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e-BIZ
MODELS
The Sound of e-Music
Traditional Music Companies will need to adapt,
or music on the net might turn out to be their swan-song
By Nita Jatar
Kulkarni
This is much more than Kuch Kuch Hota Hai. Stare hard at your music system. And then glance at your PC, or even your mobile. Doesn't matter if you sing out of key, this is the line you should be humming: the business of music will never be the same again. Quite simply, the Net presents the greatest technological advancement in the $38.10-billion global music industry since the phonograph. With technology being the driver, the music industry is spearheading an e-Commerce revolution.
It all begins with something called MP3--a file format that compresses audio into easy-to-share computer files without sacrificing sound quality. MP3, a public-domain format--along with proprietary formats from Microsoft, Real Networks, Liquid Audio, and Apple Computer--has already begun transforming the way the music industry functions. Now, thanks to the Net, the device that records music also stores and distributes it.
As of now, anyone can use compressor software like MP3 to copy music from a compact disc to a hard drive, and then put it up on a Website. Surfers can download this music, and listen to it using basic audio players, like WinAmp, MusicMatch's Jukebox, Real Networks' Real Jukebox, Microsoft's Media Player, or Sonique by MediaScience, which can also be downloaded for free. This music can then be transferred to a Walkman-like portable digital player. There are already half-a-dozen MP3 players in the US market today.
THE BATTLE FOR SURVIVAL
While the music industry as we know it today cannot fight technology, it is waging a grim battle to protect its raison d'être. The Net could mark the beginning of the death of the store-bought, record company-packaged CD or cassette. Copyright protection, then, is the hammer the industry is using to break down the thousands of sites offering illegal downloads of music. Music companies will, per force, recover the investment they have made in developing and marketing artists. However, the very act of downloading music is not illegal: you can download legally if the site has the licence.
Globally, there is no universally-recognised standard for intellectual property protection, although a consortium of music companies are working through the Secure Digital Music Initiative (SDMI) to create specifications for secure downloads of music on-line. Says Shridhar Subramaniam, 36, Director (Marketing), Sony Music India: "Doomsday predictions of the record companies falling by the wayside will never materialise. The money which the global music industry is making today is going to be made, one way or another."
While that might, indeed, happen, the tune will change for music companies, artists, and the entire value chain that delivers a music product to you: the customer. The extent of this change remains to be seen, but no one's taking any chances. In anticipation, there's consolidation, with the Big 6 music companies already down to 4. In 1998, Universal Music Group took over Polygram Music. Early this year, AOL Time Warner announced plans to merge with the EMI Group.
And then there's Kuch Kuch Hota Hai. The original soundtrack of the movie netted Sony Music India Rs 60 crore in revenues in 1998-99. KKHH was the highest grossing album that year for a Rs 1,700-crore music industry, growing at between 2 and 5 per cent. For a domestic industry where music-cassettes are the norm, piracy abounds, and the hit rate for a break-even success is as low as 10 per cent, the Net seems very far away. What chance does the Net stand if just 5 million CDs were sold in all of 1998-99? Answers Kalyana Sundaram, 35, Director (Programming), MTV India, who has seen 10 years in the music industry: "This latest craze for digital music is just a passing phase in the country."
Well, music does lend itself to the Net, almost naturally. And there are huge advantages for players in the music business, be they artists, music companies, retailers, and even support functions like marketing publicity and information. This is despite the Net being in its infancy in the country--the usual combination of low PC penetration and inadequate regulatory mechanisms to enable e-Commerce. And despite the lack of a sizeable, mature market at home. The Net, remember, destroys boundaries.
With an eye on the NRI market--prosperous, Net savvy, and eager to pick up Indian music, be it classical or film--a host of music companies and on-line music stores are selling CDs and cassettes over the Net. If music is fuelling e-Commerce, that's because it makes sense. Music is the third-largest purchase item on the Net, after computers and books. It is also easy. "The purchase of music is a personal and informed choice, with people being aware of the genre of music that appeals to them, the artists, and the albums," points out Rohit Varma, 40, Vice-President (Brand Marketing), Rediff. com, which has a hugely successful on-line music shop. The Net facilitates this search. And with many on-line music shops offering discounts and customisation, buyers are being lured to the Net.
That's what attracted the Bangalore-based Fabmart.com, India's first on-line music store. Says V.S. Sudhakar, 40, Managing Director, Fabmart.com: "We already have a strong consumer-base of 10,000 repeat buyers, and 7,000 have already bought. The future looks good." Fabmart, which also has an arrangement with the RPG Group's HMV, is planning to offer exclusive music to its customers through digital downloads. Says Sudhakar: "I feel that Indians in India are as important as those abroad, and they have the money power too. After all, what does it take to buy music?"
The problem is that Fabmart doesn't yet have warehousing facilities or a partner abroad, a necessary pre-condition to selling in global markets. "Once we have the infrastructure in place, as well as the licencing arrangements, we will enter the overseas market, which will always be a big focus area," says K. Vaitheeswaran, 36, Vice-President (Marketing) at Fabmart.
THE FOREIGN SCORES
Rediff is already focusing on the overseas market, and so is Saregama.com, which is run by the London-based Saregama Plc. Incorporated in 1999 as the international music company of the RPG Group, it has a full-fledged warehouse and e-Commerce fulfilment centre at San Jose, California, for servicing the US, Canada, and the Carribean Islands. Saregama is also planning to open a chain of music mega-stores in the UK and the US. Thanks to the huge content of HMV, Saregama has as many as 1,300 audio CD titles with additions on-line.
Finally, there's Music Today--part of the India Today Group which publishes BUSINESS TODAY--which was launched as part of the India Today Group On-line as far back as August, 1997. Soon, Music Today will have its own portal. Says Chander Rai, 56, Executive Director, Music Today: "The potential for a specialised niche label like ours is high as Indian classical music is a fad in Europe. We will be servicing our international orders through C&F arrangements in each country.`' Indeed, classical music is a big catch with the tradition-hungry NRI market. The lesson here for Fabmart--and any other Indian on-line music store--is that content, coupled with delivery, will hold the key.
Sony Music, on the other hand, has content and distribution, but it runs the risk of running foul of the traditional distribution channel. While the global giant, Sony Music, is already into e-Commerce, its Indian counterpart has recently launched an exclusive site. Listening to music--a.k.a. streaming, where a music file is sent rapidly over the Net, and listened to as it arrives, or `streams' from a server--and buying on-line will be possible, but there will be no commercial downloads as of now (except in the case of new artists). However, parent Sony Music's site allows downloads. "One has to go on-line, get into e-Commerce, and, ultimately, allow downloads as Net start-ups are getting into it," says Sony's Subramaniam.
Streaming, which doesn't give CD-type quality, is popular with radio sites, which are springing up by the hundreds. All India Radio on the Net offers live audio. There are a host of other multi-lingual, multi-channelled Net radio sites--musicurry.com, indiafm.com, aiir.com, indiaradio.com, radioindia.com--all catering to the Asian Indian community worldwide. By and large, they offer a mix of live broadcast and playback on demand. Not all these sites are into e-Commerce or digital downloads. But this is the route they will inevitably follow, as other Net radio stations are doing it.
Even TV music channels want a piece of the action. MTV Asia On-line sells CDs and offers streaming to surfers. MTV India will go on-line in a few months. The channel is already working with different music labels like TIPS, T-Series, Polygram, and Sony. In the past year, it has also brought out half-a-dozen compilations, like the latest MTV Fantastic Females, and MTV Household, which is a brand extension of the show about Hindi films and music. While Sanjeev Hiremath, 40, MTV's Director (Merchandising), acknowledges that selling these CDs on-line is the next step, he feels that there are still "too many loopholes" before selling on-line becomes a lucrative proposition. As video is the next revolution, TV music channels could well play a major role in the Net Age. Viewing the activity generated by radio sites and TV music channels and Net start-ups, it is no surprise that there's a frenzied scramble of music companies for on-line retailing.
THE DISCORDANT NOTES
There are problems, of course. A group representing thousands of record stores in the US has announced that it was suing Sony Music Entertainment for allegedly forcing retailers to sell CDs that drive customers to Sony's on-line stores. Ironically, global music giants like Sony are finding themselves on both sides of the courtroom--seeking to protect their ownership rights from on-line competition, as well as defending their initiatives to develop on-line music channels!
Ready or not, music companies have to prepare for the implications of the Net as a distribution- and delivery-channel, which will mean a blurring of lines between recording and retailing companies. The good news is that retail stores which sell on-line will have more space and can save on handling and distribution costs. Shops might have their own Net kiosks! The danger: unless the retailers and the music companies adapt, competition from Net start-ups could well pull the rug from under their feet.
Yet, a not so uncommon belief is that the Net boom is yet to happen in India. "We will be waiting and watching to see how the Net develops in India," says Brian Tellis, 40, CEO, Groove, a well-known music shop in South Mumbai. There are no plans to go on-line at present. However, Tellis--who feels it will be at least 3 years before the Net reaches the middle classes--admits that he is looking at options whereby Groove might sell through other sites.
Arch-rival Planet M will be putting up an independent Website within a month. So will Times Music. Both will also be available to consumers at a shopping site to be launched by Bennett, Coleman & Co. to go on-line any day now. "The Web is like a one-stop shop," avers Rini Adhikari, 26, Manager (Direct Marketing), Times Music, "and convenient for those who live in small towns where there aren't many music shops." "These are early days," adds Sunil Rajshekhar, 45, Director, Times Interactive, "India has to go through the experience of shopping malls first."
While the Net presents a dream to artists--of them being able to present their work to a wide, boundaryless audience--some sort of filter is bound to come into place. The sheer amount of free downloaded music available on the Net means searching for quality among the din has become tougher. Sites likes Soundbuzz.com--managed by Sudhanshu Sorronwalaa, former MTV South East Asia Chief, it aims to be one of the first on-line music distributors focusing on South East Asia--hope to be the filters while offering space to independent labels and unsigned artists. If they hope to discover another star, the Web makes it easier--and tougher.
For now, the new medium is offering convenience to music lovers. The surfer can gather the latest music news, tour dates, and information about artists on-line. There are music chat-rooms too. There are even sites where you can connect a musical instrument to a PC and jam with others around the world!
Almost everything can be personalised. At Musicboulevard.com, customers can make their own CDs by choosing from hundreds of songs. At MTV Interactive, users will soon be able to create personalised radio stations that mix genres, eras, and artists. John Lennon's Imagine might be the opening act for a Ravi Shankar performance. Imagine! |
