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All markets are not the same. Most people in India have not had access to high-speed Internet or a PC. The wired broadband penetration of India stands at about 13 million subscriptions and there are only 50 million PCs in the country. Very few Indians have broadband or a PC of their own.

3G expands consumer audience by 100 million listeners

Despite the lack of broadband and PC penetration, there are currently 121 million Internet users in India. Guess where they are? Mobile. With the rollout of 3G in India, access to high-speed Internet has become cheaper and more widely available. People don’t need to own a desktop computer to get online or, most importantly, to participate in e-commerce — all they need is a mobile phone.

The mobile model — and by extension, the mobile music model — scales. It took broadband 7 years to reach 11.5 million wired subscribers. In less than half that time, 3G subscriptions in India topped 13 million, and that number is rapidly growing. There are 884 million mobile users in India, and as smartphones flood the market, more of them will be making the switch, becoming not just first-time smartphone users, but first-time Internet users as well.

Already, 59 percent of mobile web users access the Internet via mobile only. A study by the Boston Consulting Group predicts that the total number of mobile Internet users will balloon to 237 million by 2015. It is connectivity, now more than ever.

Advertisers, rather than end users, are footing the bill.

Brands are embarking on the biggest consumer grab of the century as China’s and India’s multi-billion audiences rise in economic status. Thousands of brands are competing to become the future soda, life insurance and auto brands of this part of the planet. That’s a major influx of ad dollars looking for a scalable way to engage consumers.

Asking consumers to shell out 15 to 25 rupees for a song online was unrealistic when pirated options were widely available for free. But as legal sites gain popularity and engagement numbers soar, major brands are ready to spend their advertising dollars on digital music Web sites and apps, so music services like Saavn, Smashhits and Ragga provide large catalogs of ad-supported music for free.

The benefits are abundant for the brand advertisers, end users and record labels; the end user gets something customizable and valuable for free, while major brands can finally capture the attention of one of the world’s largest emerging markets.

So what made advertisers change their minds? Piracy. Piracy is being addressed in India via the ISPs — in February, the High Court of Calcutta handed down the decision to ban the pirate site songs.pk on major ISPs. This is a move that many have hoped to see in other territories, and India is stepping up to address the issue directly via the ISPs.

While pirated music is still an issue in India, legitimate and fully legal music streaming Web sites and apps are restoring the faith of advertisers, meaning a huge new audience for advertisers, profits for the music labels from brands with deep pockets and top-notch quality for users.

Digital means data

Labels are excited that they can finally reach audiences who are passionate about their niche content, thanks to the kind of targeting that digital platforms make possible from user data. It’s especially great for indie labels, who now have fast entry to market and an opportunity to get in front of the right audience, despite not having the major-label marketing moolah.

Thanks to the wealth of data digital music supplies, the Indian music industry can get the right music to the right people at the right time. No need to make assumptions based on demographic information or guess what people will like. Data provides the ultimate customization tool for an industry in which customization and understanding the preferences and tastes of the end user is key.

This is the moment the music industry in India has been waiting for; it can finally focus on its core business — producing music — while advertisers happily foot the bill. And users get to sit back and enjoy, share and discover for free.

Read the original article as published on All Things D.

From the Economist

“The music business is surprisingly healthy, and becoming more so. Will Page of PRS for Music, which collects royalties on behalf of writers and publishers, has added up the entire British music business. He reckons it turned over £3.9 billion ($6.1 billion) in 2009, 5% more than in 2008. It was the second consecutive year of growth. Much of the money bypassed the record companies. But even they managed to pull in £1.1 billion last year, up 2% from 2008. A surprising number of things are making money for artists and music firms, and others show great promise. The music business is not dying. But it is changing profoundly.

The loudest boom is in live music. Between 1999 and 2009 concert-ticket sales in America tripled in value, from $1.5 billion to $4.6 billion. Ticket sales wobbled in America during the summer of 2010, but that was partly because some big-selling acts took a break. One of the most reliable earners, Bono, U2’s singer, was put out of action when he injured his back in May. Next year many of the big acts will be on the road again, and a bumper year is expected.

Music’s cachet and emotional pull also make it a potent weapon for businesses that want to build their own brands. The Rolling Stones (again) led the way in recruiting tour sponsors, from Sprint, a phone company, to Ameriquest, which sold mortgages. Sponsorship can lead to musicians wearing a company’s clothes and naming songs after it: Rascall Flatts, a country music band, has done both for American Living, a label carried by JCPenney. IEG, a firm that tracks the market, estimates that the value of tour sponsorships in North America will reach $1.74 billion this year, up from $1.38 billion in 2006.

Because it derives revenues from business as well as consumers, publishing is much more stable than recording. Record companies’ publishing departments, which once seemed rather dowdy next to sexy, talent-spotting A&R, have become vital cash machines. Publishing supplied 29% of EMI’s revenues and 45% of its profits in the year to March 2010. The outfit’s new boss, Roger Faxon, comes from that side of the business—a reflection of how the economics of music have shifted.

Many of the acts that now draw huge crowds emerged in an era of multi-album record contracts, lavish marketing and radio airplay. They built their brands gradually, overcoming the occasional lousy album. They “invaded” other countries when they felt the time was right. As a result, they have legions of fans who are prepared to stump up for concert tickets. Because their songs appeal to several generations of listeners, they are attractive to advertisers and TV programme-makers. The young dreamers in shows like “The X-Factor” commonly perform songs that are more than a quarter of a century old.

Some music executives fret that the stadium-filling acts will not be replaced. It is true that the starmaking machines run by the record companies are creaking. But this does not mean there will be no more popular acts. Musicians will build fan bases in other ways—through social networks, by recording music for TV or simply by trekking from gig to gig (which is how bands became famous for much of the 20th century). Some will rise with a speed that would have shocked their predecessors—witness Lady Gaga or Justin Bieber, a 16-year-old singer who was almost unknown a year ago. Those who doubt their staying power may wish to consider that adults have long believed the music their teenage children listen to will not endure as long as the tunes they grew up with.”

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