India's Sweet Digital Music Biz

Young, mobile, phone-toting consumers in search of ringtones, songs, and movie dialogue power the fast-growing download market

by Nandini Lakshman

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If you want to understand the explosive growth in India's digital music download scene, check out the buying habits of college-bound Dipanjali Singh. The 17-year-old has a $14-a-month prepaid card for purchases on her $386 Motorola Ming smart phone, and she uses about 50% of it to feed her ravenous appetite for cutting-edge pop music

At any given moment, Singh has a repertoire of 50 songs from various artists (her current passion is San Francisco post-grunge band Third Eye Blind) downloaded to her handset directly from the Internet. She also transfers her tunes to her iPod.

She is an avid consumer of digital music—and the latest in mobile telephony. "I don't retain the songs for long, as I get bored fast," says Singh, who is on her fifth phone in three years.

Her pal Ria Chadha, whose Motorola V3i has been set up with an incoming call ring tone by Hawaiian surfer-turned-songwriter Jack Johnson, likes to move music between her wireless, Bluetooth-enabled personal computer and handset. She changes her personalized ring tone only every few months, since father pays the phone bill. More free-spending consumers like Vishal Indulkar, 25, regularly download Bollywood film dialogue clips and Indian devotional songs into their handsets.

Downloads Will Triple

These next-generation consumers are technologically savvy, and they're using their handsets in creative ways in the world's fastest growing mobile phone market. India's total handset population is expected to hit 250 million by the end of 2007, and big global companies such as Nokia (NOK), Motorola (MOT), Samsung (SSNHY), and Sony Ericsson are doing a brisk business with wireless-enabled phones loaded with FM radios, MP3 players, and sizable memory capacity.

Younger Indians increasingly want the latest music easily downloadable into their handsets for on-the-go enjoyment. According to global digital music distributor Soundbuzz.com, India's digital music sales for use with mobile phones will actually surpass CD and cassette sales in 2007. In fact, the country's digital music sales are expected to nearly triple, to $911 million, by 2010 from the $322 million level reached mid-decade, and 80% of those sales will be from purchases for handsets.

All of this is rapturous news for global mobile phone manufacturers with phone line-ups aimed at India's young, digitally sophisticated consumers who don't want ungainly CD racks cluttering up their apartments. "With no shelf space problems, searching [and downloading music] is a killer application for handset makers," says Mandar Thakur, general manager of Soundbuzz India.

Silver Ring Tones

Less thrilled about this trend is the Indian recording industry. It's fighting to shut down free music download sites on the Internet that are undercutting its profits.

The India Music Industry trade group estimates that 1% of mobile downloads involve pirated games and songs, and it has worked with government authorities to shut down more than 600 illegal sites in recent years. "This is a big issue for us," says Savio D'Souza, secretary general of IMI.

Yet for handset makers and Indian telcos, the digital music download craze is a huge and positive development. Downloadable ring tones—some 300,000 are digitally transmitted to handsets every day in India—are already a $45 million-a-year business set to grow at double-digit levels the rest of the decade. Ring tones also generate about 40% of the data revenues for India's big wireless operators such as Bharti Airtel and Reliance Communications.

And India's youthful consumers, who view their mobile phones as fashion statements, should drive demand going forward. Nearly half of India's 1 billion-plus population is under the age of 20—and that includes 163 million teenagers. By 2015 the under-20 crowd will make up 55% of all Indians.