In India, music is considered as one of the easiest and most accessible forms of entertainment. In conjunction with global markets, India has a thriving digital music industry with a rise in the number of digital delivery platforms and massive changes in digital consumption habits. The overall music industry in India has grown to Rs. 10.7 billion in 2014 at a Compound Annual Growth Rate (CAGR) of 5.5% only over the past four years.
While the digital music segment in India has been dominated by Caller Ring Back Tone (CRBT) in the past few years, new formats like streaming and downloads are getting high traction among consumers. Currently, downloads and streaming contribute almost equally to the overall digital music industry revenues, however, the streaming revenues are growing much faster. Globally as well, download revenues have seen a fall. iTunes saw a fall of around 13-14% in 2014 from music downloads sale worldwide, at the same time streaming revenues saw a major jump.
Digital music industry ad revenues are expected to mirror the growth rates to be seen by total digital ad revenues in India by 2020. These revenues would come majorly from display ads followed by video and audio ads. At the same time, the paid subscriber penetration among online music users is expected to reach 10-15%. Contribution from digital music segment to overall Indian music industry revenues is expected to grow from 55% in 2014 to 72% in 2017. Further, with that growth digital music industry revenues including streaming, downloads, other formats revenues, subscription, and ad revenues are expected to cross Rs. 31 billion by 2020.
The popularity of music among Indians can be corroborated with the number of successful music channels on Indian television. There are different channels which play different genres of songs catering to multiple subcategories of consumers. 9XM tops Indian music viewership. The Indian version of MTV, MTV India, focuses on music, reality and youth-centered programs. It features music encompassing all genres of music which has enlisted it amongst the most successful and popular music channel of the country. VH1, ETC and channel V are some of the other popular music channels in India.
With access to compatible multimedia capable devices i.e. smartphones, tablets etc. and improved network bandwidths (3G, 4G coverage), a completely new generation of online music listeners has emerged in India. There were an estimated 27 million online music users in India in March 2015. The number of online music listeners is expected to grow to 273 million by March 2020. Most of this growth would be driven by youth in the age group of 18 to 35 years and almost 85% of these users would access the music through connected mobile devices. 29 This would be driven by the preference of consuming the music services anytime, anywhere.
The consumer traction for on-demand music is more than promising and players are using a mix of business models for monetizing this opportunity. Two most promising models that are emerging are ad-supported content delivery and subscription for services. There are global examples of both ad-supported (Pandora) and subscription (Spotify) models that have created large scale of operations.
Current penetration for subscription music services in India is less than 1% among all online music listeners. Going forward it is expected to increase as the propensity to pay among the customers for using premium services increases and the access to various payment mechanisms improves.
At the same time, leading brands will factor mobile as a key platform to their brand advertising strategy and plan for the year with allocations to mobile channels that can create an immersive brand experience.
India will see the evolution of the ecosystems around both subscription and ad models; however, most of the music service providers are adopting hybrid models. These players are providing a huge music library for free to the consumer to generate traffic and monetize through ads. While providing select content or services to charge subscription premium.
Digital music industry challenges and player initiatives
As monetisation of digital music is under evolution, cost of serving for these services also poses a challenge. A large part of the digital music industry revenues goes to content labels and rights publishers, thus these services require very high scale to fund the operational costs. Most of the players are coming up with innovative models to acquire customers and scale up fast. Saavn has partnered with e-commerce player Snapdeal, Gaana partnered with PayTM while Hungama tied-up with Aircel 35 for customer acquisition leveraging the cross-selling opportunity.
Piracy is another area which hinders the customer’s willingness to pay. However, the ease of access and popularity of digital platforms like Gaana and Saavn with younger generation has helped reduce the piracy to some extent.
“The biggest trend emerging in the music industry in India is that consumption is rapidly shifting to mobile devices. At Gaana, over the last one year, we’ve seen accelerated growth in adoption, engagement, and consumption on mobile devices. The growth of streaming services is indicative of consumers preferring legitimate streaming over pirated music, primarily, for a superior, convenient, multi-device hassle-free experience. Access to millions of songs, anytime, anywhere is the ‘in’ thing with today’s digital consumer. Digital streaming is the music industry’s biggest tool to combat piracy; it presents an opportunity to expand the overall pie for the industry. The digital streaming industry in India is in its nascent stages and as the digital ecosystem in India evolves, with higher smartphone and internet penetration, the category is expected to witness sharp growth over the next 5 years,” said Pawan Agarwal, Business Head, Gaana
Digitisation of old content is still a challenge. While new music releases are easily available in digital form, a large part of the old and popular music content is not yet digitised. However, most of this content is expected to be digitized within the next 1-2 years.
High dependence on carrier billing for subscription monetisation is another challenge and is expected to remain for the next few years. In India, the cost of collection through carrier billing is very high and ranges from 30% to 60% which directly impact the subscription revenues for online music service providers. Most of the players are focusing on acquiring subscriber through other payment modes like credit cards and mobile wallets. Differentiated service is another challenge. Players are experimenting with personalized offerings, curated playlists and genre-specific radios in absence of content exclusivity.
“The consumption of digital content in India is exploding right now, as Indians continue to opt for smartphones in the hundreds of millions. We’ll likely see our next phase of user growth come from Tier 2 & 3 cities across India. We are just getting started here,” said Mahesh Narayanan, COO, Saavn.
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