TThe Indian music industry is seeing a definite shift from physical to digital, and is expected to grow exponentially in the year ahead.

The global scenario:

In 2006, $ 2 billion worth of digital tracks and 1 billion iTunes tracks were sold globally.Digital downloads currently account for seven per cent of the UK music market. In the US, digital music is expected to be a $ 8.3 billion market by 2010. 10 per cent of digital music players sold, are sold through Amazon. 30 per cent of these burn CD/DVDs weekly in the US. Digital distribution of music is expected to be the principal driver of growth in the US.

An estimated 26 per cent of all music sold by 2011 will be digital. It is expected that over 132 million digital music players will be sold globally by 2009 and the digital music industry would be worth $145.4 billion then.

The future of music?

The Indian scene:

With the world making it huge on the digital music segment, India definitely cannot afford to lag behind. India`s digital music market mainly comprises the web and mobile music market. Says IMI general secretary Savio D`Souza, "Handset sales are on the rise, more and more radio stations are coming up and also, people are becoming increasingly internet savvy; all these factors are boosting the digital music scenario in India."Adds Times Music AVP, A & R, Rajeeta Hemwani, "Digital music segment has a lot of potential. Times Music is trying to expand by signing exclusive deals with mobile operators and others in this segment. Everyone realises that five years down the line, this segment will be a very important source of income and revenue. No one can afford to just wait and watch."

In fact, the digital music business, dominated by mobile music, will surpass physical music in sales in India, says a study by digital music company Soundbuzz. The report notes that India is likely to be the second country in the world, after South Korea, where digital music will surpass physical music in sales. D`Souza does not sound as enthusiastic, however. "In India, Music-to-Music accounts for Rs one billion (Rs 100 crore) and physical music Rs six billion (Rs 600 crore). So, I nowhere see mobile music sales surpassing physical music sales."

The potential and the promise:

Digital distribution is poised to become a meaningful segment of the market in 2007 in India and will grow to an estimated $504 million in 2008, which accounts for nine per cent of the overall spending. But many predict that the digital music growth might threaten the existence of CDs.

"CDs and DVDs are here to stay for a while," says Times Music AVP, A & R, Rajeeta Hemwani

Says D`Souza, "India is still a developing country and with the kind of demand we see especially from the rural and semi-urban areas, digital music can nowhere threaten the existence of CD sales in India. Yes, the sales might decline, but this segment cannot become extinct." The slow PC and broadband penetration rate in the country also strengthens his argument. But many firms expect to draw more revenue from the digital segment against the conventional music market in the years to come.

They expect a surge in digital music space to overtake the revenues of CDs and cassettes within the next five years. Says Hemwani, "CDs and DVDs are here to stay for a while. India still doesn`t have people with high disposable incomes that would result in the CD market getting wiped out so soon. But in the coming five to six years, yes, this market will definitely decline in terms of revenue and size."

The back-runners of the rat race:Emergence of consumer-friendly and attractively-priced licensed digital services will drive spending in the recorded music market in 2007 and 2008, says a PricewaterhouseCoopers (PwC) study on Global Entertainment and Media. India and China are expected to be the fastest growing countries in the world as far as the digital segment is concerned. There has been a marked shift in demand from cassettes to CDs to mobile music; and the sound and record companies are getting interestingly keen on expanding in this market. Says Saregama vice president Atul Chudamani, "There is a shift in the racking at music stores to VCD and DVDs. Sales of physical music have definitely gone down."

Some music labels are running far behind in this rat race to generate maximum profits from the digital segment. Record labels like Saregama, Tips, Rajshri and others have a limited presence in this segment, possibly due to low demand for the kind of music they are associated with and also, because they are not really opening up to the digitized music space. Hemwani comments, "Today, T-Series and Yash Raj are definitely the key players in the digital music segment. Other music labels like Universal, Tips, Saregama have enough content, but they still have to match the pace."

On the way out?

The digital pirates:Piracy has always been a major concern for the music industry. The digital space too has not been spared by the pirates, who have been making quick money by pirating music through the web. Says Univeral`s Rajeev Gangal,"The biggest hindrance to the conventional music industry is piracy. The mobile music segment sees low piracy levels and hence, the industry is benefited more from the digital segment than the conventional one." But, according to Chudamani, "Our biggest competitor is technology. We sell music. The piracy problems will be dealt with by the anti-piracy bodies. If we start looking at piracy as well, who will look after making and selling good music?"

Hemwani cautions, "If we count the digital downloading of music as well, the major revenue is eaten up by piracy." But, he says, five years down the line, the digital to physical music in India would be in the ratio 60:40.

Digitization is here to stay and grow. Consumer demand, technology and music companies` acceptance of the fact will now decide its pace.