Indian consumers jazz up mobile music sales

NEW DELHI: More than most, the top honchos at India’s music companies know that declining physical sales in stores are no reason to feel the heebie-jeebies. And if they are listening to a song when the phone rings, they might as well carry on. Because it’s that ringing tone along with the handset that is coming to the industry’s rescue.

Indian consumers purchased more mobile than physical music in the first three months of 2007 and will buy almost nine times more mobile music than any other format by 2009, according to data sourced from PriceWaterhouseCoopers, industry associations, International Federation of the Phonographic Industry and Internet and Mobile Association of India.

“Whilst mature markets like Australia and the United States will see growing online music revenues at 1:1 online: mobile or greater, emerging markets like India will be virtually 100% mobile music-oriented,” the data says.

That’s reason enough for the music industry to turn da music on. Says a source at one of India’s leading recording labels, “New mobile services, attractive pricing and enhanced interoperability will drive sales in this format.”

Adds Sudanshu Sarronwala, whose Soundbuzz.com has done the number crunching, “Unlike in the US, India will witness mobile music sales offsetting the drop in physical sales.”

That assumption comes from the fact that projections show mobile music sales surging from Rs 1,026 crore in 2006 to Rs 3,600 crore in 2009, making up for the likely fall in physical sales from Rs 756 crore to Rs 500 crore. Total music sales will rise from Rs 1,782 crore in 2006 to Rs 4,100 crore in 2009. That should make the industry keep tapping its feet.

Even mobile operators feel that there is no reason for the music industry to lose sleep over falling physical sales. As for their own revenues, carriers are listening to the sweetest sounds. Says Vodafone-Essar MD Asim Ghosh, “It is very significant for us since it brings in additional revenues.” He, however, refused to divulge specific break-up figures.

In fact, observers say that music downloads may turn into a primary source of revenue for mobile operators. A PWC report, “Global Entertainment and Media Outlook”, issued last week forecasts that countries like India will make the digital shift faster than the US.

And the tune’s unlikely to change. Value Added Services (VAS) account for a little over 10% of the revenues of India’s largest mobile phone operator Bharti Airtel. Explains Bharti president (mobile services) Sanjay Kapoor, “Music is the second biggest VAS revenue grosser for us after SMS.” Bharti’s music portfolio is over 50,000 strong—which includes complete tracks, ring tones, ring-back tones and corporate jingles.

Adds Mr Kapoor on future prospects, “Music offers operators the ability to penetrate on a much larger scale when compared to SMS. Since it is neither handset- nor language-dependent, the market for music is larger. If you go by the success stories of Japan and Korea, VAS accounts for about 25% of the operators’ revenues. We can match this, especially considering that music is part of Indian existence unlike other countries.”

This is why some in the industry beg to differ when told that digital sales may affect physical sales. Says Mr Ghosh, “The music industry is big—their revenues from VAS will not be larger then their usual revenues.”

However, the chords are strumming something else. Says Mr Sarronwala: “The higher rate of handset replacements in India will surely bolster the growth of VAS.” His company’s conclusions show that almost 50% of all music purchases in Asia in 2006 were digital (either online or mobile).”

And he himself feels once 3G arrives in India, companies can look to many other entertainment-related revenue streams. The IFPI has already identified music videos as a revenue source for music companies. And it is not just private operators who are betting big on music.

Even state-owned BSNL, the third-largest GSM operator, has joined the fray. In fact, going a step further, BSNL, last week, awarded two contracts to Swedish equipment major Ericsson to host its multimedia services. As per the deal, Ericsson will host the mobile content download portal and a ring-back tone service for BSNL.

Ericsson will also be responsible for running the next-generation portal that will offer a variety of mobile content including music downloads, ringtones, video clips and other software applications. The second agreement is for hosted ringback tones, one of the most popular and highest revenue-generating mobile data services available today.

BSNL executives say the Ericsson deal was part of the PSU’s strategy to increase its revenues from the music and other VAS. So the Indian music industry need not fear the instruments of change. They only require a fresh tuning as, according to Mr Sarronwala, it is a format shift. In India your moby is your next jukebox.