How To Supersize The Music Industry In 2018

By

Blaise Fernandes, President & CEO, IMI

Mirroring the global trend, the Indian recorded music industry continues to transform from physical to digital; from downloads to streaming and from ownership to access.

While the global recorded music industry grew by 5.9% in 2016, India witnessed a healthy 26% increase.

The Indian Music Industry (IMI) certainly views the glass as half full. A rapid penetration of smart phones across the length and breadth of the country combined with the revolution of 'cheap data' is the DELTA factor in encouraging Indian consumers to consume streaming services, which will certainly benefit an overall growth of the music industry in India. Streaming services also offer opportunities for discovery of local talent and help Indian artists to distribute their content to various parts of the world.

According to a recent study conducted by IPSOS in India for IMI & International Federation of the Phonographic Industry (IFPI), the indications are that consumers in India listened to around 23.6 hours of music a week, ranking second highest in the world, after Mexico. This study surveyed 900 users in India and highlighted a few key insights into the behavior of music consumption in the market:-

  1. 98% of Internet users listened to music on either ad-supported or paid audio streaming services. It’s no surprise then that over 70% of the revenues for Indian music industry came from digital sources in 2016 (GMR 2017).
  2. Radio is still booming in India; 97% of those surveyed said that they turn to Radio for their music.
  3. 93% people reported using mobile devices for listening to music, up from 85% in 2016. This could be attributed to the advent of cheaper data rates thanks to Jio causing declining prices as well as the increased penetration of smartphones. The example of Wynk music reporting 75 million app downloads speaks for the success of such services.
  4. Despite growth of licensed services, there are still two big threats facing the music industry, i.e. Piracy and Value Gap.

Piracy: 94% of users in the study stated that they had downloaded music illegally using stream-ripping sites like Convert2mp3, a file-sharing network like BitTorrent or cyber lockers like zippycare and Openload.

7 in 10 of those surveyed used Google to find pirated music.

Certain features such as auto-fill and predictive text only adds to the ease of finding such content. To nobody’s surprise, the #1 reason for pirating music was because it’s free. The other big reason for pirating content is access – both access to content offline on devices and access to unreleased content.

Most licensed service providers such as Saavn include a “save offline” feature and are among the first to release content. Hence, as awareness spreads amongst users that legitimate content is available and easily accessible on licensed services, and that licensed services feature more prominently on search engine sites, we believe that piracy will start to reduce.

Value Gap: The value gap describes a growing mismatch between the value that a user upload service, such as YouTube, extracts from music, and the revenue returned to the music community who create and invest in music. The value gap is now industry’s single highest legislative priority as it seeks to create a level playing field for the digital market and secure the future of the industry. The music ecosystem is dependent on record companies investing in music and in artists.

Music must be valued fairly and its investors and creators must be fairly remunerated.

If services, which do not recognize the true value of music, are allowed to attract users from other, fairly licensed, services and drain revenues from the system, then the business becomes unsustainable. The situation also creates unfair competition. Services such as Spotify, Deezer and Apple Music are forced to compete with services that claim that they are not liable for the music they distribute.

User upload video streaming services benefitting from the misapplication of ‘safe harbours’ comprise the world’s largest on-demand music audience, conservatively estimated at more than 900 million users. The revenue returning to rights holders through these services in 2016 amounted to US$553 million. By contrast, a much smaller user base of 212 million users of audio subscription services (both paid and ad-supported), that have negotiated licenses on fair terms, contributed over US$3.9 billion. From publicly available data, IFPI estimates that Spotify paid record companies USD$20 per user in 2015. By contrast, it is estimated that YouTube returned less than USD$1 for each music user.

Combating Piracy: Today, and going forward, there is no silver bullet solution to tackle online piracy. It has to be a multi-pronged approach and a multi-stake holder approach. To begin with, piracy is no longer a silo problem for individual industries like music or film. Pirated websites are today one-stop-shops where music, film and TV content are all organized under one roof offering professional curation and investments in high-end User Interface (UI).

Content producers, creators, aggregators and intermediary service providers, uniting and working towards creating a common fund to tackle piracy, is the need of the hour.

Once funding is in place, working with Legislative, Executive and Judiciary to find solutions to online piracy is the next step. A comprehensive #DigitalCivics program in association with multiple stake holders including the Ministry of HRD, CIPAM, State Education Boards, advertising agencies, creative talent, industry bodies and civil societies will help sustain enforcement and outreach programs in addition to raising respect for Intellectual Property Rights. Now is also the time for the concerned stakeholders to turn to #WEBCRAFT[1] as piracy has no borders and is a global problem.

 

- Blaise Fernandes is the President and CEO of the Indian Music Industry (IMI), an IFPI affiliate and apex body representing music companies operating in India. Blaise was earlier the Senior Vice President of Edelweiss Financial Services. Before that, he was associated with the lobby pressure group Gateway House - Indian Council on Global Relations. His experience with the entertainment industry covers over two decades with Warner Bros., Suvarna Films, India and Walt Disney Consumer Products - Master Licensee. His experience spans strategic planning, development and management. As he undertakes his new role with Indian Music Industry, his association with Gateway House as an additional director and FICCI (State Council Member) still continues.

 


[1] A phrase coined by Anne-Marie Slaughter, an academic, foreign-policy analyst and author. As statecraft proves less and less able to solve or even tackle global problems, it is time to turn to webcraft. Statecraft is the traditional world of diplomacy, treaties and international institutions, with decisions traditionally made by statesmen in embassies and elegantly panelled foreign offices around the world. Webcraft is the foreign policy of the 21st century, a sprawling complex of networks, coalitions, partnerships and initiatives undertaken by business, NGOs, churches, universities, foundations, cities, provinces and very determined individuals, all working with, alongside or sometimes against their national governments.

 

 

 

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