Home » 05 September 2019 » “Value gap” remains a key challenge despite a 24.5% growth in the Indian music industry in 2018

“Value gap” remains a key challenge despite a 24.5% growth in the Indian music industry in 2018

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The Indian music industry contributes to 0.006% of GDP. India is the seventh-largest economy in the world and ranks 15th amongst the recorded music industries globally. For the Indian Music Industry to be one of the leading countries in the music market needs to overcome impending obstacles.

Understanding the Indian music consumer market needs deep delving into how these consumers engage with audio and video content. Also, the live music industry is poles apart than how it works in other parts of the world. That said, the landscape in the engagement of brands and user-engaging applications have taken a shape in India today.

Interestingly, Indian consumers spend 21.58 hours per week listening to music which surpasses the global average of 17.89 hours a week.

 

Where does the Indian music industry stand currently?

The Indian Music Industry has taken on to a hopeful trajectory in terms of growth and revenue in 2019. According to Economic Impact of the Recorded Music Industry in India, a report by Deloitte sized the Indian recorded music industry at INR 1068 crore (USD 156 million) in 2018. It grew 24.5% last year, keeping pace with digitisation and heavy internet penetration, streaming accounted for 70% of the industry’s total revenue.

The music industry has many partners that are powered by music. The transmission impact of the recorded music industry on its formal partner industries are TV broadcasters, Radio, Live Events, Films, and OTTs.

Music consumption on TV takes place through dedicated music channels, music-based reality shows and programs (Chitrahaar and Rangoli), commercial jingles, and background music.

The estimated revenue TV industry generates is INR 2,850 crore through music-driven content. This estimate is a subset of the total music-driven content on TV. However, this estimate does not include music-based reality shows (Indian Idol or Super Singer) which are tagged as reality shows and not music-based reality shows.

The revenue attributable to music-driven content is thus expected to be higher than the given estimate.

India’s radio industry revenue stands at INR 3,130 crore as of now. The size of the private FM radio industry in India as a proxy for the revenue of the radio industry that is attributable to music. This is estimated at about INR 2,170 crore.

India has more than 381 operational private radio stations, covering more than 106 cities and towns. The FM radio channels play different genres of music viz., Bollywood and western music. While All India Radio airs dedicated music programmes showcasing Indian classical music artists.

The live music industry in India is another sector that over the years has garnered strength. The key driver for this is different generational cohorts are noticed to display strong affinity towards musical experiences. Live events and festivals in India such as Sunburn and NH7 Weekender have a dedicated fan-base.  These events are an amalgamation of music, entertainment, and food, with music at their core. That said, this industry generates approximately INR 1280 crore of revenue.

Mandar Thakur, Chief Operating Officer, Times Music, commented,

“The recorded music industry positively impacts the live events industry, which is valued at INR 6,500 crore. Live events often play songs that have been created by, and made popular through, the promotional and distributional activities of the recorded music industry.

On the other hand, movies acquire the largest fragment of revenue through music. Obviously, Indian movies are song-based. Without a doubt, no Indian film is complete without a song. A minimum of four songs is a given. So much so that songs and scripts are interwoven. The songs shape the script of the movie, having or following a certain theme.

The official soundtracks from movies before its release allow smooth production of the film. Thus, a producer always has various avenues to monetise production costs.
In some cases, a film’s soundtrack helps generate greater interest in the film and drive up the bidding for satellite, digital and theatrical rights.

Currently, INR 2,090 crore of revenue is attributed to the music section from the film industry.

Which brings us to the latest sector of digital audio streaming. More than 4,440 million monthly streams are running across leading audio OTT players in India currently. The revenue streaming model for OTTs is currently premium and freemium (ad-supported). According to Deloitte’s estimate, the OTT streaming industry is sized over INR 270 crore.

Therefore, the transmission impact of the music industry including its partner industries is sized at INR 8660 crore.

 

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Challenges the Industry faces

For India to be amongst the Top 10 music markets in the world, it like any other music industry needs to resolve innumerable sprints that exist today. Despite increasing internet and smartphone penetration, the consumers do not pay for music consumption but rather resort to consuming pirated content.

The Indian music industry’s economic growth is stunted due to numerous factors such as piracy which leaves artists, music publishers and composers and record labels under-compensated for their work. Piracy has always been a constant battle for the Industry. This has further created a perception of music being a free commodity which affects its sale further.

Also, the value gap that exists in the country already is an increasing factor, thanks to piracy. Value gap refers to the growing mismatch between the values that user-uploading services like YouTube extract from music and the revenue returned to the music community – those who are creating and investing in music.

According to IFPI,

“Video streaming took up 45% of all hours spent listening to on-demand streaming services, with YouTube alone responsible for 36%. However, video streaming services only generated 29.8% (169 Cr.) of the industry’s streaming revenue (850 Cr.) in 2017, or 19.9% of total Indian recorded music revenues. Given the fact that 97% of the users use YouTube for music, the fact that video streaming generates less than 20% of the industry’s revenue is still a drop in the bucket.”

Determining the fair value for all stakeholders will be important to make it sustainable for all parties. Today, record labels are also evolving with technology. About 78% of the recorded music industry’s revenues in India come from digital services. However, they point out that the law has not kept abreast with changing technology.

That said, with the help of legislative and regulatory impediments to achieving fair value would naturally smoothen the process of licensing and obtaining royalties.
Record labels indicate that statutory licensing of sound recordings as the biggest obstacle in the path of the recorded music industry in India to achieving fair value.

If the industry is permitted to negotiate licensing arrangements, it would reflect the value of investments which would help facilitate fair value to all stakeholders. Stopping this can only create bottlenecks for investors and create blockages for possible investments. The entire music ecosystem and the stakeholders will ultimately be impacted due to this.

It becomes imperative for record labels, and collecting societies like PPL and IPRS to be on the same page for creating a smooth system and flow of revenue in the royalty chain.

Public Performance Rights include the right of record labels to receive revenues generated from concerts, live gigs, events, music festivals, etc.

To corroborate, Rajat Kakkar, Chief Executive Officer at Phonographic Performance Ltd, said

“Only 5% of the revenue is collected from the places where music is played. Through PPL alone, we are looking at a 800-1000 crore market,” at All About Music 2019, an annual music conference in Mumbai.

Music used as a commodity in real estate needs to be remunerated correctly for its use. Record labels point out that getting content users to buy licenses and collection of royalties for public performance are large hurdles to unlocking fair value for the recorded music industry in India.

Not to forget, with the influx of OTTs, there has come trouble seeking desperate attention of converting the ad-based consumers to paying consumers or subscribers. India is still not a country where people pay to listen to music, also for some is an alien concept. To reiterate, piracy.

The music industry in India is backed by cultural implications, with a massive and diverse population of more than 1.2 billion citizens speaking a variety of languages. An array of genres like Pop, Rock but mainly Bollywood dominates the charts and decides consumer habits leaving a small monetising bracket for non-film music. However, with the rise in independent music globally, Indian labels have slowly started expanding their business modules to this section of music.

While we are still looking at a positive future along with IMI having an active anti-piracy program, under which an internal team reports over 10,000 URL’s per month to IFPI. IMI has had a 55% success rate with the National Internet Exchange of India (NIXI) where NIXI blocked 200 out of 363 [dot]IN websites in 2018.

With the hurdles requiring immediate attention, awareness amongst artists and consumers must be met simultaneously. Also, with synch and regional music on the rise, there are better avenues and opportunities opening for the Indian music industry.

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Aakanksha Sharma

Author: Aakanksha Sharma

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