FICCI-KPMG-Report-13-FRAMES

128
The power of a billion: Realizing the Indian dream
Globally, online and mobile music revenues have witnessed
strong growth rates while physical music sales continue to
slide.
Digital Sales
Digital music revenues increased 16 percent to INR 6.0
billion in 2012. Currently at 57 percent, the share of digital
music sales is expected to rise to 72 percent by 2017. 3
There are essentially three types of digital music content on
offer legally:
• Ringtones and Caller Ring Back Tones,
• Music streaming and
• Downloadable digital music
• Music bundled with consumer devices like phones
Further, digital music is consumed either via a mobile
handset or the Internet. Consumption of online music
has seen consistent growth during the last 2-3 years
and the mobile segment has grown rapidly. Currently,
mobile contributes around 85-90 percent of total digital
music consumption in India 2 . Moreover, in 2012, mobile
Internet surpassed Desktop Internet traffic in India, as per
StatCounter Global stats. The explosion of Smartphones
and high speed 2G and 3G connections in urban markets
has largely contributed to this. Currently, there are around
40 million internet enabled smartphones and tablets in
India 3 . With the launch of new services in the industry such
as Flipkart’s Flyte and Apple’s iTunes, we will see online
music growing further. Such services are also expected to
enhance content delivery.
“
When it comes to content, there’s room
for everyone – and digital breaks down
barriers. This is how you get an independent
artist, like Yo Yo Honey Singh to formally
entrench Bollywood charts; and also get a
regional song, like “Kolaveri Di,” onto the
list of Top 15. Heavily promoted content will
always do well, but now we’re starting to
see high quality content that may how have
the same level of promotion gain traction
through a groundswell of interest.
“
- Paramdeep Singh
Co-founder and Managing Director,
Saavn
Physical music struggles for survival
Physical music continues to de-grow in terms of sales as
well as share of industry revenue due to consumers shifting
to newer technology platforms (online and mobile) and
continued piracy. The industry witnessed a decline of 12
percent Y-o-Y in 2012 3 in the sale of physical music formats.
While physical music sales have been overtaken by digital
music sales, the physical retail model still exists in the
smaller towns and pockets of metro areas, where internet
penetration is low and people still depend on physical
formats like CDs for music. 4
© 2013 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated
with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Desktop Internet vs Mobile Internet traffic
Source: StatCounter stats tool
02. ‘Online Music Industry in India: A look at Past, Present and Future ‘, Nextbigwhat.com, November 2012
03. KPMG in India analysis
04. Industry discussions conducted by KPMG in India
“
The share of physical sales is declining out
of the overall music pie, but it is not dying.
Physical medium exists in many parts of
the country, especially in tier 2 and 3 cities,
where people still buy CDs and DVDs.
Physical is here to stay at least for another
three to four years.
“
- Devraj Sanyal
Managing Director,
Universal Music India & SAARC
Poor sales volumes have pushed retailers to reduce
the depth of their catalogue. For instance, Planet M’s
entertainment portfolio now constitutes only 20 percent
of its total sales and the company expects this to shrink
further to 10 percent. Regional content players have been
the worst hit as the SKU realization of CDs is much lower
than the Hindi film music or international albums. Planet M
has set a base SKU realization of INR 150 as a criterion to
stock inventory thereby, removing most regional content,
which is usually priced between INR 50 to INR 99, from its
catalogue 4 .