Companies go digital as music sales sink


MUMBAI: With the influx of digital music downloading and easy access to pirated music at dirt cheap rates, retail stores have suffered a big blow with the dropping sales of compact discs.


A recent survey by Soundbuzz revealed that in the last few months, Indian music lovers acquired more music on their mobile phones than by purchasing music CDs and cassettes.


While CD sales are on the decline, it is ‘mobile music’ and digital distribution of music that continues to be the key growth drivers of the industry, so much so that it is estimated that they will soon overtake the conventional music industry in terms of revenues.


What�s more, this year India will become the second largest market in the world to see digital music sales outpace digital sales. However, according to estimates by PricewaterhouseCoopers, the size of the music industry in 2006 was Rs 7.2 billion (Rs 720 crores) and is projected to grow only marginally (four per cent) in the next five years to Rs 8.7 billion (Rs 870 crores) by 2011.


At a time like this, most retail stores have been thriving entirely on music related products. So what is the picture of their sales graph? Planet M operation business head Amod Naik says, "Undoubtedly, the sale of music CDs is on a downhill and we are running losses because of this development. We suffer mainly in the top 10 charts of Bollywood, however pop albums are doing okay."< Page Break>


Naik believes digital music downloading is the norm today and very soon CDs will be knocked out of the market. But that has certainly not affected the sale of home videos. "Our DVD sales have grown by leaps and bounds and we are very happy with the returns," states Naik.


Landmark, primarily a book store, also deals in music merchandise. Landmark store manager (Andheri branch) Wayne Shackleton, admits that there has been a dip in sales, but they haven’t reached an extreme low. "Though not drastic right now, the sales have gone low. The cassettes are already pass� and we don’t stock them in our stores," affirms Shackleton.


Though digital music is on a rise, Shackleton feels that loyalists will still crave for quality. "Music buffs come to our store for catalogues along with their favourite music CD, which is not available anywhere else, not even on the Internet. So that’s one thing that can keep us going," he adds.


Music companies are weighing their options, which will help them tackle this grave issue. "Nothing much can be done against piracy. The music companies will not reduce the MRPs and in turn we get affected technically. We are looking at alternate ways to sustain our profits. We will now diversify into other areas as well," says Music World business head Aditya Tibrewala. < Page Break >


The number one music store in the country, Planet M is already gearing up with new plans, which will be unveiled before this Diwali. The idea is to walk with the trends flowing in. Explains Naik, "We will install kiosks in our branches and customers can download the songs available by shelling a particular price." Apart from this, the music shop has decided to concentrate more on other music related products like iPods, video games etc.


Like retail stores even music companies are looking at various options to keep abreast with the latest developments. T-Series will soon be launching web stores for music downloads. "Instead of buying pirated versions of poor quality, one can opt for original music on our website," avers T-Series vice president marketing and promotions Vinod Bhanushali. However, he denies the reduction in the supply of music CDs to retail stores. "There are times when these outlets do demand for less CDs in a particular season. But our digital downloading plan is not intended to clash with our distribution of CDs," he explains.


Universal Music Group managing director Rajat Kakar analyzes this issue as a format changing period. Says he, "Cassettes took over records and then CDs followed. Digital music is a little ahead of physical CDs, which is on a slight decline." But according to him it’s the cassettes, which are on their way out and are affecting the market, while the CDs are booming. "The decline in the sale of cassettes has not compensated with the rise of CDs, that’s the reason everyone feels CDs will be out of market soon."


Kakar believes that fighting piracy is out of the question and Universal Music is not contemplating a change in the pricing of their products. "We can’t slash down the MRPs as we will not be able to compete with piracy," Kakar states.< Page Break >


Universal has been partnering with iTunes, Napster and Soundbuzz to be actively involved in digital downloading. Adds Kakar, "Our main target is mobile phones. So we have tied up with Hutch and Airtel, which is bringing in great returns."


The growth of the Indian music industry in the coming years will be driven by distributing it over the digital medium rather than the current physical medium. To garner this robust growth potential, the current music formats will have to be digitized for appropriate content monetization. However the pace of this change required for this purpose by the Indian music industry has been slower as compared to the developed countries in the rest of the world.


As far as statistics go, the music industry in the US has witnessed a mammoth loss in the sale of music CDs. There has been a considerable drop of 13 per cent since 2005 whereas digital music has augmented by 60 per cent.


Overall the Indian music industry is projected to increase by four per cent over the next five years, which is the combined growth of physical sales and share of revenues from digital music, which will be distributed via mobiles and online music sales.


Hence the time is apt for Indian music companies and retail stores to wake up and smell the coffee and gear up for the digital revolution.