The wrong tune

Music business should be more worried as CD stores shut

The city of Kolkata is dismayed that the flagship music store of the Music World chain is shutting shop. The store, on the crossing of Park Street (now Mother Teresa Sarani) and Middleton Row, sits squarely at the centre of the eastern metropolis' central shopping and cultural district, and frequently hosted album releases and concerts as well. It seems that the store was just not selling enough compact discs or CDs to make its presence there worthwhile. Music World's decision reflects the dilemma facing several other major retail chains. The RPG-Sanjiv Goenka group, which now owns the HMV-EMI record label, has shut down its music retail business. Planet M, owned by the Videocon Group, has seen music sales shrink as a contribution to revenue from 40 per cent a few short years ago to barely a quarter today - and, according to a report in this newspaper, expects to see it go down to 10 per cent by next year. It's a similar story for Crossword, owned by the Raheja Group; music sales as a share of its revenue are now barely two per cent. Unsurprisingly, the current format for lifestyle-group chain stores - with rows of music albums the centrepiece for toys and stationery - is being speedily jettisoned.

The problem is twofold. The first, of course, is that the real-estate boom has driven rents so high across prime commercial areas that how much revenue is earned per square metre becomes the most crucial input for a store's profitability. Unfortunately, CD sales require a great deal of space for display and storage. Physical music stores thus start with a massive disadvantage. This is made worse by the fact that, even otherwise, the margins on CD sales are low - around 30 per cent, reportedly, in comparison to 40 per cent for books. Meanwhile, of course, many Indians listen to music in other digital formats - on their phones or computers or through dedicated MP3 players. As their numbers grow, the well-stocked CD superstore will become an anachronism.

Why, then, are the reductions in the number of CD stores being met with some distress among consumers? The primary reason is not the fault of the retailers - it is the inability of music companies to adjust to the new digital world as fast as their customers. Some companies are better than others - the RPG group's Saregama label, which owns a large proportion of older Indian film music, has managed to digitise its properties quite well. But for other purchasers of music, the death of CD stores means a sudden unavailability of legal music; record companies have notably failed to find a strategy to get digital music to Indian consumers in a way that minimises piracy. Even the online retailing behemoth Flipkart has just shut down its successful Flyte MP3 store, one of the few ways for Indians to access a wide selection of legal MP3s.

Record companies must up their game. In the West, Apple's iTunes store and its competitors have worked hard on creating rights-protected versions of MP3s that both minimise piracy and maximise access, in order to ensure that people can find the music they want at a reasonable price. Record companies, initially hesitant, were eventually beaten into line, and have seen their revenues grow since. But that hasn't happened in India. If Indian consumers are not to see their access to music dry up to what it was in the parched pre-liberalisation 1980s, record companies should read the writing on the wall: they can't sell CDs any more, and need to work harder on their business models.