Low PC penetration is one of the primary constraints of digital music distribution in a developing market like India. If one excludes the enterprises, small offices and SME segments, PC penetration in the home segment is very small. Internet penetration in home segment is even lesser.

Another major constraint that stifles the growth of digital music distribution is the time taken to download a song through the Internet. Whether you download through wireless connections such as GSM or CDMA or wired broadband connections such as ADSL, 60 minutes of music will take anywhere between 40-90 minutes to download.

Another factor that needs consideration is, how many people who otherwise use the PC and Internet for chatting, e-mail etc, would prefer to come to their PC to listen or manage their downloaded music content.

So when one combines all these factors, it is clear that digital music (using current business models) can never become a mass-market phenomenon.

That is why, all players are looking at digital music distribution as a premium-play value added service, addressed to the top most cream of the market.

A New Approach
While the population of India is 1000 mn, atleast 500 mn of these are potential consumers of music. The mobile subscriber base in India has already touched 100 mn. It is growing at a robust pace. Many entry-level mobile instruments already have FM Radio capability. So, adding a flash memory based MP3 player isn't going to add to the cost much. Stand-alone MP3 players can also be made at low cost for non-mobile users.

So, the market potential for digital music distribution in India is between 100 mn to 500 mn.

The Revenue Potential
The average revenue per user in the mobile market is now approximately Rs 400 per month.

Like in the mobile phone market, here too, the actual revenue per user could vary widely between Rs 50 per month to Rs 1000 per month. However, making a safe assumption that for music alone, the average revenue per user could be approximately Rs 200 per month at 100 mn consumers and Rs 100 per month at 500 mn consumers. That works out to a market size of Rs 20 bn to Rs 50 bn (per month) or Rs 240-600 bn a year.

To put it in perspective, the current total size of the Indian music industry itself is just about Rs 6 bn per annum. So, a new business paradigm as proposed here, could grow the Indian music industry 50-100 times its present size.

Key Drivers
To tap in to this enormous opportunity there are a few key drivers that we need to have in place.

User Devices: The primary reason why low cost portable MP3 players (or entry level mobile phones with MP3 capability) have not taken off in India is because its usefulness is tied to the PC and the Internet. If only we could liberate consumers from this unreasonable demand of having a PC and a broadband connection, the market for these devices will explode.

A mobile phone to some extent liberates the consumer from the PC, however, the cost and more importantly the time to download music is too prohibitive to be of any relevance in the mass-market context.

Server Side Content: The market cannot take off unless popular content is available at an attractive price. This requires a tie-up with all music label companies and if required direct tie-ups with film producers. The packaging and pricing of the content should be flexibly varied, depending on the demographic profile of the consumer.

Music Vending Machine (MVM): It is now obvious that driver 1 and driver 2 are absolutely useless, unless there is something in between to bridge the gap between the consumer and the content. And, that bridge cannot be and should not be a PC or Internet connection for reasons already explained. A music vending machine with hard disk can deliver a 45-minute music album through its USB port or Bluetooth to the consumer device in less than a minute.

A music vending machine with hard disk can act as a stockist of popular content. The consumer can instantly choose and download what he wants. Here the options could vary from ready to download packaged content, or individual selection of assorted songs from different categories.

A music vending machine with hard disk can dynamically change what its stocks and what it does, depending on the shifting preferences, trends and geographical, demographical profile of its consumers.

For example, an MVM installed in a mall will stock different content from a MVM that is put up on a public bus stand. Similarly what is moving fast today, could become dead stock a few weeks later and hence has to be replaced with faster moving content.

This dynamic change in stock position across the market comes without any risk of material wastage as it happens in the case of cassettes and CDs.

The stock at each MVM can be managed and updated through a virtual private network on Broadband Internet, mostly using off-peak bandwidth that is lying idle during the nighttime.

A music vending machine can also capture detailed consumption patterns across demographical, geographical segments and the data can be shared with content owners and creators of music. Thus, a network of music vending machines can act as a “virtual repository for the content owned by the consumer” (by looking at the purchase history of the consumer from a central server).

This means that the consumer has the assurance that he need not to pay again for listening to the same music that he has already bought once.

This is the killer application that will finally liberate the consumer from owning a PC or any kind of media, because ownership of content is dematerialized. It is held virtually in the server database against the consumer account.

This will also liberate the consumer from the limitations of MP3 players that have limited memory. The consumer can buy music into his/her player, but can later overwrite them to listen to something else, because he or she is always assured that his/her owned content can be accessed anytime anywhere on the MVM network.

Standards: Since there will be different types of devices in the market, and there will be multiple music distributors operating to serve the huge market of 100-500 mn consumers, we need some standards to complete the picture:

MVM to User Device-Handshaking Protocols
The MVM should be able to recognize the make and type of the device held by the consumer so that downloads are allowed only on approved models. The interface is through USB or Bluetooth.

Three levels DRM Standard linked to pricing should be set dynamically at the time of delivery, by the MVM. The DRM should be enforced through the firmware of the MP3 player. The pricing of the content should be dynamically decided at the time of delivery based on the type of DRM standard chosen and the type of device connected by the consumer.

• Download from MVM, upload to any PC or other devices and do what you want.
• Download from MVM, cannot upload/transfer to any other device but hold content in the device as long as you want. Overwrite content with new one if the space is full. Can refill previously purchased content free of cost from any MVM.
• Download from MVM, cannot upload to any other device. Validity limited to no of “plays” or no of “days” as required. (Subscription model)

Virtual Repository
When there are multiple operators selling music in the market, we would need a few virtual repositories that hold the consumer's account details and purchase history. All operators can access these repositories.

Common Smart Card
It would be ideal if a consumer can use a common smart card to access music sold by multiple operators. Cash could be loaded in to this smart card by paying at the retail outlet where the MVM is located, or could be transferred in to the smart card-online from the consumer's credit card or debit card account. The MVM will double up as an online payment collection point for this.

A network of hundreds of thousands of music vending machines could not only revolutionize music distribution, but could also be used for distributing video content, games etc. In that sense the MVM will become a DVM (digital vending machine).

Ramkumar RS
consultant, Strategic Marketing and Organizational Development,
MEL Systems and Services
vadmail@cybermedia.co.in