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India sees high-pitched growth for digital music

Music lovers are turning to digital options amid a flurry of activities in the industry which has seen the launch of new legal streaming services and apps for mobile devices.
Written by Swati Prasad, Contributor

NEW DELHI--Music lovers in India are turning to digital options amid a flurry of activities in the industry which has seen the launch of new legal streaming services and apps for mobile devices.

The local music industry last year registered a growth of 5 percent over 2010, boosted not by the sales of music CDs but by increased consumption of digital music. According to the Ficci-Frames report 2012, released by industry body Ficci and KPMG, digital music saw a significant jump of 24 percent year-on-year.

Over the past year, the industry has seen the rise of different digital platforms such as pay-per-download, unlimited music streaming, and subscription-based music services. Legal streaming services such as Gaana.com, Dhingana.com, Saavn.com, and Flyte.com as well as various mobile applications were also launched.

Available since February, Flyte.com has enjoyed good response from music lovers in India. "Music downloads continue to grow at an impressive rate," said Sameer Nigam, vice president of digital business at Flipkart, which operates the online music store. As of September, the site had sold over 600,000 tracks.

Snehal Shinde, Dhingana.com's co-founder and CEO, said over 11 million active visitors from over 220 regions across the globe access the site every month. It saw a growth of 300 percent in 2011, he said in an e-mail interview.

"We want to build the biggest social music streaming service for the Indian market, on the lines of Pandora and Spotify. Our target customers are those who love Indian and Bollywood music," Shinde added.

In November, Saavn.com launched Saavn English offering over 250,000 songs from label partners Sony Music Entertainment and Universal Music Group.

Digital music in India was worth INR 5.2 billion (US$95 million) in 2011, accounting for 58 percent of the music industry's overall revenue which is expected to touch INR 14.3 billion (US$261 million) by 2016. Digital revenues comprise sales from music consumed either via a mobile handset or the Internet, with mobile contributing roughly 90 percent of total sales.

Two factors are driving the consumption of digital music via devices. First, India's Internet penetration rate is growing and expected to increase from 88 million active connections in 2011 to over 400 million by 2016. Second, adoption of mobile devices is on the rise, with a growing number of consumers accessing the Web through their mobile phones.

New business models
Digital music is available essentially via two models today: as free services, relying on advertisement for revenue; and subscription-based services, which are free from advertisements.

Dhingana.com, for instance, operates on advertising as its main revenue model. Shinde said: "We expect majority of our revenues to come from online advertising such as display, audio, and video ads. We plan to add paid subscriptions and downloads, which will contribute further to our revenue."

The growth potential for digital music is significant. India currently has around 100 million Internet users, which is growing at 40 percent year-on-year, and 50 million smartphone users which is growing 40 to 50 percent.

Some market players such as Flipkart.com have partnered music labels. "We have tied up with over 200 domestic and International labels currently," Nigam said, adding it inked revenue-sharing deals with most of its music partners.

Similarly, Dhingana has direct licensing deals with over 500 music labels. "Music streaming is only in its infancy in India. There is scope to develop a great product and grow our user base by manifolds in a short period of time," Shinde said.

The advent of 3G and increase in mobile Internet usage have also led to new apps for music lovers. Times Music has several mobile apps running on BlackBerry, Android, and iOS. Nokia's Ovi Music service is also popular in India. Music retailer Saregama India, for one, has been closely working with mobile operators such as Vodafone and Airtel to launch music apps.

Nigam said: "Mobile as a platform is a critical part of the digital music scene, since more and more music is being discovered and purchased via mobile devices." Flyte also launched an app for Android which enables empowers users to search and buy music directly via their device.

The Flipkart executive noted: "We believe there are two ways to check piracy. One is enforcing the law [and] the other is to give consumers access to affordable digital content."

With movie soundtracks a mainstay of India's music industry, contributing some 70 percent to overall revenue, the trend toward digital music will further boost demand for Bollywood and regional film music.

Shinde said: "Consuming digital music is going to be a daily activity for a majority of Indians in the next few years, and streaming will be the best promotional platform for all movie production houses and branded advertisers."

Swati Prasad is a freelance IT writer based in India.

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