In conversation with Indiantelevision.com Group's Director Content and RnM Editor Pavan R Chawla, Neeraj Kalyan, Head, Intl Business, Publishing  & Digital Content - T-Series, speaks of the digital space and its challenges. He believes  digital online piracy' is the biggest challenge the industry is facing, bemoans that the revenue pipeline is under the control of telecom operators, describes the â€?Copyright Board's order against PPL' as â€?the sunset of free trade and freedom to contract,' and speaks of synergies between Radio and Digital, and assesses the potential of the Digital space in India. Excerpts

What is your vision for the digital space in India, and your assessment of its future in the region?

Due to a steady growth in the digital arena over the years, the delivery of music and entertainment content has not remained restricted to conventional media like cassettes and CDs as consumers are increasingly adapting themselves to  new modes of  technologies and delivery like radio (FM / Digital) mobile and internet through various digital modes and platforms like iPods, PSP, mobile handsets, internet streaming and mobile radio streaming. Over the past few years we have shifted our focus to delivery of music through new media with emphasis on websites, and mobile ringtones through aggregators and mobile services operators.

Our endeavor has been to foresee emerging markets and lay down carpets of future technologies and delivery systems for our consumers.

India is at the threshold of digital revolution and the growth curve is yet to arrive. Internet penetration is still at a nascent stage (considering population size)  and thus there is huge potential and a lot of possibilities for the digital business that will see more traction in the years to come. The future lies in new formats and  modes of distribution like micro SD cards, Pay TV, IPTV, and convergence of different platforms in seamless and  efficient delivery of the content to the user  And of course, launch of the 3G  platforms will be the first test of India's real digital potential.

What are the challenges faced by the space, and how do you think these can be overcome – what should the government and the industry do to overcome these challenges? 

The most important challenge to the entertainment space is Digital Online Piracy,  which is continuing unabated and the government has failed to check despite having the technology, laws and infrastructure to curb it.

The political and bureaucratic brass of India lacks the will to do it 

One such example of India's political fraternity's lack of understanding of industry issues is proposed amendments to the Copyright Act, wherein there is also an endeavour to give protection to websites that store, distribute and communicate material that infringes copyright on the Internet! The proposed changes in this regard have the potential to completely obliterate copyright protection on the Internet and grant exemption to rampant and rank copyright infringement on the Internet  There is cause for serious concern given that the Internet is a rapidly growing mode of distribution of copyrighted material, with ever-greater penetration.

The second most important challenge for content owners is the revenue pipeline remaining under the control of the telecom platforms, giving them undue advantage in revenue sharing. Unless the content industry is able to find ways to acquire consumers directly, the industry will continue to suffer at the hands of the large Telcos.

Government interventions -- although in the larger consumer interest -- by way of TRAI  guidelines have hit the mobile VAS business in the last year. Having to re-confirm their orders so many times before actually getting the content puts off the consumer.

The tariff war in the telecom space is also adversely affecting the content industry, and telcos are pushing for further revenue cuts, which is really harmful for the content industry's ability to flourish --  or should I say which will actually raise questions on their very survival.

As a significant player in the space and region, what is T-Series doing to support industry initiatives to overcome these challenges?

Being the largest player in the music industry, we  have invested considerable resources to highlight  the challenges being faced by the industry as a whole, and are willing to support any further initiatives to safeguard the industry interest. It's ironic that being at the top of the ladder,  it has become a lone struggle for us,  but we have invested and will continue to invest human and financial resources to fight it out within the legal framework of India and several other varied jurisdictions.

We are working very closely with some of the A list legal firms in the US as well as India to bring some sanity in this free for all digital environment.

These issues are not only affecting the content owners but also negatively affecting the ARPU of legitimate  platforms, so  it is high time all stakeholders came together to address these issues jointly.

With such a huge catalogue how do you manage to curb piracy?

In addition to our own raid teams to control traditional forms of physical piracy, we are working diligently towards online piracy and have dedicated teams to monitor the internet 24X7 followed by legal actions in India and abroad. It's a continuous process and we have earmarked sizeable resources for this exercise.

What percentage of downloads are legal in India?

Not more than 10% on the internet, but the Mobile downloads percentage is far better. 3G will open up new challenges for the content cwners because if the telcos are not able to stop the illegal websites,  then 3G will become a double edged sword for both,  the telcos and the content owners.

What is your take on the Copyright Board order which the Music industry had hoped would help it, but is now viewing as a pro-FM Radio industry ruling?

The Copyright Board order against PPL really came as a shock to the entire music industry.

It is the sunset of free trade and freedom to contract.

The Copyright Board's order seems biased in granting compulsory licenses for broadcasts of copyright works, thereby curtailing the powers of copyright owners to bargain. On the other hand, it  places the broadcasters on a higher pedestal by placing no fetters whatsoever on their powers to freely negotiate the advertisement rates on their channels.

This partial control by the state is discriminatory, counter productive to the Industry and will lead to placing of unprecedented check on freedom of trade in the history of Independent India.

India cannot be compared with International markets which are mature; for example in the UK,  the minimum percentage of royalty is 5% of gross revenue for Master sound recording and another 5% of gross revenue for Performance royalty for Radio Broadcast. The total received by the copyright owner is at least 10% of gross revenue of radio broadcasters.

The Radio Industry has been working in tandem with copyright owners on freely negotiated voluntary licenses. The recent order will impose a state controlled regime that is neither desired nor workable. This will not only take away the concept of copyright and exclusivity but will also make it unviable for many copyright owners which may again seriously jeopardize the commercial interests of the copyright owners and create market imbalances and affect free trade in the economy.

It seems India is moving backward from Free Economy towards being a socialist economy. We are really astonished to note that the Govt. is charging 4% of the gross revenue as license fee from the FM Channels whereas CRB has ordered mere 2% for the Copyright Owners.

Why is the music industry, which is already facing severe hardships due to rampant internet piracy, being made a scapegoat to favour another industry? If the government is so concerned about the health of the Radio Industry,  then the charity should begin at the government's end – it should waive off the license fee it is charging the FM networks, and not take away the livelihood of lakhs of people associated with the music industry.
 

How can radio and digital complement each other? What synergies do you see between the two?

The two verticals are altogether different. Digital is interactive, and is more to do with consumer experience and the content is to own by way of downloads,  whereas Radio is a mere linear streaming.

However Radio has grown in India in the last few years up to the extent where it can be used to measure and set benchmarks. With over 190 FM station licensed by T-Series, we remain connected with our consumers through Radio and use the radio playlists as the benchmarks of popularity.

FM stations in India use a very scientific method to gauge consumer preferences by inviting a varied group of individuals and subjecting them to different songs and then they are asked to tune in or tune out on a rotary dial with a meter to gauge the level of their ratings. This research leads to the Radio playlist and which in turn act as benchmark for us.

We monitor radio playlists on a daily basis across India by  using Aircheck services. These learnings are then translated into marketing strategies to promote content on digital verticals.

The internet is a great platform as it acts as a conduit between the consumer and the content. Content brands can leverage the interactive nature of the internet to establish a personal connect with the consumer. At T-Series,  along with our exclusive digital partners Hungama Mobile, we use our expertise on the digital platform to create services that not only create awareness but go a step further to ensure interaction with the content / artist. Therefore, we feel that the way forward for internet will be -- successful integration of digital services with traditional media practices for holistic communication opportunities.

What is the revenue pie of digital today? What will it be, as per your vision and market research?

Currently Mobile & Digital contribute close to 40% to the music pie; 20% is physical formats,  and rest is shared amongst TV, Radio & Publishing. Going forward,  the Physical pie will shrink further and revenue will grow in Digital & Publishing verticals.

What will be the impact of digital on the music industry, as a 'soft' pipeline of content delivery that is replacing the 'hard' pipelines like cds / dvds -- revenues-wise, and in the way you do business.

It is true that in present times the audience has access to music through various digital platforms and technologies,  and we have countered the paradigm shift in the consumption pattern (listening time) by increasingly promoting and pushing our catalogue through new media platforms.

We have increasingly used satellite television channels, internet websites andmobile platform to push our music and copyrighted content.

We identify leading partners in new technologies and platform and we explore emerging markets  Adapting and moving with emerging markets has been our effort for the past five years.

We have dedicated, vertical-specific teams to push our content on Radio, TV, Mobile and Internet. These teams work closely with our media partners to increase ear time on these platforms.

As the consumption patterns are shifting from Physical media to Radio, TV, Mobile & Internet, we have been concentrating on revenue models in sync with changing consumer consumption patterns.

Recent Nielsen Digital music sales reports say sales in the U.S. have fallen in the first half of 2010. Will this have an impact on the digital front in India as well? How do you read the space?

It all depends upon the bandwidth challenge, which still remains. As per our estimates, the  internet population in India is 65 million, although some believe it is in excess of 80 million. If you take 20 million NRIs,  it tops 80 million; we are the fourth largest internet market in the world. I believe we are over 50 million mobile internet users in India. We should be a 200+ million consumer market by 2013. Despite these rosy pictures, as I just said, the bandwidth challenge remains.

Another big challenge in this space is micro payments,  and as online usage habits of credit card users in India are different from those of consumers in the West, we are evaluating some subscription models including Freemium models 

The newer generation smart devices which will hit the market by next year which would be a blend between an iPhone and a netbook will further augment the growth of mobile internet.

 
What is your marketing strategy for Digital music? What are the top online hangout places for target end-users for T-Series' digital sales?  What percentage of your overall media spends is spent on digital marketing?

Our important TG hangouts online include sites like itunes.com and internet streaming sites like in.com, rediffishare.com, tseries.com, hungama.com, etcetera.

We own and control more than 100000 sound recording comprising of a wide variety of music such as Bollywood, regional music, digital music, folk music, etcetera. Managing such a repertoire is always challenging. Regional is the focus for us now. People living in the specific regions of the country are so well connected with their roots that each Indian language has huge potential.

The key to promoting regional/ special music is to focus on such original markets which are often found in the remote parts of India,  and we push our products both through physical and non-physical platforms with special emphasis on the localized needs of each market. Effective supply network and efficient communication network are key in our business.

We further target the niche markets through new media promotions like SMS push, Out Bound Dialers and  IVR services in vernacular medium. These promotions on mobile verticals are very specific and are managed on specific geographical areas.

About 50 percent of our total media spend goes for digital marketing.

How does your deal with Hungama help you?

Hungama and T-Series are two sides of the same coin;  one concentrates on content creation and aggregation, and the other is focused on distribution and monetization of the same content.

We are really excited to be working with Hungama Mobile to deliver exiting and original entertainment content and are working diligently to establish a more comprehensive distribution network in the mobile and digital space together.

Together, we are very receptive and flexible to adapt to any change for the good,  and quick to realign our strategies to suit the fast evolving market conditions. This is what differentiates us from the competition. It was this zeal and flexibility that made us see the VAS & Digital juggernaut coming six years ago, and helped us align our long-term interests with the technical and distribution strengths of Hungama in the digital space.

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Neeraj Kalyan is an MBA in Marketing with an IIFT qualification in Export Marketing, and a veteran with over 20 years of experience, of which the last 14 have been in critical positions across the Music industry. Kalyan currently heads the entire Music Publishing & Copyright Management operations for T-Series in the domestic and international markets. His major function areas in the company traverse Product Strategy, Mobile & Digital Content Management, International Music Publishing, Copyright Licensing, Overseas Channel Management and Legal & Corporate Strategy  Some of the major product categories he has covered in his career so far include Music & Film Software in both physical and digital formats, Digital & Mobile Content, Consumer Electronics and Household Appliances.