts

Lastly, apart from the shifts in consumer preferences, company strategies and business models, one big change awaited for the next growth wave is the implementation of recently enacted and regulations on digitisation for cable, implementation of Phase 3 and copyright for Radio and the roll out of 4G. These shifts are expected to be game changers in terms of how business is being done currently and what could be the path going forward.