The sounds of a revolution

Music device revolution is set to storm India

You can strap it around your arms or wind it around your neck while on your morning jog. And while you jog, you can listen to songs, download and store your personal CD albums directly, listen to FM radio stations and even count how many calories you have burnt during the workout.

Say hello to the Yepp range of digital audio players (MP3), launched by Samsung in India without any advertising fanfare over a month ago. The response to this machine - the length of your palm - has stunned the Korean chaebol.

Over 800 pieces of them have already been hawked. Crows Samsung vice president Vivek Prakash: "We can sense there is a large market which is waiting to be tapped." He expects to sell at least 1,000 of the four different multipurpose MP3 players every month despite the steep price "� anywhere from Rs 11,000 to Rs 35,000 (this version stores over 7,500 songs).

Samsung's Yepp MP3 players are the tip of a music and music device revolution that is set to storm India. Virtually every biggie in the music device business is or will be here, ranging from Apple and Samsung to the Singapore-based Creative Technologies (of powerful PC speaker and sound blaster card fame) and Philips.

A downloading primer

Samsung's Yepp allows you to download music directly from a compact disc or an audio cassette without using a personal computer. For this, plug the MP3 player through a cable directly to the stereo system. In most other cases you can download music in two ways.

One, insert your music CD in your PC, convert the music file into an MP3 file through software the MP3 player company (or the mobile phone manufacturer, if you're using a cellphone) provides, and then transfer this through cable or Blue Tooth to the MP3 device.

Two, go to one of the internet sites that offer music and download it directly through cable or Blue Tooth to your MP3 device.

As a thumb rule, 1 MB of space is required to store one minute of a song on an MP3 player. So for normal songs you need about 4 MB space on your player.

Compression technology has helped in reducing the space required to store a song that's in a CD and transfer it and store it in a MP3 player by nearly one eighth to one tenth. But new Microsoft technology (Windows Media AudioWMA) can compress a digital music file by half. This means you require only 2 MB space to store a song.

You can store music in three kinds of storage devices. Flash Memory is based on semiconductor technology. So the cost per MB of storage space is higher. But it helps to make the device (MP3 players and mobile phones) light and easy to carry.

Hard disk drives (HDD) are electro mechanical devices. Hence the cost per MB is lower. But they make the device less portable. They are ideal for those who have a large music collection. Micro Drive is a smaller version of HDD but is based on semi conductor technology. It is cheaper than Flash Memory but more expensive than a HDD.

They're pushing to sell multi-functional portable MP3 players and portable audio players. Joining them are mobile phone companies like Motorola, LG and Sony-Ericcson, all of which are transforming cellphones into powerful music devices with MP3 players.

That's for starters. Internet sites that offer downloadable music like the Singapore-based Soundbuzz.com are launching special sites for India. Reliance Infocomm is quietly working on offering digital music downloads to music lovers who walk into its stores. And mobile service companies see in music a new revenue stream. Hutchison, for instance, offers music downloads in the UK. So why not in India?

Last month, Apple launched its iconic iPod in India. The playing card-sized iPod is the first major device since Sony Inc launched Walkman in 1979 to have changed the way people on the move listen to music and can store between 1,000 and 10,000 songs (depending on the model you buy) on its hard drive.

Says E Y Yeo, Apple's product marketing manager, portables, Asia Pacific: "Our stress in India is to sell the mini iPod which can store 1,000 songs and is affordably priced. We see a good market in India." But unlike in the US or Europe, iPod owners will have to wait for a few months before they can access music from Apple's iTunes, the site from which they can download music directly to the iPod for $0. 99.

The iPod will be available at music shops, large retail outlets and consumer electronic product show rooms. It can also be bought from internet shopping site Fabmall, apart from existing Apple dealers. Apple has also set up its first exclusive showroom in Bangalore and buyers can touch, feel and listen to the iPod here.

Creative too is here with seven MP3 portable players, though less than 1,000 of them are sold a month. But Creative claims that it is the only company that offers buyers three choices: extremely light players with flash memory, players with a micro drive (which reduces the weight) and a bulkier machine with a hard disk drive.

Unlike its competitors, Creative is absorbing part of the high customs duties so that the price difference between a smuggled player and one available legally in the market is minimal.

Says Creative Technology's sales and marketing manager, India, Rajshekhar Bhatt: "We have tried to absorb 10-20 per cent of the price so that we can offer it at lower prices." The prices: Rs 8,595 and Rs 12,595 (for one model, depending on the memory), Rs 9,295 and Rs 11,695 (for another), with the higher end model being priced at Rs 19,595.

Philips India, meanwhile, is retailing its MP3 players at over 23 Reebok outlets across the country and has positioned them as products for athletes (these are shock and splash proof, with easy to operate buttons and a removable memory card). Says Philips brand manager Gautam Dalal: "We expect the market for on-the-move MP3 players to take off by the end of this year and in 2005 as prices fall. The market is in its infancy."

Mobile phone manufacturers too are launching music phones. Last fortnight, Motorola launched its E 398 and is positioning it as a music phone, complete with surround sound earphones bundled with a flash card memory which can store one hour of music. Music buffs can buy and attach flash cards with more memory in the phone (up to 1 GB ), something that will allow them to store 8 to 10 hours of music or about 250 songs.

Says Percy P Batlivala, Motorola's general manager, south west Asia personal communications sector: "For us music will be the key differentiator from our competitors. After all, everyone offers camera phones or Blue Tooth-enabled phones, among other things." Batlivala says that in the next 12 months nearly half the phones priced at over $ 100 will have some kind of MP3 facility in the phone itself.

Still, Motorola isn't the only mobile phone company that will offer music phones. In the next few weeks, Sony-Ericcson will launch over four MP3-enabled phones. It expects 8 per cent of its higher-end phones to have these features and will offer a replaceable memory stick on which you can organise music albums.

Not to be outdone, Korea's LG wants to sell MP3 phones at under Rs 12,000 by the end of this year "� the cheapest model with music in the market "� and has set itself the ambitious sales target of over 50,000 MP3 phones in a year.

Singapore's Soundbuzz.com already has a small downloadable music market (over 5,000 songs a month) presence in the country and believes that this will grow by leaps and bounds. It has a repertoire of both Hindi and English tracks (see box). Hutchison, which has partnered with BMG for 3G phone services in the UK (songs are sold for £1.5 each) is in talks with Soundbuzz.com and does not rule out the possibility of offering music downloads to its subscribers here.

Enter Soundbuzz

Only a few Indian music buffs have heard of the Singapore-based Soundbuzz Pte Ltd. What exactly does the company do? Set up by former MTV employees and investors like Creative Technologies, its website offers both Hindi and English music.

Soundbuzz is a leading content provider and delivers ring tones to telecom companies here. It says that the ring tone business is already worth over Rs 50 crore "� one reason why it is confident that downloadable music will catch on.

A few months ago, Soundbuzz tied up with Saregama to digitise its music and offer its wide repertoire for download on Soundbuzz.com by October. Notes Atul Churamani, vice president at Saregama: "Soundbuzz has been a driver of music downloads globally as it provides digital rights protection (so that songs cannot be copied)"

Soundbuzz already has licensing arrangements with companies like Tips, Times Music and EMI. It hopes to offer over 140,000 Hindi tracks for sale on its special customised Indian music site which will be launched in a few weeks.

The site will offer the latest music (older tracks were available earlier) and will be compatible with Microsoft's new Windows Media Player 10 (you won't be able to download songs using an iPod, however). Indians will also soon be able to download international music on their MP3s.

The company claims to have over 150,000 English tracks on its site and it is perhaps the only legal music net downloadable store in Asia, where Apples' iTunes is conspicuous by its absence.

How much will you have to pay to download music? Says Mandar Thakur, who heads the company's business in India: "Our prices will be in line with what you pay for a CD. But in our case you have the choice to pick only the songs you want." Thakur says that Hindi songs can be downloaded for Rs 12 to Rs 15 per song. Compare that bill with the cost of a Hindi movie CD: around Rs 100 for eight tracks.

The price for English song downloads has not been finalised, but Thakur expects it to be Rs 40 to Rs 45 or lower, depending on whether international music companies will have a special price for Indians. All songs have to be paid for only through a credit card.

But most individuals are reluctant to give their credit card number on the internet. To resolve the problem, Soundbuzz is talking to telecom companies "� payments for music downloaded can be made via GSM phone service or broadband service bills. The other alternative is prepaid music cards with fixed denominations "� you'll then have to give your scratch card number before downloading music.

Quite clearly, everyone is assuming that India will not be insulated from the global revolution in music sparked off by iPod, making downloadable music quite the rage. There's no doubt that the market is pregnant with possibilities. Over one lakh portable cassette stereo players (like the Walkman) are sold every month in the country. And 15,000 to 30,000 high-end FM radio sets are bought every month.

Buyers of both items are obvious targets for portable MP3 player makers. Indeed, Dalal reckons that manufacturers can sell about 7,000 MP3 players every month if MP3 prices drop to an affordable Rs 5,000 to Rs 7,000.

As for downloads on mobile phones, mobile service companies argue that there are already over 3 lakh GPRS subscribers in the country who are ready to pay for value added services, including downloading music. They'd also buy MP3-enabled phones.

Moreover, a rising number of mobile phone users are paying to download ring tones, something that was unthinkable two years ago.

Mobile phone service company executives reckon that over 150,000 ring tones are downloaded every day at an average price of Rs 8 to Rs 10. Says an industry insider: "Today for every 100 monophonic tunes downloaded, 50 polyphonic and 2 ring tones are also being downloaded. Look how the market is moving up the value chain."

Still, the key question is how music device manufacturers and others will drive sales. Samsung, for instance, is selling the Yepp at two levels "� as a lifestyle product that will be showcased at large retail outlets with its other products like camcorders and high-end laptops; and as a PC peripheral, a data device that can plugged to a USB port for data and music transfer. Says Prakash: "Seventy per cent of PC users in the country use some Samsung component.

We will tap this market for our MP3 products." Samsung is also looking at bundling MP3 products with Samsung PCs.

Sony-Ericcson, on the other hand, is leveraging its muscle in the music industry (though Sony Music). So its MP3-enabled phones have a direct linkage to the "Play Now" website which offers a repertoire of music (Indian music will soon be available) that can be downloaded for free at the moment (mostly 30-second songs). Sony-Ericcson mobile phone owners will soon be able to download entire songs, though it's still not been decided whether they will get this free or will be charged a price.

To make it easier for customers to download music on its phones, Sony-Ericcson is opening "Fun Zones" within large stores, in New Delhi and Mumbai to begin with. Here owners of MP3 Sony-Ericcson phones will be able to download an array of songs.

Motorola too is looking at a multi-pronged strategy to push sales. Batlivala acknowledges that these products have to be sold through alternate distribution channels.

The US company has chosen to use music outlets and hopes to open at least two or three such shops in over 30 cities where its MP3-enabled phones can be demonstrated and sold. For starters, Motorola will open six stores in Mumbai and another six in Delhi and see the response.

Motorola also hopes to leverage its recently announced international partnership with Apple's iTunes, the music site, from which music can be downloaded on to Motorola phones (apart from iPods) at a price.

It has also consciously priced its MP3 phones low to try and capture a larger market. Batlivala says that currently only models priced above Rs 20,000 have an MP3 player. That will change "� the threshold level has been brought down to Rs 13, 000.

For all the brouhaha, MP3 music device makers will face a host of challenges. Challenge one: prices are too stiff; most MP3 players are available abroad at a fraction of the Indian price. In India, imposts constitute 60 per cent of the price and it is cheaper to smuggle or bring an MP3 player from abroad than to buy it in India.

Example: the mini iPod is available abroad for less than Rs 12,000, roughly half the price here. Dalal makes an additional point: "Taiwanese MP3 products are available at Rs 1,500-Rs 2,000. So why would one pay so much for our products?"

Challenge two: broadband penetration is low (India has under one lakh subscribers to broadband services) "� and broadband is essential to download music quickly (it could take you double the time if you use a dial up connection). PC penetration too is low.

Says Atul Churamani vice-president, artists and repertoire, at Saregama (which has an agreement with Soundbuzz.com): "For music downloads, the infrastructure has to be developed first. In India, broadband will drive the growth of music downloads but it's still being developed."

Challenge three: the public doesn't have too much of a choice in downloading music from the internet legally and can opt for illegal, poor quality transfers. Notes Rajesh Sawhney, chief operating officer at Times Internet, which has a revenue sharing agreement with Soundbuzz.com: "The response to paid downloads of music in India has been lukewarm. The paid download music market size is minuscule. But the illegal music download business is overwhelming."

He is hopeful, however, that the market will grow once the penetration of Ipods, MP3 players and mobile devices that can play music increases, though he says it will take another year or two.

Yet music device makers and others are trying to surmount such problems. MP3 player manufacturers have already petitioned the government to reduce the 20 per cent custom duties on MP3 players and treat them as storage devices, on which the duty is 0 to 5 per cent. They also hope that peak duty rates will fall further as the government follows World Trade Organisation rules.

If that happens, prices could drop dramatically by nearly half or more something that, no doubt, will be sweet music for the ears of Indian music aficionados.

(Additional reporting by Shuchi Bansal in Delhi and Gouri Shukla in Mumbai)