The Hindu Business Line : Music industry having it good

THE domestic music industry is in a revival mode with a few of the majors expecting to close the current fiscal with higher turnover and lower losses, according to sources in the Indian Music Industry (IMI).

This was confirmed by Mr Vijay Lazarus, President of IMI, the industry apex body. He said that while the erosion of the size of the legitimate music market had been stemmed this year, quite a few companies had reduced their losses and some were expecting to return to the black.

Mr Lazarus mentioned T Series, Sony, Universal and Tips as companies, which were doing well this fiscal. "The industry, whose market size had shrunk from Rs 1,000 crore in the 90s to Rs 500 crore in 2002-03, has now been able to stem the loss and is expected to maintain its turnover," he said.

Stung by high costs, on one hand, and piracy on the other, the domestic music industry is now tightening its purse-strings on music acquisition even as it holds the price-line of products such as pre-recorded CDs and cassettes, sources said.

While, earlier, the big seven of the Indian music industry were "busy" outbidding each other to procure film music rights, now most companies were being cautious while purchasing music rights, and acquisition costs were heading southwards.

"The music industry is likely to do better in 2003-04 — most companies have not bought any new rights — and the few that have, have negotiated lower prices," sources said. A growth of about 4 per cent can be projected for 2004-05, according to Mr Lazarus.

Elaborating on the acquisition cost aspect, sources said that while earlier the music industry was buying music rights at costs varying between Rs 3 crore and Rs 12 crore per film, now this has been capped at around Rs 5 crore. Many companies including the largest in the IMI-fold — Saregama — had begun reopening deals for re-negotiation.

Music companies had also begun adopting a strategy of going in for a mix of a `minimum guarantee price' plus royalty-sharing in order to minimize their risk, if the music of a particular film fails to click.

The major companies in the IMI-fold are: Saregama, Sony, Tips, Universal Music, BMG Crescendo, Virgin, and Venus. "Together these companies have bought the music rights of only about 13 films so far this year," sources said.

Alongside, the music companies have also stopped offering recorded CDs and cassettes at discounted prices. It had started the practice in 2001-02 in a bid to match the prices of pirated products. However, even as this resulted in the price of CDs dropping to as low as Rs 99 (from Rs 250) and that of cassettes at an average of Rs 40 (against Rs 55), the pirated products were available at far lower and unmatchable prices.

To some extent this policy threatened to become counter-productive, according to industry sources. "Beyond a point, it squeezes margins and impacts bottom line," a source at Saregama said, adding that efforts to curb music piracy this way has not helped much, though it did boost sales.

Most of the companies are trying to improve their top lines by tapping alternative revenue models while trying to maintain costs. The problem of piracy continues to dog the industry, IMI's efforts notwithstanding, and 40 per cent of the recorded music sold in India is still pirated.

The IMI wants the film industry to help curb piracy, since it affects the entertainment sector as a whole. On its own, IMI has stepped up its anti-piracy activities, conducting more raids, which have yielded a cache of counterfeit CD inlay cards and CD-writers.

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