Posted:
| Playing a new tune |
| Meghana Biwalkar / Mumbai May 16, 2006 |
| How the Indian music industry is reshaping itself to changing market dynamics. |
| Ramesh Choksi, owner of a small music shop in central Mumbai, proudly asserts, "I sell only originals," and points to the laminated placards in his shop: "Be original, buy original." |
| "Piracy is a crime, don't ask for it." But, his smile fades away as he adds that tackling the piracy of CDs and cassettes is not his only concern. He says, "I fear that I may soon start losing revenues to mobile phones, MP3 players, iPods and the Internet." |
| Choksi's fears and concerns are actually representative of the changes that are sweeping the estimated Rs 720-crore Indian music industry. But the good news is that many companies are taking proactive and reactive measures to stay afloat and even thrive in the long term. Just how are they doing it? |
| Surviving a scourge At one level, the Indian story resounds that of the global music industry hit hard by piracy. Industry estimates suggest that China's piracy level is more than 90 per cent. |
| In comparison, piracy is close to 50 per cent in India, similar to other Asian markets such as Indonesia, Malaysia and Pakistan. Though a lot is being done to curb piracy and unauthorised music downloads, it continues to affect the physical formats (CDs, cassettes, VCDs and DVDs) of music. |
| Savio D'souza, secretary general, Indian Music Industry (IMI), says, "Piracy is both a social and a marketing issue." |
| The result : in the 1990s, the revenue of the Indian music industry was about Rs 1,150 crore (Source: PwC-Ficci), before diving to Rs 450 crore by 2001. While the industry has clawed its way back with sales of a shade over Rs 700 crore currently, music companies and retailers are trying hard not to let these issues dampen their spirits. |
| As singer Sanjay Maroo, who released his album Chaley Jaaon last year through the Internet on rediff.com says, "You can't fight technology, it's better to work around it." |
| That explains why an increasing number of music companies are partnering with mobile companies, to encourage downloads and online sales. |
| There is hope. Vipul Pradhan, CEO, IMI, says, "Even though sales of physical formats have gone down, there has been a positive movement towards consumption of music." That's because the consumer is not buying just Hindi film music. |
| Tapping synergies Earlier, the Indian music market was completely dominated by film music, and selling music rights contributed as much as 15 per cent of a film's revenue. |
| However, with the success of music videos, Bollywood remixes and other non-film albums, the organised non-film music market stands at about Rs 100 crore. |
| Though the organised market for film music in India is Rs 400 crore, experts say that the dependency on film music has reduced considerably in the past few years. |
| Smita Jha, principal consultant, PricewaterhouseCoopers, says, "The popularity of non-film albums is rising steadily due to increased exposure to non-film music videos on mobile, TV and the Internet. This exposure usually translates into sales of music albums." |
| Along with remixes came a trend where film producers and record companies got into backward integration. For instance, film producer Yash Raj Chopra floated his own distribution and music company Yash Raj Music in 2004. |
| "This move helped film producers to control the music rights of their films. Further, they could save costs on music promotion by using the same platform to promote both the film and music," says, Nitin Keni, director, Nitin Keni Creations, a Mumbai-based film production house. |
| However, while this integration may have worked for producers like Yash Chopra or Zee Films, many others also work with music companies to sell their music. |
| At another level, the way film producers get compensated for music rights has also changed. In the last couple of years, music companies and producers have agreed to share revenues from royalty only against sale of CDs and cassettes. |
| This has helped both producers and music companies to earn a healthy return on investment, which otherwise would have been negligible due to rampant piracy. |
| Earlier companies would buy music rights from film producers against a minimum guarantee. This cost would typically range anywhere between Rs 3 crore and Rs 5 crore for a film. However, with rise in piracy levels and declining sales, music companies realised that cost of acquisition combined with production and marketing costs was much higher than actual sales of physical formats. |
| Thus, cutting costs on acquisitions of music rights helped music companies boost their topline. Further, with the rise in other modes of entertainment, music companies soon started looking at broadening their channels and product base. |
| Shridhar Subramaniam, managing director, Sony-BMG, says, "With the rise of satellite television, radio, the Internet and mobile, music record companies need to look at business-to-business [B2B] solutions rather than just business-to-consumer [B2C] solutions." |
| According to industry figures, radio, mobile companies, the Internet and live events, contribute to just a quarter of the Rs 720-crore music industry. |
| For instance, music companies get Re 1 out of Rs 7 a customer pays to download songs on their mobile phones, while radio contributes only 0.5 per cent in terms of revenue to music companies. A recent IMI release shows a 33 per cent drop in music buying of regular radio listeners due to over exposure to popular songs on radio. |
| Thus, in a hope to recover the huge lopsided sales, Subramaniam avers that, "Alternate entertainment channels are a vast stream of revenue generation and it offers new opportunities to sell and package music differently." |
| Increasing the pie Between 2001 and 2004 when legitimate sales dropped sharply, the music industry took drastic steps to improve the situation. Realising price as an issue for rampant piracy, music companies lowered prices of CDs from Rs 300 to Rs 90. This helped the industry in terms of increased sales for a short period, but the volumes dipped soon after. |
| The reason: sudden surge of cheap MP3 and VCD players. For instance, in 1994, Bollywood blockbuster Kaho Na Pyaar Hain sold nearly 7 million copies. At present, any album that sells anywhere between 1 and 2 million units is termed successful. |
| Pradhan says, "It is important to increase the availability of legitimate products by way of expanding the retail presence in order to improve sales." |
| Further, music companies are realising that the sale of music alone is not enough to sustain profitability. Accordingly, they are looking at acquiring combined video and music rights from film producers. |
| For instance, Sony Music promoted Bollywood hits like Kal Ho Na Ho, Kabhie Khushi Kabhie Gham and Kaal. Times Music, too is eyeing the video segment to expand its portfolio. |
| D'souza adds, "This brings down the acquisition cost and also helps to increase the presence by way of product expansion." Along with allied products, music companies are looking at alternative channels to reach out to consumers. |
| HMV-Saregama, for instance, after placing its tunes on Apple's online music store, is readying to launch its new music site. It is also looking at other sites like Yahoo, MSN or VSNL to reach out to more consumers. |
| "Online music helps customer to sample their favourite music, and make a CD of their choice," says Pradhan. But, for the uninitiated, music companies are willing to offer a compilation CD to consumers. |
| As a result, customers are not compelled to pay for an entire collection when they would require only a few select tracks in the album. At present, Times Music, HMV-Saregama and Tips are offering customised formats — customers can decide the contents of the album they buy. |
| If companies are making customers revisit their favourite music, they are also looking at introducing the digital consumer to new genres of music. T Suresh, head, Times Music, says, "Customers have started accepting new kinds of music. Record companies are gearing up by bringing artists and customers on the same platform." |
| For instance, Times Music organised events and contests to promote its UK-based artist Raaghav and Bombay Rockers from Denmark by getting them to perform in India. Music companies are also scouting for new talent by way of reality shows to promote sales of physical formats. |
| For instance, Indian Idol on Sony or Zee's Sa Re Ga Ma Pa Challenge are used as platforms to encourage sales of albums, based on the show. |
| Jha says, "It's a great way to promote albums as it not only generates content which is popular with the audience, but also helps the company to save huge costs on marketing an album." Indian Idol Abhijeet Sawant's album, for instance, managed to sell over five million copies last year, and was considered one of the top-selling non-film albums of the year. |
| If it is about riding on the popularity bandwagon, then music companies are also making sure that they don't miss the opportunity as mobile phones get musical. Music companies are tying up with mobile service providers to promote music by way of caller tunes and mobile downloads. |
| For instance, Hutch recently announced its full song download initiative through Tips music for the latest Bollywood film Krrish. |
| Similarly, handygo.com, a global mobile value-added service provider released Indi-pop band Euphoria's album Mehfuz on its site facilitating audiences and listeners to watch and view the entire album on their mobile phones. "This will take our music to the world," said singer Palash Sen of the music group, Euphoria. |
| Times Music, with a marketing budget of 23 per cent of its total revenues is looking at brand associations to promote its albums. In the past, Times Music and Indian Oil Corporation's (IOC's) petrol brand Extra Mile got together to promote the album, White Water. |
| Suresh adds, "We are on a continuous lookout for brand profiles that either match the album's theme or the artist's image. For White Water, the theme was in-car music with soothing tracks meant for long-drives. Thus, IOC's Extra Mile was roped in, as the brand was promoting its attribute to sustain long-drives." |
| With all this, Savio of IMI feels confident, "With so much activity in the music industry, it will grow to an extent where all formats can survive. It is estimated that the total industry size will be about Rs 1,400 crore by 2010." |
| If that's the big picture, at the grassroots, small retailers like Choksi are hoping that his attempt to fight piracy will be successful and his business expands from one retail outlet to the second one. |
| https://www.business-standard.com/common/storypage.php?leftnm =lmnu7&subLeft=2&autono=91125&tab=r |
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