With CDs in danger of going the way of the tape, receding into 'a relic of the past' territory, music labels are relying on an unlikely ally to pull them through — mobile phone handset manufacturers.
When Samsung launched its first dual SIM mobile phone in India, the reigning market leader — Nokia — was caught on the back foot. But even as the Finnish handset maker struggled to play catch up to technological innovation, it had spent years in the seemingly Quixotic task of tying up with music labels both global and local, viewing this as a potential revenue source. Nokia today speaks with pride about its extensive library: 7.7 million tracks across 22 genres. What it's less enthusiastic to talk about is the revenues from the store, but more on that in a bit. As of today, Nokia stands a better chance to distribute music in India, because of the reach it enjoys in the sub-continent — way higher than Apple's iTunes' music store, which had an official launch in the country only in December last year.
At least prima facie, music is a good bet for a mobile handset maker. According to a report released by KPMG early last year the Indian music industry achieved revenues of Rs 9 billion in 2011, registering a growth of 5% over 2010. The report also pointed to the continual shift of music from physical to digital formats. Jehil Thakkar, head of Media and Entertainment, KPMG India says physical music continues to decline as digital grows. "OEMs are working as a catalyst to help consumers get started on digital music," explains Thakkar. He feels there is still time for the ecosystem to mature as music libraries of OEMs continue to grow. Some of the music labels we spoke too were unanimous about the growth of digital music in India and the role played by OEMs in pushing this. R Madhusudhan, VP - digital music Sa Re Ga Ma says, "The biggest success has been achieved because of efforts taken by operators and device manufacturers. A lot of people are accessing music through mobile phones."
Nokia began this journey in 2005. It launched devices pre-loaded with music and claims to have tried to build this as a USP of sorts. While the popular snake game was the first piece of content it offered, the company decided music would be a better strategy for the future. Viral Oza, marketing director, Nokia India says "Customers are not happy with the quality of pirated music. They want access to genuine music which is of much superior quality." In its current avatar, the songs on the Nokia store are DRM free — making it easier to download and distribute. "You have to understand the 'wow' factor this gives youngsters. It highly improves the person's social currency," says Oza.
Currently customers, who purchase a Nokia device are offered free access to the store either for a period of three or six months. If customers want to continue, they can buy vouchers with prices ranging from Rs 50 for a week to Rs 250 for three months. Nokia is characteristically tightlipped about the extent of repeat purchase.
Sanjit Chatterjee, director marketing & strategy, Reve Systems, a mobile VoIP company is not too sure whether Nokia customers will come back after the initial free period. "Paid VAS is still not very popular. Unlike iTunes store which is more of a shopping portal where customers can shop for a lot of things including entertainment, Nokia Music Store is just music. So the stickiness is likely to be less," says Chatterjee.
However, Nokia's competitors are not ones to sit by idly. They are all forging agreements with labels and making songs part of their offering. Samsung has tied up with Hungama.com to make music available to its customers. A Samsung user can access music either through Samsung's WAP site or a new service under the 'My Music' vertical. Unlike Nokia, all songs downloaded by a Samsung user is paid for and not free, unless offered as such by the content provider. Sarfaraz Nawaz Alam Borah, lead -mobile applications & services, Samsung Electronics says, "Our focus on music started three years ago and today about 30%-40%of our VAS revenues come from music."
Three months ago, indigenous brand Micromax launched 'Mymicromax.com' an entertainment portal which can be accessed through the mobile phone and according to Manoj Gupta, GM - VAS marketing, Micromax Infomatics, the portal already gets 10 lakh page views a day and 30,000 downloads of different kind of VAS including music. Gupta says today 17%-20% of their total revenues come from VAS which includes ringtones, music videos and music tracks. However, Gupta says for the space to mature a lot of support is required from the music providers as well as the mobile phone operators. "Music labels ask for a minimum guarantee, which is difficult to give. We are pushing for a revenue sharing model, but there is still some way to go," he shares. Among mobile operators, Vodafone is the only one to offer good terms for partnership says Gupta.
Sony Mobile is also going the pre-loaded way. While the company refused to share its actual plans, Sony has already outlined a strategy whereby its mobile phones will harness the equity of all its devices including Walkman. Sources close to the company claim that by April this year, Sony will launch a couple of handsets with pre-loaded music.
Not content with being passive suppliers of music, mobile phone companies count among the major backers of festivals. The soon to be held Fly Music Festival featuring everyone from dinosaur rockers like Deep Purple and the surviving members of The Doors to relatively recent artists like KT Tunstall and Mastodon is being sponsored by Micromax. Nokia claims to be going one further creating Nokia Music Theatre complete with an album named Asha out on Universal Music.
According to KPMG's Thakkar, for monetisable digital music to get a major push, there needs to be a widespread rollout of 3G and 4G networks. "Data speeds will increase access to music and impulse purchase will go up," predicts Thakkar.
Similarly he says there has to be revenue sharing between telcos and content owners, because at this point the labels have no choice but to approach handset manufacturers and operators to distribute digital music. Smartphones that enable connectivity to the internet are further likely to push adoption says Madhusudhan. Today for Sa Re Ga Ma, more than 80% of sales come from digital music and only 20% from physical formats. He admits that partnerships such as the one with Nokia also help curb piracy to a great extent. And that's the unfortunate truth of the business: labels may soon have no choice but to partner handset brands. The only other option is a disturbing trend that's rife through small town India at present. Young people armed with enormous memory cards cram them to bursting with several gigabytes of pirated music, obtained from a friendly neighbourhood mobile shop all for a paltry sum; an arrangement in which neither label, operator nor handset maker stand to profit.
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