“This finally proves that Indians will NOT pay for music.”

Physical Vs Digital Music in India
Physical Vs Digital Music in India

That was the noise accompanying the big news last week of Flyte closing down its mp3 business soon. There were a few murmurs to the contrary, but this was the overwhelming sentiment online. So we decided to take a step back and relook at facts.

For starters – the backgrounder on the Indian digital music industry will help. In 2011, digital music consumption overtook that through physical media, as per industry insiders, currently around 55-60 % of music sale happens through digital route. A FICCI –  KPMG report estimates digital music industry will grow at an expected CAGR of 22% till 2016.

Streaming is wildly popular now that data speeds support that. And what’s amazing is the popularity of music on the mobile – that accounts for upto 90% of digital music consumption! Even cheap devices are very capable music players now, and enough storage and the proliferation of affordable data plans is helping. The recent “any video at Re.1/-” is just one more response to this hunger for music on the move.

Let’s run through all the things that have worked in India so far, from a digital music perspective.

Local shop “downloads”

Akshat, founder of BlogVault, also sent his reaction to comments around the Flyte story almost immediately. Here’s what he had to say

“There is a huge market in India for music and I had not really understood it until about 3 years back. I was traveling to Jaisalmer and I had hired a taxi there. Interestingly, the taxi driver was playing assorted old music from 80’s and 90’s. Upon inquiring I learnt that the driver had a USB stick which he would take to the local store. He would pay Rs. 100 and would get the stick filled with random music. He was not really interested in listening to the latest music or anything specifically so random old stuff on the drive worked for him. I later noticed the same thing recently while speaking to a security guard at my gym who would load up music on his phone by paying his friend Rs. 100.”

We’ve all seen those “[Songs downloaded here]” signs at various businesses. Sure, the source might be a torrent, or a ripped CD, or other forms of piracy. But hey, there’s  whole lot of end consumers who are actually willing to pay for music!

Online stores are doing pretty ok!

Download Unlimited Bollywood Music and Videos from Hungama
Download Unlimited Bollywood Music and Videos from Hungama

Nearly 11% of Hungama’s subscribers pay for legal downloads – mostly between Rs. 5- Rs 20; that’s not bad at all! Siddhartha Roy, CEO, Hungama claimed a while ago that their total number of downloads including mobile and web at Hungama touched 75 million. Flyte itself saw 600,000 legal, paid downloads within a few months of launching and got to revenues of over 1 crore pretty quickly. And finally, iTunes, Google Play are all looking at the Indian music (and movies) download market.  Micropayments aren’t solved, but many of these players are betting it will become big sooner than later.

The pay-to-download model may have growth challenges, but there’s surely no drought of paying customers.

Streaming – the new Radio!

Indians are streaming music – including that on YouTube – on their laptops and phones in huge numbers – in mid 2012 Gaana.com itself reported seeing “almost 3 million unique visitors a month who spent 22 minutes on the website, on an average”.

SaavnEven for the free streaming services, bandwidth, esp on phone, isn’t free. Fair use policy set by Internet service providers, ensures even the top end of the consumers care about how much bandwidth they use.  Like electricity, digital music could well take a utility approach and this is what streaming services can make money from. Indeed, Saavn, Dhingaana, and many more including niche streaming sites and apps all have a growing audience, and are starting to experiment with subscription models, apart from (limited) advertising revenues.

Ashish (of the NextBigWhat team) provides some anecdotal evidence- “The shopkeeper near my area plays bhajans (devotional music) from Youtube early in the morning. Youtube Click for BuyHe doesn’t want to download – he is happy searching and playing streaming music. Same with my Enfield mechanic – he doesn’t want to ‘store’ music as the taste changes too frequently. But, they are happy to ‘pay’ for streaming bandwidth, without knowing that they are actually paying for it.”

Surely – someone’s paying!

Our take is that there still is enough meat in the market, and with the growth of streaming, lots of opportunity of experimenting with new monetization models. The digital music industry sees overall revenues of about $400 million. But if one includes the pie that’s right now served by the informal/unorganized and pirated market – paid – it’s probably an order of magnitude larger than that.

Even in the case of Flyte which started this flurry of naysaying about the Indian digital music consumer – its not over yet, whatever their reasons for the current decision. If you read carefully in between the lines – they’re likely to be back after some tweaks and changes to the model.

We’re pretty sure that Indians are paying, and will continue to pay for music!

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