Music companies ferret for new revenue sources
Battling the problem of stagnant physical music sales, music companies are positioning themselves as music entertainment companies. Players in the industry like Saregama, Sony BMG and Universal Music are waking up to new revenue streams like music-based value additions like mobile ring tones and full song downloads.
Simultaneously, the entry of content aggregators like Mauj Telecom, Hungama and Yashraj Films into the music domain points to the highly competitive scenario that the industry will witness in the next few years.
A report by Soundbuzz, PricewaterhouseCoopers and IFPI says that the year 2007 will witness the digital music industry surpassing physical music in sales. So, for total sales of Rs 4,100 crore in 2009, Rs 3,600 crore would be contributed by mobile music, while physical music will have a share of only Rs 500 crore, the report says.
Recent surveys have also shown that VAS like ring tones and ring back tones are a major hit with the consumers and are opening up substantial revenue streams for the music companies.
The home video segment too has emerged as a significant revenue earner. Shridhar Subramaniam, Managing Director, Sony BMG Music Entertainment, said the international music and home video segment contributes to 20 per cent each of the total revenues, while a major chunk of 40 per cent comes from film and local music.
For Universal Music, the home video segment contributes just around 5 per cent. "The year 2006 was an exceptionally good year for the industry with a big list of blockbusters like Krrish, Fanaa, Rang De Basanti etc," says Subramaniam.
Music has become more broadbased and there is a transformation towards music entertainment companies. Eros, an overseas film distribution company, has also started a company focused on the music segment. Conversely, erstwhile music players have extended their spectrum to film production. One example is Venus, which has entered film production. Saregama too has ambitious film and television plans.
Another key trend is that with the proliferation of mobile phones and digital media, revenues are earned not by selling a single package but small pieces sold in large quantities. Thus, we see all kinds of ring tones, call back tones and SMS tones collectively contributing to revenues for the company. Gone are the days when a single CD used to bring the entire revenue.
Sony BMG introduced the MP3 format to check piracy. According to Subramaniam, though others had forewarned the company about the risky decision of releasing DVDs of Rang De Basanti before releasing its CDs in the market, Sony BMG went ahead and the move proved to be profitable for the company.
The mushrooming of FM stations has been a boon to the music industry, Subramaniam says, especially for regional music. He also believes that good hit music will now have deeper penetration, thanks to the numerous FM stations coming up in each state.
On an average, Rs 1,300 per hour is paid to the music company for its properties used on the FM station. This rate shoots up for the prime time. He is also laying a big bet on overseas market and also artist management as an avenue. He says that the revenues from publishing in India are miniscule unlike abroad.
Saregama’s decision to re-enter film production has also come as a surprise. However, Chief Creative Officer, (cinema and television), Saregama India Ltd, BR Sharan, clarifies: "By producing films, we will have a say in 'producing' music, too. This is a huge step forward from merely acquiring music."
Since TV has taken over as the new popular entertainment vehicle with a huge reach, Saregama is exploring music channels, music programmes on general entertainment channels and other such options, so that the new sounds that are created get maximum exposure.
There are a few challenges before the industry as well. As Atul Churamani, Vice President, Artist and Repertoire, Saregama India points out, "There are two main challenges - piracy, which gets easier with the advancement of technology and monetisation which gets more difficult as the media fragments and more consumption formats emerge." Also the unfair revenue sharing terms in favour of the operators remain a concern.
In the future, we may also see user generated content for radio and companies like Sony BMG tying up with regional players for bringing better and relevant music for the consumers’ ears. Such licensing agreements would be frequent.
Slowly, music is ceasing to be just music. It is on its way to become a lifestyle product and organised retail has brought about good integration with music retail chains like Planet M.