Technology in tune

With Internet downloads and mobile phones turning musical, Saregama has little choice but to go digital.

Take a look around: iPods are in. And Saregama's going digital. Come July, its new music site will be ready for downloads. With as many as 1,50,000 tracks across languages and genres, it would mean online access to nearly half the content it owns. What's more, you can shop for more than 30,000 of its songs at other sites.

Says Subroto Chattopadhyay, president & CEO, Saregama, "We are creating a destination entertainment portal with a strong technological spine that would make it versatile. Other sites such as Yahoo, MSN or VSNL will also have our songs."

A couple of years back, Saregama placed some of its tracks on Apple's online music store, iTunes. And soon, it may strike a deal by which more of its repertoire finds its way to iTunes.

Famous for its 99-cent-per-track pricing, this site marked its 200 millionth download in 2004, a year that saw online music spend quadruple in the US.

Though the Napster threat of 1999 was tackled legally in the US, the very existence of MP3 digital music files was a wake-up call for music companies using traditional formats (CDs, cassettes and so on). And now, with the undeniable convenience of a net-loaded iPod, they have little option but to digitise content.

Overall industry sales in India have been crashing. Deepak Kapoor, executive director, entertainment practice at PricewaterhouseCoopers (PwC), predicts that the Indian music industry, currently at Rs 700 crore, will grow to just about Rs 740 crore by 2010, sluggish by any standards. And that's because of rampant piracy.

So while going digital is the way foward, it has not been an easy decision for Saregama; Internet sales could well cannibalise sales of CDs and cassettes. Unless Internet volumes are large, this could hurt the company's finances. Also, it's not as if regular formats are dead. As Chattopadhyay points out, even internationally, digital penetration is still low, at 15 per cent or so.

"There are many who want the pleasure of listening to music on a good system, and even if people listen to a song on the radio, they still like to pick up a CD or cassette," he observes. Sometimes, it's a CD sleeve's artwork and literature that connoisseurs don't want to miss.

Yet, Saregama's attention is now on digitisation of its music library. It's a new revenue stream, and offers vast opportunities to exploit and package content more effectively.

For its portal, Saregama is exploring an option whereby subscribers can listen to an unlimited number of songs for a flat monthly fee. Given the singles' trend, it is offering streaming, download and net-radio too.

A single track will be for Rs 12. Compare this with 99 cents in the US, a price at which margins are not exactly stunning. But Saregama believes that Rs 12 per track should fetch the company decent margins.

Explains Chattopadhyay, "Compared to cost-per-track in a CD, this is a good price, though we are still studying pricing models."

Royalty costs on a per-track basis are lower too, so that helps. Compilations and albums will also be available. Internationally, digital albums are priced around 30 per cent lower than physical albums, according to a PwC study.

Among the challenges for Saregama in going digital will be technology, which is expensive "" initial spends are estimated at Rs 10-15 crore, and it may still not be altogether piracy-proof.

While piracy-trapping technology exists and logsheets to track downloads are available, it may not be as simple as it seems. Moreover, the e-commerce culture is yet to catch on in India.

Now that more than half its content has been digitised, Saregama is also looking to sell music to mobile companies. PwC's Kapoor believes that along with licensed digital distribution, mobile music would be a key growth driver. With many more mobile phone users than Internet users, this could prove to be a far more lucrative opportunity.

While Saregama has been selling songs for use as ringtones and caller tunes, Chattopadhyay says full-track downloads are some time away. However, talks with network companies are on.

With the new initiatives chipping in, the company hopes to do better financially than it has done in the recent past. Saregama managed to tun around in 2004-05 with a net profit of Rs 5.2 crore on revenues of Rs 101 crore.

Today, it claims to have a market share of 37-38 per cent of the total number of tracks listened-to across genres and languages in the country. But, piracy apart, competition has increased, and the company has not had much luck lately with Hindi film music.

While measures are being adopted to combat piracy, Saregama plans to spend more on every new release, backing it up with events and the like. That, together with its retail reach (to extend to petrol stations and multiplexes soon), could help bring it to the forefront of the market once again.