The taming of Napster

CONVERGENCE

India is still home to thousands of megabytes of illegal music.

Music companies raised a toast last month when Napster, a US-based music download service company, decided to take the legal route to return to its roots.

Five years after it was forced to down shutters by the courts for facilitating unauthorised sharing of copyrighted music, Napster announced a new web service that offers listeners more than two million tracks for free.

But unlike last time when it cocked a snook at music companies (it had induced 20-million users to share around half a billion songs, all copyrighted, for free), Napster has now decided to split advertising revenue with them.

It was a big transformation for a company, which had in mid-1999 changed the music world forever through an ingenuous source code, developed by 18-year old Shawn Fanning. It was a brilliant innovation but the problem was that Fanning was selling the key to somebody else's candy store.

Napster's decision to opt for the legal route symbolised a victory for all music companies, which were fighting against illegal downloading. For Indian music companies, legal downloads present a limitless opportunity. Take the mobile music industry alone.

The pre-loaded and downloads put together is estimated at Rs 600 crore (for example, over 300,000 ring tones are downloaded every day) and is expected to grow at over 50 per cent.

And KPMG says legal mobile music, which now contributes around 5 per cent of the total music industry turnover in India, is expected to increase the share to nearly 23 per cent by 2010. Quite possible, as in Europe alone, ring tones generate annual revenues of one billion euros.

But the good news seems to end here, as legal online music download is growing "� but only just. It accounted for a mere $6.5 million of the $1.1 billion spent worldwide on music online in 2005. And in India, the volume of illegal transfer of music is still three and a half times that of legal music.

This is one reason why the Indian music industry, which has the fifth largest consumer base of music units in the world, is ranked 18th when it comes to music value. Then there is the problem of under-reporting by mobile firms.

Though mobile firms deny this, the music industry says royalty is paid for the first download of ring tone, which is then passed on to other users free of cost.

Piracy is clearly the biggest problem but the other grouse that the music industry has is the way the revenue pie is shared in legal downloads.

While mobile service providers corner nearly 60 per cent of the revenue per download, 15 per cent goes to the government and 25 per cent to music companies which is way too low, they argue.

The silver lining is big music companies have started accepting that internet and digital technology will define the industry's future and are figuring out ways of making money on music: digital downloads, ring tones, customised CDs and song dedications to name a few.

Saregama has done this with great effect. It has tied up with MSN Music, iTunes and Napster on a payment basis, and its subsidiary "� hamaracd.com - has made a success of selling customised CDs and digital downloads.

Online offering could indeed be the music industry's salvation.