usic Industry in India is one of the oldest and has

had the reputation of being one of the strongest

parts of the entertainment sector in India. However,
in the wake of the new age, the industry has undergone a sea
change. According to industry
expected to grow at a CAGR of 1
estimates by FICCI. These estimates only take into account the
traditional revenue streams of music which include the physical
sales and digital sales of music. Howe
of new media and convergence of media newer revenue
streams need to be taken into consideration to truly define the
width and breadth of the music industr
Revenue Streams for the Indian Music Industry
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usic Industry in India is one of the oldest and has

had the reputation of being one of the strongest
parts of the entertainment sector in India. However,
in the wake of the new age, the industry has undergone a sea
change. According to industry experts, the music industry is
expected to grow at a CAGR of 1-2% by 2012 according to the
estimates by FICCI. These estimates only take into account the
traditional revenue streams of music which include the physical
sales and digital sales of music. However, with the emergence
of new media and convergence of media newer revenue
streams need to be taken into consideration to truly define the
width and breadth of the music industry
Revenue Streams for the Indian Music Industry
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Constituents of the Industry
The main players of the music industry
Musicians/Singers, Lyricists, Composers
Ensembles or Content Aggregators
Music Companies, Industry Associations
Distributors or Dealers, Organized Music Retailers
Telecom Operators
A typical value chain for the music industry can be
depicted as follows:
Music Industry Value Chain
Source: Indian Music Industry Association
The steps in which the value chain operates are:
Step 1: The music director, lyricist and artists are
Step 2: The film producer also sells rights of physical, digital and broadcast distribution
to the music company
Step 3 & 4: The music company converts the music into CDs/Cassettes and distributes
the music to the consumer t
Step 5: The music company earns royalties through the radio broadcast in association
with the industry bodies such as SIMCA and PPL
Constituents of the Industry Vertical
The main players of the music industry:
Composers, Music
Ensembles or Content Aggregators, Film Producers,
Industry Associations, Radio,
Organized Music Retailers,
A typical value chain for the music industry can be
Music Industry Value Chain
The steps in which the value chain operates are:
Step 1: The music director, lyricist and artists are appointed by the Film Producers
Step 2: The film producer also sells rights of physical, digital and broadcast distribution
Step 3 & 4: The music company converts the music into CDs/Cassettes and distributes
the music to the consumer through the distributor/dealers or organized retailers
Step 5: The music company earns royalties through the radio broadcast in association
with the industry bodies such as SIMCA and PPL

appointed by the Film Producers
Step 2: The film producer also sells rights of physical, digital and broadcast distribution
Step 3 & 4: The music company converts the music into CDs/Cassettes and distributes
hrough the distributor/dealers or organized retailers
Step 5: The music company earns royalties through the radio broadcast in association
Step 6, 7 & 8: The music company also
sells rights to content aggregators, who
further convert music into formats
compatible for telecom operators, further
enabling the consumer for mobile
downloads
Areas of operation
Production of Music: Music production in India is
either film music or non-film music. The most
dominant part of the Indian Music Industry is films,
and music has always formed an integral part of the Indian Film Industry. On an average, a film
in India has 7-8 songs. The music of a film is released a few months prior to the release of the
film. On an average a films music has a shelf life of 6-8 months depending on its popularity.
A film producer contacts the lyricists, music directors and artists for making music for his/her
film. In terms of presentation, the music is presented by the film stars on screen. This is an age
old tradition in India, where the film stars lip sync the songs to give it their face for audience
popularity.
In terms of non-film music, various upcoming artists contact music companies to record and
create music.
The way a film producer interacts with the music company is imperative to understand the areas
of operations for the music industry in India since they are responsible for production of music.
Typically, the physical and digital rights of music are auctioned or sold to the music company for
a negotiated time period. Three main models are followed to sell music rights:
Outright Sale, in this case the film producer does not earn any further royalties, as music
becomes a property of the music company
Minimum Guarantee and Royalty-based revenue sharing
Only Royalty, in this case only royalty is shared and no upfront money is given
At this point, it is also important to understand that the roles of the various players in the
industry are not rigid. For example, the promotion of a film may be handled solely by the film
producer or shared with the Music Company and content aggregators.
The music companies are at the centre of operations for the music industry. A music company
takes into account film music and non-film music. The way the music company operates has
been explained in Exhibit 2.
Distribution of Music: Distribution takes place in three varied but integrated ways to reach the
consumer: Direct Sales, Mobile Sales and Radio.
Direct Sales: The music company produces physical formats of
music in forms of CDs and Cassettes, which reach the retailers
through the distributor/dealer networks. These retailers are both
organized and un-organized. The un-organized retailers are small
shops in cities, which might be dedicated to music goods or
department stores, stacking all household items.
In recent times, the organized retailers in forms of dedicated,
atmosphere creating music stores have emerged in the country.
Digital, Mobile Sales: The music company sells the digital rights to content aggregators, who
further convert the music into digital formats. These digital formats are downloaded by the
consumer. These formats are also sold to telecom operators, which the consumer buys in forms
of mobile downloads of ringtones, dialer tones, etc.
Radio: Radio broadcasters buy rights either directly from the producer, the music company or in
association with the music company and industry associations. The broadcasters in turn pay
royalties to the producers on a per hour of music played basis
Establishing Business Activities
The Indian music industry has gone through a phase of long existing studio culture, to an
unstructured unorganized business. However, with the entertainment business identified as a
growing industry by the government. The industry has progressed towards a culture of
conglomerates. However, an important aspect of this change in the industry is decline of
traditional formats of music. Due to this, the industry has various loose ends at different levels of
distribution. The emergence of newer forms of music listenership has opened up various
opportunities for varied players. There is an unmet demand for three main forms of players:
Content Aggregators
Telecom operators
Organized Retailers
Market Potential
The music industry although experiencing a sluggish growth currently, has a promise of high
growth potential as the transition of the industry from traditional formats to a new age format
takes place. While the overall projected growth of the industry in compounded annual terms is
1-2%, the growth is digital formats of music is phenomenal.
Investment and ROI
Investments in the music industry for making and distribution of music range anywhere between
INR 5100 Mn. Due to the increasing number of films, non-film music, international music and
various other genres emerging, the advertising and promotion costs are also turning out to be
very high for the music producers and distributors.
According to the experts, the film musics revenue share is approximately 30:70, 30% for music
and 70% for films. The return on investment is also divided in the same split, depending on the
revenue of the film.
However, the return on investment is a controversial topic for the music industry. The
consumption of music is on an all time high in India, but the appropriate monetization of music is
not taking place in accordance. According to industry insiders, the music industry needs better
collections, stringent anti-piracy laws, awareness about the copyright issues and a streamlined
mechanism of monetizing music sales.
The main bone of contentions of not receiving the due return on investment is against radios
and mobile operators. The industry insiders feel that while radio is gaining popularity and
earning large margins, the music industry is not getting the appropriate share of this revenue.
Also, in case of mobile operators, the mobile music industry is growing at a phenomenal rate.
However, the revenue split is 25:75, music industry and telecom operators. It is sometimes
40:60, but in this case the music industrys share is divided as 15:25 among producers and
music companies, in turn not adding much value to either of the players. To make matters
worse, physical sale of CDs and cassettes are declining. As a result, the music industry is
unable to recover investments pumped into making music.
Therefore, while the investments in making music are rising with the changing consumer
landscape and increased competition; at the same time, the return on investment is on an all
time low for the music industry.
Skill Set Requirements
The basic skills required for music creation are instruments and
vocals. Traditionally, various Gharanas have existed in India,
which teach instruments and singing to aspiring musicians.
These Gharanas are divided on the basis of Genre of music,
instrument of music or regional music. Some of classifications
are:
Hindustani Music: Kalwanta Gharana founded by Baiju Bawra, Kawal Gharana founded by
Amir Khusro.
Instrumental Music: Sarasota Veena Gharanas, Table Gharanas, Sarod Gharanas, Sitar
Gharanas.
Regional Music (on basis of melodies and language): Punjab Gharana, Ajrara Gharana,
Benaras Gharana, Lucknow Gharana, Farukhabad Gharana
Key Industry Trends and Future Perspective
Mobile Music an emerging revenue generator
Internet Penetration on a slow, but steady rise
Radiochanging the landscape of music hearing
Live Music Concerts
Talent Shows

Business Profile of Music Industry in India
Prepared by Mudra Institute of Communication Ahmedabad (MICA)
For Department of Science & Technology (DST), Technology Bhawan, New Mehrauli
Road, New Delhi 16
Note: Various references have been used in the preparation of this profile. For further details please contact the Institute.
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