Some Services Are Shutting but Online Music isn’t Dead: It’s Just the Beginning

In the last few months, many players in the digital music industry have shut shop. But these are mostly for strategic reasons and not because digital music is dying.

In the last few months, many players in the digital music industry have shut shop. Recent developments include the shutdown of In.com which used to stream music along with other things, Nokia’s decision to shut its music website in India, Google pulling the plug on music search in India, and Flipkart shutting Flyte, its mp3 store.

But these are mostly for strategic reasons and not because digital music is dying. The digital music industry is still dealing with piracy and finds it hard to monetize services. However, companies like Gaana, Saavn, Dhingana & Hungama are making efforts to grow the digital music business. These are still early days for India’s digital music industry which accounted for nearly Rs 700 cr in revenues at the end of 2012.

Digital Vs Physical
Digital Music Vs Physical Music in India (Rs cr)

While it remains to be seen how much Indians will pay for music, it’s an undisputed truth that Indians are crazy about their music! Let’s take a closer look at the recent developments.

In.com Shuts Music Streaming: Shutting down its music streaming service was not an individual decision driven by the lack of demand for music streaming services. Web18, it’s parent company, is planning to shut down In.com and other properties as a part of larger cost cutting measures at Network18. In.com tried a lot of things and it failed. It gained some traction in the beginning but that tapered as time passed. Its attempt to sell the world’s smallest e-mail ID also didn’t take off.(More here)

Flyte Shutdown: E-commerce firm Flipkart shut its digital music store to concentrate more on its core business. Flipkart found that music downloads wasn’t easy for them to scale until problems like piracy and micro-payments were solved. More here.

Nokia Music Shuts Website: The company pulled the plug on Nokia Music’s Indian website in September. Nokia, however, continued the service for phones. Nokia music was launched in 2009. The company wanted to scale down desktop downloads as a part of its mobile first strategy. A Nokia spokesperson says that it will continue to invest in Nokia Music on the mobile. More here.

Google Shuts Music Search Service: Google India launched the Music search service in 2010 and while the service never took off in a big way (Google stopped updating the catalog after December 2010), the service is now shut down. This was part of Google’s spring cleaning, during which it shuts down certain services.

Digital Music Industry Trends in India

1. Shift to mobile: This trend is hard to miss. Music consumption has shifted to the mobile. While desktop downloads were prevalent in the past, most music service providers are now focusing on mobile. Nokia’s move to shut its website and keep its mobile music service alive underlines this trend. Streaming services like Dhingana and others have already seen a majority of their users coming from the mobile platform. Dhingana, for instance, saw a 200% increase in their mobile user base in 2012. The smartphone explosion and improving mobile data infrastructure is aiding this trend.

2. From Per Download Charges to Subscription based billing: Earlier this year in February, Saavn launched its pro version for subscribers. In June, Gaana launched a new version of its app and Gaana+, a premium subscription based service. Most of them are charging users for offline listening while streaming is free. In July, venture backed Dhingana launched its ad-free paid subscription for iOS & revamped its website. Dhingana Gold costs $1.99 per month. Others have followed suit.

3. VAS in trouble: The music industry used to make a lot of money from hello tunes that were sold to mobile phone subscribers. This seems to have gone down recently. With regulations around Value Added Services getting tighter, this business has taken a hit and we will see this continuing into the future.

4. Telco Tie-ups:  Last month, Dhingana partnered with telecom operator Idea Cellular to launch a co-branded music subscription service which allows users to download unlimited music with no data charges. Like with the messaging apps, we see others following suit.

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