Mobile music

Universal just tied up with Reliance Communications for a music distribution deal.  Pretty straightforward logic.  Reliance has access to ~ 11 Cr subscribers, Universal has ~ 300K songs.  Physical sales in India have been on a terminal decline, while mobile sales continue to grow.

I wish one could get numbers on how well the deal works out for Universal though.  Reliance’s customer base is primarily SEC B/C, not necessarily downloaders of English music.  Apparently, even existing Indian music providers don’t make a whole lot of money from Reliance’s subscriber base.

Of course, the grip that mobile operators have over the music providers is not funny.  Being the dominant channel, they are able to corner anywhere between 50-80% of the total consumer spend on mobile music.  And that isn’t going to change anytime soon!

Data Post: How much do artists make online

In response to Amit’s posts on the future of music. Here is a fantastic post on how much artists make online. The data visualization is very well done! It talks about how many songs the artists have to sell on a specific medium in order to make “minimum wage”. Forget rock-star earnings! 😉

This image is based on an excellent post at The Cynical Musician called The Paradise That Should Have Been about pitiful digital royalties. (Thanks to Neilon for pointing that out). I’ve taken his calculations and added a few more.

The economic conundrum of CRBTs

For the uninitiated – CRBT stands for Caller Ring Back Tone.  It’s the wonderful song you hear in lieu of a ring tone when you dial into someone’s number.

CRBTs are expensive.  Here’s how much it costs:

* Cost of calling into a chargeable IVR system to select your music – Rs 10

* Cost of downloading a CRBT – Rs 15

* Monthly rental for playing a CRBT – Rs 30

* Average frequency of changing a CRBT – 0.8 times a month

* Total monthly cost = Rs 30 + 0.8*(10+15) = Rs 50

So, this is expensive right?  In a market where few people pay Rs 75-100 for a legit album, there’s a bunch of people paying Rs 50 p.m. for a song they don’t even listen to!

How big is this?  Very.  Mobile music revenues account for 50-60% of several music albums, and CRBTs are a dominant contributor to that number.

Now here’s the conundrum.  Who actually downloads these tunes?  If you checked on the average office-going city slicker, you’d probably find a 10-20% probability of these persons having a CRBT.  But if you went lower down the SEC ladder – to the carpenters, drivers, household help, coffee boys etc – you’d witness a 70-90% penetration of what is probably the most expensive music in the world.

Why do people with an average income of Rs 3-10K p.m. spend so much on a tune meant for others?

More bad news for music

How does one make money from music anymore?

1. The traditional model of selling an album around one or two great songs doesn’t work anymore.  People can legally download a copy of the single from itunes.  So, instead of $ 14.99 for an album, you have to be content with $ 0.99 for a song – although its likely that you’ll sell a lot more singles.  Still, the gains are hardly likely to make up for the loss.

2.  Sales cycles are incredibly short.  I did a post on the New Product Life Cycle sometime back – music is a classic representative of this cycle.  True block-buster albums are rare.  Most music has to be be sold within a few months of launch and then milked from compilations.

3. Piracy is rampant.  And there is precious little one can do about it – though that doesn’t stop the industry from trying!

I can go on.

But along the way, a few good internet models started emerging – like itunes, Rhapsody and Spotify.   This was good.  There was hope for the industry.  As long as an economic engine finds its place, one could keep the consumers and the labels happy.

Now it turns out that some of these models aren’t so good for the artistes.  Apparently, Poker Face played a million times on Spotify in the last 5 months – and all Lady Gaga got was the princely sum of – hold your breath – $ 167.  (You’d spend more money than that on coffee at Heathrow waiting for your flight to take off!).  This is a problem.  As the Guardian puts it:

“Spotify is the cool company that keeps the Kids happy, but also signs contracts with the Man…And if this is the best Good Cop can do, God help us all”

Is Spotify ripping off the labets?  The labels ripping off the artiste?  Or, a business model that doesn’t work?  That music will survive is a given.  The question is – with what business model?