Technology redefines music retailing

With each passing day, there is an increasing craze for music. Technological advancements have further led to the emergence of new trends in the Indian music industry. Though the overall sale of cassettes and CDs has declined, the consumption of music has increased. Through this article Pallavi Majha explores which way music retailing is headed and what challenges the Indian music industry faces Although music in India has always been seen as a big industry, in recent times, with the advent of high-speed internet broadband services and prevalence of rampant piracy, independent artistes and music retailers have had to bear the brunt of losses. Music companies and retailers are fighting hard to put an end to piracy. Legal intervention is also being sought, but the degree to which piracy has infiltrated the system, it cannot be contained by strict implementation of the Copyright Act alone. Independent artistes' right to royalty has also been affected by the flooding of counterfeit products in the market. State of the Indian music industry The Indian music industry, which boasted a turnover of Rs 1150 crore in the 90s, now stands at an abysmal low of Rs 450 crore (in 2005). Sales of physical formats, like CDs and cassettes, have come down considerably due to the other modes of sourcing and listening to music, developed recently. However, Ajay Mehra, CEO, Times Group, explains, "There is a feeling that the music industry is declining. What is happening is that although CDs and cassette sales have come down, overall the people are consuming much more music in the form of downloads, television and radio. So, I think that the music industry is actually growing, and it is only the formats that are changing." Amir Curmally, MD, Rhythm House, Mumbai, opines, "Our experience and gut-feel suggest that the industry has reached a sales plateau since the last five years or so." Another important issue, that is striking a discordant note in the music industry, is the growing unrest between music companies and the group of music composers, lyricists and singers. Financial factors aside, the music lover has never had it so good before. Music is being consumed more as compared to earlier times with the availability of different formats in music such as downloads, MP3, radio, television, etc. Latest trends in the industry There is a trend towards consuming more music no matter what the source is, whether it is radio, television, mobile ringtones, online music, downloaded music and so on. Says Mehra, "Selling and buying of CDs and cassettes are only the physical forms of acquisition. We should observe how and where people listen to music - whether on the internet, in music stores, in the form of ringtones, or anything else. Our aim, as retailers, should be to reach out to the maximum number of people." Radio, mobile companies, the Internet and live events, contribute to just a quarter of the Rs 720-crore music industry. A recent Indian Music Industry (IMI) release shows a 33 per cent drop in purchases made by regular radio listeners due to over-exposure to popular songs on radio. There are a number of formats through which music is individually absorbed. Here are some of the latest trends of consumption. Internet sales: Increasingly, people want to consume and purchase music on the Internet. This does not necessarily mean that CDs will no longer exist, they will certainly appeal to specific customers, while other music fans will use the online music world. Internet sales are likely to account for 25 per cent of the music industry revenues by 2009 in India. One of the biggest advantages of retailing on the Internet is its enormous reach. Mehra believes, "Internet sales are still very small in India. It is a medium that certainly needs to be exploited." The trend will also shift towards offering user-tailored music. Music sales in offline stores are continuing to drop the world over, and India is no exception. Consumers will want to buy specific songs as opposed to complete albums. This will change even more dramatically once full-length music downloads on the mobile are introduced in India. "Internet plays a double-edged role. On one hand, it helps to disseminate relevant information about new artistes and albums, whereas on the other, it promotes piracy through file sharing networks. As broadband increases in popularity, the recorded music retailer will come under increasing threat from Internet piracy," says Curmally. Music downloading: Technology advancement has led to an expansion in the listener's base and music downloading at a low cost. People, today, are happily listening to innumerable songs on their MP3 players, leaving cassettes and CDs in the cold. The industry has lost nearly Rs 450 crore to piracy. Media: Music is easily available on radio channels, and music videos on television. This is precisely what has led to a considerable decrease in the sales of music albums. Mehra opines, "Media promotes music in all aspects. TV and radio are the first promoters of music and, thereafter, people go and buy according to their choice. In the short term it may appear that the media is taking away sales, but in the long term this is definitely not so." Online music: Online music sales could be one form of reviving fortunes. Online purchase is about personalisation, and hence, the consumer will always be king in terms of choosing what he or she actually wants. The merit of the online music retail model is that you absorb the content without the retailer incurring incremental costs. Moreover, says Curmally, "Online music sales via transaction sites have not really registered their presence because the industry's trade margins are fast eroded by the high cost of payment gateways as well as logistics providers (couriers, etc)." Large online music retailers, like itunes, MSN music, Napster and AOL music owe their success to great user experience, using technology and consumer recognition techniques in a very personal and non-intrusive manner, employing excellent search features, and extending effective promotions and marketing. E-tailers should also be able to store information on their consumer's preferences, offer loyalty programmes, etc. Mobile ringtones: With film and popular song downloads becoming increasingly popular, the telecom companies are charging anywhere between Rs 7 to Rs 12 per ringtone download. The lion's share of nearly 60 per cent of the Rs 7 for a single ringtone download, goes to the mobile service provider, while 25 per cent rests with the copyright owners (usually music companies which, in turn, are expected to pay the artistes) and 15 per cent is given to the government. Mehra observes, "Mobile ringtones are yet another way of consuming music, and the customer is listening to music in different forms. We allow downloading music in a digital form, in our stores. It will ultimately encourage new music much more." The business of ringtones contributes merely Rs 15 crore of the music industry's total revenue. Artistes blame music companies for having wronged them and robbed them of their rightful royalty. On the other hand, a majority of music companies are in the red due to issues plaguing the industry, specially piracy. Integration of film producers and record companies A new trend is emerging wherein film producers and record companies are getting into backward integration. This move has 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. The integration has worked for producers like Yash Chopra or Zee Films, there are others are who are looking forward to such kind of integrations. The coming of the latest technology has to be accepted and implemented in order to continue at the pace at which society is moving, otherwise there are chances of no forward movement. That explains why an increasing number of music companies are partnering with mobile companies, to encourage downloads and online sales. Agreement to share royalty 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. Worldspace 'shop-in-shop retail Worldspace Satellite Radio, one of the world leaders in satellite-based digital radio services, formed strategic partnerships with two of India's largest music retail chains Planet M and Music World, extending its retail reach through 59 premium music stores located in nine cities across the country. Under the terms of these agreements, Worldspace would showcase and sell its subscription satellite radio service and its products. It delivers over 40 channels of diverse music genres and entertainment to music lovers throughout the country and beyond. Through these sales and marketing alliances, Planet M and Music World would create 'shop-in-shop' spaces for Worldspace with branded kiosks to present customers a taste of the Worldspace experience, showcasing the widest variety of uninterrupted, digital quality radio entertainment. Film and non-film music Earlier, the Indian music market was completely dominated by film music, and selling music rights contributed as much as 15 per cent to 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, the dependency on film music has reduced considerably in the past few years. The popularity of non-film albums is rising steadily due to increased exposure of music videos on mobiles, TV and the Internet. This exposure usually translates into sales of music albums. Challenges for music retailing Highlighting the challenges in music retailing in India Mehra says, "Piracy is the biggest challenge. High dependence on film music, need for promotion of more and better artistes, showcasing a larger range of music, are some of the challenges in music retailing." Issue of piracy Piracy is a social as well as a marketing issue. Music directors, singers and lyricists and music companies agree to the fact that the issue of piracy has eaten into the music industry and left it hollow. Not only India, but the entire global music industry is 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. Suggesting measures to curb piracy, Mehra says, "More legitimate and organised retailers should encourage customers to buy the original and discourage pirated ones. If the prices of CDs and cassettes were made realistic that would also help reduce piracy. A lot of movies are released later than the release of their music CDs. If the movies are released simultaneously on DVDs along with the theatre release, there will be less piracy." Cold war among music companies and artistes Though not ready to comment on this issue as a retailer, Mehra suggests, "Music companies should invest in artistes to promote them in a sustained manner." As long as the issue of royalty remains unsettled, musicians will continue to be insecure. Music companies need to give artistes their rightful share of money. The controversies regarding royalty seem to be on the minds of almost everyone in the industry. With technology advancing at a rapid pace, musicians want a share not just from cassettes and CD sales, but also from radio and television channels that air their songs, from sites that allow people to download music and from ringtones that are being downloaded. Ringtone issue Composed tunes are played in stores, clubs, discos or even live, and musicians should rightfully be earning royalties from these. The ringtones issue is the latest controversy that needs to be urgently addressed by the music fraternity. Music directors, singers and lyricists are demanding an equitable share of revenues for their music that ends up as ringtone downloads. Though there are no reports to suggest how big the ringtone market is in India, nearly two lakh ringtones are downloaded in India every day. Measures to recover losses of music industry Legitimate music sales dropped sharply at the beginning of the 21st century. As a result, the music industry took drastic steps to improve the situation. Realising that the price of music sold in the market was one of the reasons 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. As of now musicians are required to adapt and accept changes in technology. We cannot stop iPods from coming into the market, and ringtones from getting downloaded. If technology is changing rapidly, musicians have even more reasons to be informed about their rights. With the growth of satellite television, radio, the Internet and mobile phones, music record companies need to look at business-to-business solutions rather than just business-to-consumer solutions. Singer Association of India Sonu Nigam along with collegues Alka Yagnik and Suresh Wadekar started a Singers' Association of India (SAI), aimed at tapping the real issues that music companies fail to address. Songs, today, are known from their performers, and not people who have actually sung that song. The music companies need to aggressively market singers, encourage the non-film music market, give singers their fair share of royalty. Organised music retail - the need of the hour According to Mehra, "In stores like Planet M sales are going up as they are well-organised and formatted stores. Customers are going in for larger retail store formats. Another issue is that of making small payments with credit cards for individual songs." Therefore, efforts are required on the part of music industry to make music retailing more organised. Support of music companies Today, Indian artistes hardly get any support from music companies, and have to invest their own money to bring out an album. A majority of the artistes feel that it is this attitude of the Indian music companies that has encouraged international artistes like Trickbaby, Juggy D and Raghav to capture the Indian market. Usually, the cost of bringing out a non-film music album is anywhere between Rs 35 to Rs 50 lakh. A majority of artistes say that music companies are not willing to shell out that kind of money on them and would prefer the artistes to give them the finished product. This means that the artiste records the album, complete with mixing and mastering, and also shells out the money for the music videos. The role of music companies, feel musicians, has been relegated to giving the album the required publicity and bringing it out on the music shelves. Non-film music should be encouraged The non-film music category should be encouraged to grow. Self-sponsored albums and remixes have resulted in the gradual death of the music industry in India. Even as we are talking of royalties and copyright issues, Fashion TV is blaring 90 per cent of the sound bytes from different Rajasthani folk songs and tunes. The situation, according to musicians, is getting bleaker, especially as a new trend arises. This time it is a loaning facility wherein a particular music company loans an amount to an artiste for bringing out an album. The artiste, in turn, is expected to pay it back at the end of a certain period. Though music companies remain tight-lipped on this issue and artistes prefer not to talk about it in the open, it is obvious. A majority of established artistes are finding it increasingly tough to convince music companies to invest money in their projects. The poor marketing of albums and artistes by companies is also reason why the non-film album category is faring so poorly. As a suggestive measure Mehra believes, "The government needs to reduce taxes in terms of entertainment so that more concerts and similar activities are encouraged. It should also help control piracy by encouraging and supporting organised retailers." An overview The current music industry appears to be full of challenges and controversies, though we cannot deny the fact that music consumption is increasing with each passing day, through whatever source. All the fears and concerns for the music industry are actually representative of the changes that are sweeping the estimated Rs 720-crore industry. However Mehra comments, "The current music retail industry is still living in the old days, churning out whatever music is being produced for films. They need to change this and bring in new music." With regard to musicians, they are not greedy, rather they are just becoming more aware. Call it awareness or the need to keep in step with the changing times or even fighting for their rights, the issues regarding royalty are clearly stepping up the tempo for musicians.