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How the revenues from digital music overtook physical sales

The question is not tough. Yet, Lijin Thomas , marketing head of Landmark, pauses to think. It takes a while before he can recollect the latest Hindi movie album that flew off the shelves. "Dabangg," he says, finally. How many days was it in high demand? Three to four weeks. How many CDs have been sold till date? Around 3,800.

Five to seven years ago, average albums clocked these figures in his bookstore chain. Today, it takes the biggest grosser of modern Indian cinema, 3 Idiots, to sell its music CDs for more than a couple of months. Between 2006 and 2010, physical sales, including latest movie albums, dropped by about 50%. Most music buffs get their favourite songs free — on the Net or on their mobile phones. So how do the music companies make money?

Through ringtones, hello tunes, downloads on the Net/mobile phones and online streaming of videos. Yes, digital music has come of its own. And last year its revenues surpassed the collections from sales of CDs and cassettes. According to a FICCI-KPMG Indian Media and Entertainment Industry report 2011, digital music earned Rs 420 crore last year, 24% more than the sales of physical products, which grossed Rs 320 crore.

"Music labels and stores like ours were prepared. So much is happening in the digital space. Tracks are available for free or the price is so low that CDs can't compete with them. To stay in the game, we will start online downloads from October-November. The business model will be innovative and interactive to stand out in the crowd," says Thomas.

The crowd has formidable new faces — handset makers like Nokia (Ovi store), telecom service providers like Airtel (music-related value-added-services), FM channels like Radio Mirchi and online content aggregators and distributors like Hungama Digital Media Entertainment. Equipped with deep pockets and strong infrastructural support, these companies have changed the music business. So much so, that the biggest music company by revenues is now Music Bharti .

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