HONG KONG – India’s music sector could be poised for explosive growth if digital technology is embraced.
Speaking at a fringe meeting May 9 ahead of the Music Matters convention Sudhanshu Sarronwala, CEO of Singapore-based music download provider Soundbuzz, said that India has many factors favoring a fast-forward.
These include: a vibrant music industry closely connected with the local movie sector; a legal regime for digital downloading that is on a par with Australia’s sector-leading legislation; a distribution platform growing at 5 million cellphone subscribers per month; the availability of capital for development; and an FM radio market in its infancy.
Industry starts from a low base. Although it is the world’s fifth largest music market in unit terms, piracy (particularly on the eccentric MP3 CD format) smashed the physical market from a value of $300 million in 1997 to some $150 million last year, according to V.J. Lazarus, prexy of trade association Indian Music Industry and performance rights agency Phonographic Performance.
Some recovery has occurred with the download to mobile phone market now representing 10 million ringtone downloads per month and annual revenues of $100 million.
Sector also suffers a highly fragmented retail structure and lacks economies of scale among music labels – PPL claims to pay out to 142 labels. Lazarus warns that music firms need to act quickly or risk further losing out to the telcos which currently enjoy margins of 50% to 70% on the value added services they rep.
Lazarus and Sarronwala said that music will next benefit from widespread local deployment of broadband internet, which will allow growth of specialist digital download services, and from development of full-track downloads to phones.
“Music has been looking for a new carrier, at 23 years CDs have been around for too long,” Lazarus said.
Old technologies have a long tail in India, but digital is at least expected to knock out the residual cassette market.
Radio could be a bigger story. State radio broadcast monopoly has only recently been broken and India now counts 22 FM radio stations in 12 cities. With radio newscasting still a state preserve, new stations have lots of needle time.
Lazarus says that physical music sales have dropped in areas covered by the 24-month old FM stations, but that market has now bottomed out and music firms can start to think of radio as a shop window, and a revenue stream through PPL. FM is set to expand to 350 stations soon.
Indian tastes too may be changing — away from movie soundtracks which have dominated the sector for decades.
“When action films became more popular and films started to use less music, it created a vacuum and artists began to emerge in their own right. We are very happy about this,” Lazarus said.
Moving the sector’s corporate players along may be the toughest part. Country boasts entrenched local majors including (former EMI Music subsidiary) Saregama and Super Cassette Industries, and groups Yash Raj and Adlabs spanning movies, music and other sectors.
All four of the global music majors are present in India (Warner Music with a licensee), but imported product counts for less than 7% of the market and the majors have difficulty accessing the soundtrack sector.
Lazarus said that the foreign majors can play a role in the label consolidation process, but they will have to learn to get into the film sector and expand the role of individual artists.
“Foreign direct investment is flowing into the Indian sector like never before,” a Singapore-based spokesman for fund management group Templeton Asset Management said.
Sarronwala said that his company has been operating in India for five years and now runs online download services on behalf of four local players, making it the number three mobile music aggregator in the country.