FICCI-KPMG-Report-13-FRAMES

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140 The power of a billion: Realizing the Indian dream © 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. “ Pricing parity, technology and transparency are going to be the three growth drivers for the industry. We first need to have legal music available at affordable price points. Only then will consumers shift from consuming pirated music to legal stores. The next wave of growth will come from newer platforms and technology. New streaming models, download models, phone-to-phone sharing will enable better music discovery and consumption options. Players who are technologically smart and innovative will flourish. We also need to bring in greater transparency in music business. Robust cyber laws are the need of the hour. “ - Devraj Sanya Managing Director, Universal Music India & SAARC Digital threat to production houses The growth of YouTube as a digital video sharing platform has allowed amateur and professional artists alike to showcase (and often monetize) their content, reaching viewers directly. This has adversely impacted the relevance of traditional production houses, who rely upon digital music for 30 percent of their revenues 79 . Significant dip in revenue from Caller Ring Back Tones (CRBTs) The Telecom Regulatory Authority of India’s (TRAI) directive to service providers for obtaining a confirmation from consumers for activation and renewal of value-added services have severely impacted the industry’s digital revenues from CRBTs. Post the TRAI guidelines in 2011, the industry has witnessed a 40 -50 percent dip in CRBT revenues and a similar dip in mobile radio, video streaming and other offerings in 2011. Industry participants anticipate further declines of 60 – 65 percent in CRBT revenues once all telecom carriers comply with the TRAI directives. “ The Mobile economy for the past several years gave a growth in revenues for the Music Industry. This year, driven by the TRAI directive, there has been a considerable drop in some services, such as CallerTunes etc. The paid customer base has shrunk from 80-90 million subscribers to 40 million in less than a year. There is still no clarity on next steps. There is a need to develop a quality music service across devices and generate more out of mobile internet through micro transactions. Advertising driven models will not work for the industry. “ Scan the QR code to hear more from Neeraj - Neeraj Roy Managing Director and CEO, Hungama Digital Media Entertainment One billion dollar dream of music industry - Opportunities and challenges With proliferation of smart devices and internet penetration, the digital and online consumption is steadily increasing in the country, which today stands at second largest internet user base in the world. The real task at hand for the Indian music industry is how to grow the music business and set a real goal of a billion dollars in annual revenues to the music industry that we can achieve in the next decade. The fifth year of flat or declining physical sales and revenues has directly resulted in a reduction of artist videos, new talent promotion, investments and job losses. The only way to revive investments in new artists and create more jobs (in music and VAS industry) is by increasing the revenues of the music business. Until few years ago, it was possible by to sell more albums and at a higher price but the steady decline in CD sales explains why that is no longer a possibility. The current estimated value of the Indian music industry revenue is less than USD 200 million (Approximately INR 1000 crores) whereas the global music industry revenues are estimated at USD 23 billion in 2012 (as per Recording Industry Association of America). Based on the declining CD sales, physical sales will continue double-digit declines in units and even greater declines in value. The silver lining is growth of digital albums which will continue to grow in unit sales. However, gains in digital sales will continue to be erased by declines in physical sales. Considering a modest inflation at around 9 percent a year, current revenues cannot support a sustainable music business. Thanks to recent Copyright Act amendments placing unprecedented fetters on the content owners to negotiate a fair value for their contents, TRAI guidelines hampering the marketability of VAS content and unabated rise in internet piracy, the music business has never been more risk prone than it is today. The good news is that India is at the threshold of digital revolution and the growth curve is yet to arrive. Now is the time for the music industry to focus its efforts on developing a new paradigm for music revenue creation. 79. IFPI report 2012 Neeraj Kalyan President, Super Cassettes Industries Ltd
The power of a billion: Realizing the Indian dream 141 Luckily, non-physical music revenue is growing and is the only kind of revenue that can support a vibrant sustainable music business over the long term. The industry needs to be bullish on the following for long term gains: • Music synchronization license revenue is still a neglected child and needs a little pampering by music labels. • Advertising-revenue sharing with video search platforms such as YouTube and Vevo generating growing revenue with others like Dailymotion joining the party. • Music cloud lockers such as iTunes Match, Amazon Cloud Drive, Google Music downloads, Xbox Music and Samsung Music Hub are yet another potential revenue for the music business but each one has its’ own pros and cons. • Music performance revenues is still a very under rated vertical in Indian and needs to be nurtured for long term gains. • RBT subscriptions and streaming services remained the master of the digital economy but downloads revenues are clearly important pieces of the revenue pie going forward. • Music streaming subscription revenues are going to be another major growth area in the future. Proliferation of legitimate internet platforms such as iTunes, Hungama.com, Flipkart, T-Series.com and Ovi etc., which started offering licensed content for downloads to the consumers, is playing an important role in seeding the paid music eco-system. Other music streaming services namely Saavn, Dhingana, Gaana, in.com etc, although licensed by the music industry, are offering free legitimate music to the consumers but are solely dependent on ad supported revenue models and sustainability of such a model over the long term is a big question mark. Although combined music-streaming services in India may only have 3 to 4 million music subscribers today, 30 to 50 million are clearly possible in next 8 to 10 years. At 40 million subscribers at USD2/ month (considering currency depreciation and inflation in next 8-10 years), the industry can nearly achieve USD1 billion in gross revenues (Approximately USD 400 million in net revenues after taxes and revenue splits with service providers) from online music subscription services alone. However, in order to sustain revenue growth in the streaming vertical, industry will eventually have to shift towards a subscription based eco-system in a planned and sustained manner as free music is a very dangerous thing and we would not like our children grow up believing music is for free. Globally there are only an estimated 300 million music buyers in a world of 7 billion people. There are 6 billion active cell phones and 1.2 billion smart phones 80 . 50 million new cars hit the roads every year. How can music subscriptions be bundled into as many of these 80. http://mobithinking.com/mobile-marketing-tools/latest-mobile-stats/a#subscribers subscriptions as possible? Just an average monthly subscription of only USD2 bundled into 3 billion devices would take global music revenues to more than USD70 billion from current USD23 billion and if Indian music can garner even 1 percent share of this global market in next 8-10 years, we are home. Before we embark upon this journey to achieve our dream of increasing pie size, a number of challenges need to be overcome. It will take an organized effort by the music industry and our technology, device and mobile service providers to make this dream a reality. All the music stakeholders from music labels, film producers, musicians and authors to singers, publishers, digital content aggregators and VAS service providers must organize now to build the business we all want. For example, T-Series has spent last year in setting the right foundation in terms of content digitization and meta tags, training the existing teams, getting the right people on board as partners, and putting the distribution pipes in place for seamless delivery in the future. Moving ahead, some of the priorities we will be concentrating on in coming years would be what you can do once you have everything connected, every license in place: solve the problem of discovery, micro payments and what people are going to be listening to next, and making sure that they can get that social signal in a way that is meaningful, exciting, and engaging and help increase the pie size. Integration of Social Media (Facebook, Twitter) and Video Search platforms (Youtube, Daily Motion etc) with download recommendations is going to play a pivotal role in nurturing the paid eco-system in the near future and today we are at the threshold of this metamorphosis. Building the correct and comprehensive metadata for better search and discovery is going to play the most important role for individual content owners and is the first stepping stone for the future success. Under reporting and complete reliance on platforms for revenue data is another challenge and unless the industry adopts a more robust B2C Content Delivery Network under direct control of the content owners likethe one designed by French technology platform ‘Digiplug’ for a major label in the West. Until then music industry will continue following the streaming / download platforms with a beggar’s bowl or alternatively demanding huge upfront guarantees which in turn may make survival of these services questionable leading the industry back into the rut. The Producers and Studios also need to rationalize the current unsustainable price for music rights which will help the music industry mitigate its risks and instead focus on increasing the pie size by channelizing investments in new technology platforms. The steep hike in music acquisition cost in recent times is only killing the goose which may lay golden eggs later. © 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.
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Acknowledgement We acknowledge the
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