When Samsung launched its first
dual SIM mobile phone in India, the reigning market leader — Nokia — was
caught on the back foot. But even as the Finnish handset maker struggled to
play catch up to technological innovation, it had spent years in the seemingly
Quixotic task of tying up with music labels both global and local, viewing
this as a potential revenue source. Nokia today speaks with pride about its
extensive library: 7.7 million tracks across 22 genres. What it's less
enthusiastic to talk about is the revenues from the store, but more on that
in a bit. As of today, Nokia stands a better chance to distribute music in
India, because of the reach it enjoys in the sub-continent — way higher
than Apple's iTunes' music store, which had an official launch in the
country only in December last year.
At least prima facie, music is a good bet for a
mobile handset maker. According to a report released by KPMG early last
year the Indian music industry achieved revenues of 9 billion in 2011,
registering a growth of 5% over 2010. The report also pointed to the
continual shift of music from physical to digital formats. Jehil Thakkar,
head of Media and Entertainment, KPMG India says physical music continues
to decline as digital grows. “OEMs are working as a catalyst to help
consumers get started on digital music,” explains Thakkar. He feels there
is still time for the ecosystem to mature as music libraries of OEMs
continue to grow. Some of the music labels we spoke too were unanimous
about the growth of digital music in India and the role played by OEMs in
pushing this. R Madhusudhan, VP - digital music, Sa Re Ga Ma says, “The
biggest success has been achieved because of efforts taken by operators and
device manufacturers. A lot of people are accessing music through mobile
phones.”
Nokia began this journey in 2005. It launched
devices pre-loaded with music and claims to have tried to build this as a
USP of sorts. While the popular snake game was the first piece of content
it offered, the company decided music would be a better strategy for the
future. Viral Oza, marketing director, Nokia India says “Customers are not
happy with the quality of pirated music. They want access to genuine music
which is of much superior quality.” In its current avatar, the songs on the
Nokia store are DRM free — making it easier to download and distribute.
“You have to understand the 'wow' factor this gives youngsters. It highly
improves the person's social currency,” says Oza.
Currently customers, who purchase a Nokia device are
offered free access to the store either for a period of three or six
months. If customers want to continue, they can buy vouchers with prices
ranging from 50 for a week to 250 for three months. Nokia is
characteristically tightlipped about the extent of repeat purchase.
Sanjit Chatterjee, director marketing &
strategy, Reve Systems, a mobile VoIP company is not too sure whether Nokia
customers will come back after the initial free period. “Paid VAS is still
not very popular. Unlike iTunes store which is more of a shopping portal
where customers can shop for a lot of things including entertainment, Nokia
Music Store is just music. So the stickiness is likely to be less,” says
Chatterjee.
However, Nokia's competitors are not ones to sit by
idly. They are all forging agreements with labels and making songs part of
their offering. Samsung has tied up with Hungama.com to
make music available to its customers. A Samsung user can access music
either through Samsung's WAP site or a new service under the 'My Music'
vertical. Unlike Nokia, all songs downloaded by a Samsung user is paid for
and not free, unless offered as such by the content provider. Sarfaraz
Nawaz Alam Borah, lead - mobile applications & services, Samsung
Electronics says, “Our focus on music started three years ago and today
about 30%-40%of our VAS revenues come from music.”
Three months ago, indigenous brand Micromax
launched 'Mymicromax.com'
an entertainment portal which can be accessed through the mobile phone and
according to Manoj Gupta, GM - VAS marketing, Micromax Infomatics, the
portal already gets 10 lakh page views a day and 30,000 downloads of
different kind of VAS including music. Gupta says today 17%-20% of their
total revenues come from VAS which includes ringtones, music videos and
music tracks. However, Gupta says for the space to mature a lot of support
is required from the music providers as well as the mobile phone operators.
“Music labels ask for a minimum guarantee, which is difficult to give. We
are pushing for a revenue sharing model, but there is still some way to
go,” he shares. Among mobile operators, Vodafone is the only one to offer
good terms for partnership says Gupta.
Sony Mobile is also going the pre-loaded way. While
the company refused to share its actual plans, Sony has already outlined a
strategy whereby its mobile phones will harness the equity of all its
devices including Walkman. Sources close to the company claim that by April
this year, Sony will launch a couple of handsets with pre-loaded music.
Not content with being passive suppliers of music,
mobile phone companies count among the major backers of festivals. The soon
to be held Fly Music Festival featuring everyone from dinosaur rockers like
Deep Purple and the surviving members of The Doors to relatively recent
artists like KT Tunstall and Mastodon is being sponsored by Micromax. Nokia
claims to be going one further creating Nokia Music Theatre complete with
an album named Asha out on Universal Music.
According to KPMG's Thakkar, for monetisable
digital music to get a major push, there needs to be a widespread rollout
of 3G and 4G networks. “Data speeds will increase access to music and
impulse purchase will go up,” predicts Thakkar. Similarly he says there has
to be revenue sharing between telcos and content owners, because at this
point the labels have no choice but to approach handset manufacturers and
operators to distribute digital music. Smartphones that enable connectivity
to the internet are further likely to push adoption says Madhusudhan. Today
for Sa Re Ga Ma, more than 80% of sales come from digital music and only
20% from physical formats. He admits that partnerships such as the one with
Nokia also help curb piracy to a great extent. And that’s the unfortunate
truth of the business: labels may soon have no choice but to partner
handset brands. The only other option is a disturbing trend that's rife
through small town India at present. Young people armed with enormous
memory cards cram them to bursting with several gigabytes of pirated music,
obtained from a friendly neighbourhood mobile shop all for a paltry sum; an
arrangement in which neither label, operator nor handset maker stand to
profit.
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