Piracy no big threat to music cos.

By Ramnath Subbu

MUMBAI, OCT. 14. The Indian consumer market for music, estimated to be growing at around 30 per cent, is in for exciting times. The industry size is around Rs. 1,500 crores with legal business accounting for about 75 per cent. Of the organised segment, about half comes from the large music labels and the balance from a plethora of regional labels.

In the Indian music industry, about 70 per cent constitutes film music, 15-20 per cent popular music and the remaining is the classical and regional music. Noticeably, there is a gradual plateauing out of weightage to film music in preference to individual recordings and in fact in the last couple of years, individual artistes' sales have gone up 3-4 times.

There has been, according to industry sources, a phenomenal growth in the last ten years as also a shift from the grey to the legal market.

Till a couple of years ago, the industry was bearing the brunt of piracy and this was taking a toll on most companies. But the situation has improved significantly with discipline having come from within the industry and today, pirated cassettes/CDs constitute only a small portion of the turnover.

For companies, record labels are an important factor. Sarigama (formerly Gramophone Company of India) of the RGP group, has the largest catalogue in India with more than 60 per cent of film music up to 1985. Music companies need to be aggressive in acquiring the music rights for films.

But, according to an industry spokesperson, ``the economics do not really work out in the film genre of music. A company will have to pay anywhere from Rs. 8-10 crores for the rights of a film and even then, there is no guarantee that the rights will remain with the company. At such a cost, to break even, the company will have to sell above 40 lakh cassettes.''

Technology too has played an important factor. The first switch was from cassettes to compact discs (CDs). Now, music on the net is the next big thing. All that is required is a formatting device and a music player. The MP3 format, essentially MPEG-1 Audio Layer 3, is popular and enables the file size on CDs to be compressed to a fraction of its size without in any way hindering quality.

Music companies are not unduly worried about piracy on the net and do not consider it a significant problem as yet. This is largely because the penetration of the net is low and net music piracy would be only minuscule.

Sarigama occupies the premier position in the Indian music industry with the largest number of music rights with a catalogue of 1.35 lakh songs spanning a time of about 60 years. Of the whole segment, the company's market share is said to be around 15 per cent.

It has been moving aggressively from being an Indian music major to a global music software player. It launched its e-commerce site in the U.S. and then expanded to Europe. It has also entered the regional music market and acquired the Master Recording Company, owners of the Sangeeta brand of music catalogues that has given the company access to more than 2,000 titles in Tamil. Besides, it has entered into a seven year licensing agreement with Pyramid International, a Singapore based company. Under the agreement, the audio rights of Pyramid's catalogue of 500 Tamil film songs, 200 Carnatic classical, 100 Malayalam film songs would be marketed by RPG Global in Asia and parts of Africa.

Tips Industries, another in the field, has its IPO oversubscribed about four times last month. The issue price was Rs. 325 per share. The IPO of 30 lakh shares includes a book built portion of 27 lakh shares (90 per cent of the issue) and the fixed price portion of 3 lakh shares (10 per cent).

The IPO for around Rs. 100 crores is to part finance the setting up of a studio for recording music, a plant to manufacture CDs, expand the existing cassette manufacturing facilities, acquire audio rights, augment long-term working capital and meet issue expenses.

Tips has a library catalogue of 8,000 titles, of which 3,185 are Hindi film music. The company has recently acquired music catalogues of Time Audio, Weston, Oriental Music, Swaran Sudha, Rajashree Music (Gujarati) and Videomaster. The company is looking at acquiring film music rights in the South too. It has made a commitment of Rs 120 crores for acquiring audio rights of 57 movies over the next three years.

The company is also looking at alliances with international majors. Earlier, it had entered into a marketing arrangement with Aiwa and sold one million CDs. With a burgeoning demand for CDs, the company is planning to set up a manufacturing facility of 40 lakh CDs per annum at Silvaasa. At present, it has two facilities for cassette manufacturing and recording.

Magnasound (India), which is considering an initial public offering (IPO) at the end of the current year, has already appointed DSP Merrill Lynch as its merchant banker. It also has offices in Canada, the U.S., Dubai and the U.K. It has also got licences to manufacture and market there. The company has 12 branches in India and is now exploring the Southeast Asian market. Magnasound's success revolves around its ability to give artists a brand image. It has launched or has been associated with a number of artists. The company's exposure to film music is mainly in the South. It is planning a tie up for distribution network.

Send this article to Friends by E-Mail

Section  : Business
Next     : BSE plans options in index trading soon