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Guess what? The biggest music company in India is a Telecom operator

May 20, 2009
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An interesting development happened this month in India's music industry. Music Bharti, the music related arm of Bharti -- the biggest telecom operator in India, became the biggest music company in India by revenues.

As I see it, it signifies following things:

1) Piracy is definitely killing the traditional music business comapnies like Saregama, HMV, Sony-BMG etc. Bharti does not incur any distribution cost like these labels have to incure on making their music CDs and cassettes present in music shops across India.

2) Being the biggest telecom company in India with over 70 million users, Bharti has the biggest one-to-one distribution network in India. This coupled with aggressive marketing, Indians tendency to splurge on their mobiles with hello-tunes, ringtones, caller tunes and what not, has opened up a totally legal way of making money from music.

As Chris Anderson talked about this in his book The Long Tail, the marginal cost of adding another song to its library is zero for Bharti, and it results in virtually unlimited choice to its users. For a music buyer, the chances of a song being available with Bharti Airtel would be higher compared to finding it in a neighborhood music shop.

However, from the personal ideation point of view, I'm slightly perplexed why Bharti is not using the recommendation system to get people's satisfaction levels with their downloads. Though it can be argued the tracks which get downloaded most, or put as caller tuned most number of times directly signify the choice of consumers as a whole. However, it misses the personal recommendation feature suited to individual tastes, which Amazon or Netflix deploy. I also think that Bharti can put the whole catalog of its music online and allow users to download any song of their choice to their phones.

One important point that is missed in the headline is about the profits. Bharti still has to license its music from the record labels, and that would cost money. Now, as I know it, the power has been with telecom companies when it comes to content developers of games and applications. However, with music contracts, I don't know as of now. But it can be argued that when even the multiplex owners have more power over the movie revenues in India(cause of the ongoing fight between multiplex owners and Hindi commercial cinema industry), then consolidated telecom firms would definitely have more power over the music companies. So, the ground has shifted for the music companies.

In US, it was Apple with its iTunes. In India, it's Telecom companies that are calling the shots. Where would the music companies go to find their profits?

Update: The folks at Medianama have done some calculations and asked industry people to do the maths of money split-up between telecom operators, platform owners and content owners/aggregators. In case you're interested, do read the links.