There’s hope on the horizon for the Indian music industry, if the KPMG report for the year ahead is to be believed.
The developments in the last year have been significant for the music industry. While the tug of war between the music labels and the artistes continues on the copyright amendment bill, the KPMG report released in March suggests that 2010 witnessed a rapid evolution from physical to digital platforms, and that should bring some respite. The Ficci-KPMG report suggests that, for the first time, sales of music of dynamic and multiple business models enabled through digital platforms surpassed the physical sales. Also, music companies have begun entering into partnerships with social companies and are gearing up to provide consumers legitimate networking platforms to promote music content and exploit the platforms to download music digitally.
About the Copyright Amendment Bill 2010, the report mentions that, once passed, the bill would bring in a paradigm shift in the Indian music industry. This will result in reduction in price paid by music companies for music, since they will no longer own the right but merely enjoy a right to commercially exploit the music
Interestingly, the report also sends out a warning that, with the emergence of multiple stakeholders, the relative strength of music companies to exploit the economic rights hitherto acquired upon buying music rights, could go down. However, the precise impact on the music businesses in the medium to long term remains to be seen.
Meanwhile, the rollout of 3G services has proven to be of benefit for the music industry. The availability of low-cost smart phones and new methodologies to package and distribute music content is opening up new avenues for music consumption.
Social networking sites have also played a huge role in reaching out to the listeners. While globally, YouTube has been used by music companies to distribute music, India too is gearing up for such licensing arrangements that has helped music companies earn revenues either on a per user view basis or from a share in the advertising revenues. For instance, In.com had partnered with Sony Music for live streaming Shakira’s first single SheWolf.
Taking cue from global successes, various music labels in India have entered into strategic partnerships with social networking websites. These social networks are actively being leveraged for promotion activities. ibibo.com has partnership agreements with Sony Music, EMI, Saregama and Warner Music. Bigadda.com has promoted Bollywood properties like Kambakht Ishq and Love Aaj Kal. And Hungama Mobile has launched a unique social music-on-demand service called MusicConnect for Aircel subscribers. This service enables Aircel subscribers to enjoy their favourite songs via interactive voice response (IVR) on their mobile device via the mobile internet which can be shared using social networking sites like Facebook and Twitter.
Music on TV
TV remains an important part of music consumption, and the genre is becoming crowded with several players focusing on gaining traction quickly. The report points out that, “Most of these channels are targeting the young population and hence are altering their content mix to suit their dynamic tastes and preferences. Some channels continued their journey of moving away from music based content to reality shows.”
2010 saw channels like Channel V experimenting with youth centric fiction for the first time. Some legacy music channels stayed with pure music and others diversified more aggressively into non fiction content targeted at youth. While Channel V cut down its reliance on music drastically, with music being aired only in the morning 7 – 10 am band. Others like 9XM and Mastiii achieved success with their pure play music focus. MTV changed its positioning twice in a year with first cutting down music content to 20 per cent and then increasing it to 50 per cent in the later part of the year.
Interestingly, the re-positioning by music channels has shown good results because the share of the ‘music channel’ genre at all India level has so far seen a rise – 1.8 (2006), 2.1 (2007), 2.5 (2008), 2.2 (2009), 2.5 (2010). At present,the music channel genre commands a nine per cent share among overall channels. Music based reality show Indian idol stood at no. 6 on top ten non-fiction shows in 2010. The first
three positions went to Bigg Boss, KBC and Khatron Ke Khiladi.
Recovering from the impact of the economic slowdown, the radio industry registered robust growth of around 24 per cent improvement in profitability during the year, the Ficci-KPMG report pointed out. Growth was driven by both metros and non- metros by five -15 per cent for the established players and 25-30 metro markets. However, the top eight metros still dominate the market, accounting for 70-75 per cent of industry revenues.
The average growth rate for the larger, established players like Radio Mirchi, Big FM and Radio City was in the range of 15-20 per cent. Radio too had its share of royalty related tug of war during the year. The Copyright Board ruled in August 2010, moving from a fixed royalty fee, to a two per cent share of revenues. While the matter has been appealed in court, the industry is expecting a final resolution that will benefit the industry as a whole. This is expected to have a significant impact on profitability going forward.
The new royalty structure is expected to make the cost economics of radio in small towns viable, as industry players are expected to see significant margin benefits from this.