Music helps soothe the savage beast, said Shakespeare. As far as India is concerned, it has also been exciting a lot of human souls lately.

The foremost indicator of this excitement has been the share price of the venerable Gramophone Company of India (GCIL). From a level of Rs 50 in June it soared to above Rs 500 in October, and is currently around Rs 380. There is also Universal, one of the big five in world music business, taking over Polygram tin, drum and whistle, and gushing over the potential of music in India. Side by side, Sony Music is playing the market by its own rules. It looks for sounds, not names, while selecting music and has shown commitment to customers through import of quality tape as well as through its $12 million investments made in India so far. Different sounds are in the air.

Background
Music has always been an important part of the Indian social ambience, with film music traditionally accounting for the lion’s share of the total sales. A look at the history of Indian cinema reveals that music has been an important tool in building a film's appeal and enhancing its performance at the box-office. Music then existed as a sub-section of films in people's collective mind. In being so, music has also created many labels of its own -- in the shape of music directors, lyricists and singers.

These spin-offs have helped generate many alternate revenue streams. This has, in turn, liberated film-based music from complete dependence on films for an identity. A Kishore Kumar or an R D Burman could command a series of launches in their own right. This appeal stretched across screen images (and even endured cover versions) and rubbished the theory that music for the Indian market meant just play-back and was not powerful on its own.

In a very disorganised way, music has impacted the economics of a movie project. The T-Series juggernaut expanded the market for music in the eighties. But it was not till the nineties that music’s potential was harnessed. The early nineties saw the advent of satellite channels in a big way in India. This really helped marketing of films. Promotion became very cost-effective as reach expanded. Satellite channels were also a simple way to target the NRI segment. It is no coincidence then that movie collections in the overseas circuit picked up dramatically in the nineties.

Beaming with the satellite boom
Music reaped additional benefits from the satellite TV. Apart from an expanded reach, the medium also provided visual backing to the audio content, which is a phenomenal reinforcement. Sections of songs, coupled with visual clips, gave a new dimension to advertising beyond the mundane print version. Music here graduated to something which could actually build a movie's image and drive its sales.

Music rights became big business. As for audio companies, they had a market where awareness was high and it was only a matter of getting the supply in time. Satellite became a great factor in scaling down piracy, the music industry’s traditional bugbear. For the producer, if handled carefully the satellite was a tremendous profit centre, and a great cushion if his movie failed to live up to his expectations at the box office.

With this in mind, music companies stepped into the production arena. Prominent entrants included T-Series, Venus Cassettes and GCIL.

Music now moved a step forward and began to drive movie themes. On the one hand, there were strongly-scripted movies where music was given special attention. On the other, there were movies like Aashiqui, Phir Teri Kahani Yaad Aayi and Bada Din where music drove the movie. The main advantage of adopting this formula was that the star appeal was optional and hence movie budgets could be scaled down. Audio companies were seen as a cut above in music-oriented movies, since they had, in literal terms, their ear to the ground. As Dhiraj Shah, promoter of the Time group puts it: "Music companies integrate better."

The natural focus of music companies helped segregate the music, and thereby the film, genres more clearly.

As normally happens with the emergence of a successful trend, everyone queued up. The visual advantage of satellite television had given a fillip to non-film music, which was exploited well in the early stages. But later on, an overdose of supply and, more importantly, of lack of originality put viewers off. This has been more evident in the last three years’ sales, where the euphoric rise tapered off.

But the main lure of music remained the fact that the more you play music, the greater becomes its attraction. In these times when five new audio companies are created every month, the library of a music company is considered a prized asset. In GCIL’s case, this has been one of the main attractions, other than the restructuring of its balance sheet. Again, in GCIL's case, the demand was also fuelled by the fact that there were not too many worthy exposures to growth witnessed in the music industry. Listed entities like BMB and Vijayta Audio definitely did not inspire anyone. In the light of all this, it can be understood why, in 120 trading days, GCIL's stock closed on its upper circuit limit 40 times.

Indian market peculiarities
The plethora of audio labels is one of the most significant factors that distinguishes world music industry from the Indian one. Some of the trademark features of the domestic industry are listed below.

Piracy: This has been the most rampant feature of the domestic music industry. Piracy refers to making unauthorised copies of a title and selling it. Piracy operates in a localised market and has inferior hardware. Between these two, one can afford to price output low and still make handsome profits.

The sheer geography of the Indian market has aided the nefarious activity. T-Series, with its low pricing strategy modelled closely on piracy, had revolutionised the cassette market in the eighties. But before satellite came along, very few people were aware of the immense potential of the country’s remote regions as a market for music. As per industry figures, piracy has diminished greatly in the nineties and now accounts for just a quarter of the total music industry size. However, till legislations fall in place, industry sources aver that piracy will sustain.

Cost sheet: The Indian market is also unique in that hardware, not software, is the main component of a music company’s cost. That the inputs into a tape, and not the value of the music recorded on the tape, influence the price in this market. This again is the legacy of piracy, as also of the fact that India has till date remained a cassette market, while huge markets the world over have shifted to CDs. The average album sales value here, at Rs 26, is less than a dollar.

Exposure: India is a rare case, where, more due to quirky legislations than anything else, the masses have been exposed more to satellite television than to FM stereo. This has also contributed to the low penetration of CDs " the Indian market by and large does not appreciate the finer points of high-fidelity music. Visuals are appreciated more " a tendency that helped leverage the advantage of the satellite channels.

Distribution distinction
Another idiosyncrasy is the distribution network. Market observers opine that nowhere else is music distribution such a powerful element in the business as in this country. From available estimates, it is the most profitable part of the business.

As is apparent from the chart, around 50 distributors have an ironclad grip on the lifeline of the music industry. The average cost of a cassette for them comes to around Rs 19. Their realisations on this vary from Rs 38 (large retailers) to Rs 44 ( small retailers). The price for the customer would, of course, be Rs 50. The reluctance of even GCIL to divulge details of sales broken up by A, B and C town classification is an obvious indication of how important are the semi-urban and rural areas that are being handled by the highly efficient network. Since distributors take up huge volumes of albums from all companies on cash basis, no company has an advantage in the distribution process. This, along with the lack of effective piracy laws, is what has kept the market from becoming oligopolistic.

The importance of this network lies in the fact that music cassette sales are highly time-sensitive. In the case of films, their music is launched two to four months in advance of the release of a film. Synchronised promotions on various channels help build up demand for the film’s music. There is a second spurt immediately after a movie is released, if audience response is positive. In both the cases, if supply is not made available immediately, the demand is either satisfied by pirated cassettes or it shifts to some other album that is being promoted. Loss of sales in either case would butcher profitability. The current system can make available a million cassettes to the customer on any given day.

While this system is efficient, it also holds music companies at the mercy of this cartel of sorts. Even though there is much to gain by bypassing this network and going for direct marketing, they cannot afford to do so. It would take massive effort, cost and time to replicate this kind of network and as discussed, just the time factor could kill an album. But total dependence on this network is avoidable. The most favoured antidote, other than increasing presence in different genres, is music stores. The last year has seen a host of music retailing outlets open up, the biggest among them being Music World, floated by the RPG group.

Role of music shops
Music retail outlets, a very popular concept in the developed nations, are an expensive proposition in India, when it comes to asset outlay and working capital. Their aim is to style the retail shop as a desirable social location as well as to make an occasion out of buying music. The emphasis is on ambience and the target mainly the youth. But overall, the quality-conscious buyer is in mind. Such shops’ margin on unit sales is high. In the context of distribution, music retail outlets have a lot to contribute.