MUMBAI: With physical CD sales under continuing assault, digital music distribution is bringing in a major transformation in the Indian music industry 

2009 witnessed a deluge of digital platforms for music. Handset major Nokia launched its music store in India, print major Deccan Chronicle planned the launch of its music portal. On the online front, In.com concentrated on promoting music, and digital giant Hungama announced the launch of two portals- Hungama.com and Artistaloud (both targeted at promoting artistes and downloadable music), while the Bennet, Coleman promoted Indiatimes too introduced music elements to its portal.

Consumers are spoilt for choice with numerous players eyeing the digital space. Music consultant Mandar Thakur observes, It is great to see so many players getting into this space as many players will create enough traction and will give the consumers fantastic choice. We, at Soundbuzz had created the online music space in Asia/India years ago and I wish we had many players at that time as well... 

Emphasises digital media and music consultant Vivek Paul, It is better if more players enter the market as it would indicate growth in the segment and bring in healthy competition with marketing efforts from each of the distributors. The recording industry's conventional business is changing from its 60 years of conventional retailing and distribution to digital distribution which is cost effective, quick to market... 

Music record labels, principal players in the digital distribution value chain, have to currently take into account that the chain now also includes broadband digital music stores like iTunes, mobile network operators, MP3 player and mobile-phone manufacturers, music distributors, platform software companies and other technology providers.

Will consumers dig into their pockets?

With rampant piracy, it is questionable if consumers would log on to a website and download legal music, shelling out even as low as nine rupees per track   

Thakur opines, Questioning whether consumers would pay for music would not be really relevant in today's established time and digital music market. If you'd asked this in 2000 or 2001, it would have merited a debate!...

Vivek Paul seconds the thought saying, Piracy does not stop the growth of new avenues and the single big factor of buying from legal distributor/s is assurance of quality. Much of research and surveys have indicated that users are willing to pay for legal content as it protects their purchase. Also the legal services do tend to offer a sizable repertoire in the database....

Citing the example of Caller ring back tones (CRBT), PPL CEO Vipul Pradhan says, CRBT has developed into a huge business in India which proves that consumers are ready to pay for music. As there is no piracy on CRBT tones- the labels, telecom operators, content aggregators have found a business model there and online music would also garner profits in long run... 

Synergy between media- the key driver

Although the physical sales have been dwindling, music labels aren't complaining, having found another avenue in digital music. The digital download scenario is spiraling and it can be attributed to synergy with mobile and other services 

Deccan Chronicle's online venture Odyssey 360 degree business head Harsh Grandhe says, The way of storing and listening music has digitalized and we want to capture that market. Masses have moved to mobile listening and consumers prefer carrying music in their respective devices and music downloads provide the facility of portability of varied songs....

Pradhan foresees the advent of 3G technology as a boost for the digital music biz. The bandwidth availability is the main hurdle and with 3G technology entering India, there would be flexible bandwidth available for downloading music onto your handsets. Direct downloads from website onto handsets would mark the success of online websites selling music....

Thakur examines, India is the second market after South Korea where digital has overtaken physical (purely on a topline revenue level). The digital music industry in India is the mobile music industry and people will access music on their portable devices whether through a telco network or via Wi- Fi or Wimax. All you have to do is look at the slew of services tied into devices be it - itunes / iphone, Nokia/Ovi etc...   

There are different parameters to a profitable venture however sales does bring in a sizable portion of revenue. The model needs to be 360 degrees and integrated in a single access for online and mobile,... Paul states.

Stumbling blocks

The Internet penetration in India is gaining traction, around 40 million Indians have internet access now, and that number has increased 700 percent since 2000 (source: Internet World Stats), however this still only represents 6.5 per cent of the total Indian population.

Paul maintains, Asian markets are driven by mobile, so full length content and its consumption is impacted but as the markets mature, the behaviour will also change from download to access base....

Drawing attention to other hurdles in profit making in the online space Thakur says, The hurdles include high costs of content royalties in the online space, broadband penetration, resistance of consumers to pay via credit card, absence of wide catalogue, programming of relevant �retailable' content and high costs of marketing the digital music stores....

Music industry veteran M M Satish opines, Pricing would play a key role and if you have competitive module, you can automatically kill piracy. Digital music is slowly seeping in and is the future until and unless any other technology replaces it... 

Pradhan agrees, There has to be a model where the content enables an opportunity for operators, the online platforms and telecom companies to make profits....

The online space in India needs to mature out to include mobile with consumers increasingly using a mobile device for all purposes consumption of the �mobile internet' will only explode further- so it is absolutely critical to have a mobile carrier/ telco synergy.

Music labels in digital space

Indian labels are increasingly venturing in the digital space and 2010 might see some key labels expanding their presence over the web. Times Music is working on its website and would be hosting it this year, Saregama had announced its website a year back and is contemplating launching it this year 

Online sale involves lower distribution costs and eliminates the retail margin of 15-20 per cent for the labels. Part of these savings can be utilized for innovative net marketing that offers consumer's detailed information and reviews, and also the flexibility of customized and unbundled offerings.

Analyzing the trend of music labels venturing into online platforms, Thakur says, Music labels must definitely retail specific digital formats but music labels themselves getting into retailing music online might not be such a smart idea when they could use their funds better somewhere else. That is not their core business and we haven't yet come across any successful effort globally that has worked for a individual label or a group. There's always a first time but a music labels greatest moment today is creating great music and partnering it with others to create a 'win-win' distribution channel - not to themselves go out and create / own online retail channels / stores that will keep changing every day with technological advances....

Release of music in the digital space is now a norm and the labels will have a two tier strategy - align and provide licensing to distributors and integrate purchase function to the digital assets.

Foreseeing digital music as the future of industry, Paul affirms, The future of the music is digital distribution and yes it will be a sizable form of revenue. However the success of the business plan is going to be on a 360 degree offering and the music industry therefore comprises of - labels, artists and creators of musical works....

On the lower end, players like Rediff.com's Songbuzz and Motorola's Soundbuzz wound up operations last year.