Digital music companies are looking to create original content as they drive usage of their apps. The fairly sharp rise in number of downloads coupled with an increase in time spent by consumers on music streaming apps has led them to believe this could help grow the business. With subscription revenues yet to flow in, however, advertising will still remain the main source of income.
“With the Indian consumer still reluctant to pay for content and given she pays for data usage, streaming apps are developing original content to drive advertising revenues,” says Gopa Menon, vice president, Isobar, a full service digital agency.
According to a Ficci-KPMG 2016 report, the size of music industry which stood at Rs 1,080 crore in 2015 is expected to grow to Rs 2,060 crore by 2020. Revenues from music sourced from music streaming apps accounts for 55% of revenues generated by the music industry. The other sources are sale of music rights to private FM radio, live events, etc.
Currently, advertising accounts for the largest chunk of revenue of as much as 80-90%. As per industry estimates, a banner ad—either a video or an image—on music streaming apps such as Gaana or Hungama is charged Rs 150-250 cost per thousand impressions (CMP). The cost of a roadblock advertisement ranges between Rs 2.5-3.5 lakh per day. A roadblock advertiser typically runs the campaign across multiple placements on the app for a whole day. For audio ads, music streaming apps look at signing longer-term deals, typically for a month, with advertisers who pay Rs 2.5 lakh for a month.
“Of the total user base of Gaana only 1% are paid subscribers. However, we are able to generate 20% of our revenue from this 1% user base. In the next three year the aim is to increase the paid user base to 5%, so that we are able to up the subscription revenue by 100%,” said Gautam Sinha, CEO, Times Internet, the digital arm of The Times of India Group.
Gaana claims that over 20 million users access the app on a monthly basis. As per the company, over 10.5 billion minutes were spent on the app last year.
Similarly, Hungama claims to generate 55% revenue from subscription and the remaining 45% from advertising.
“We allow users to accumulate points, which can be further redeemed to either download songs, or convert into premium subscribers,” explains Neeraj Roy, MD and CEO, Hungama Digital.
While, telecom operator Airtel’s music stream app Wynk, claims to provide an ad-free experience to its user base. “The fact that we have a strong library of content due to the parent company’s association with music label firms for Hello Tunes, has helped in creating a strong base of subscribers,” says Karthik Seth, CEO, Wynk, adding that it will take another 3-5 years for the digital music industry to get its share of regular paid users.
Gaana, Hungama and Wynk are cranking up their original content play so as to build a loyal customer base before international behemoth Spotify enters the Indian market with its humungous music library of more than 30 million songs.
While Saavn runs various audio-series such as Trial by Error: The Aarushi File, amongst others, Gaana has introduced audio content from Radio Mirchi such as Mirchi Murga with RJ Naved and Hansi ke Phuware Sud.
“If global competition Spotify enters the country, original content will come in handy to compete against it. On digital there are very less barriers to compete, so one needs to build those at an early stage,” adds Sinha.
Wynk however, will continue to focus on being largely a streaming product. “While this is an interesting area to innovate in, at this point we are a focused music play product,” says Seth.
According to Airtel, Wynk has registered over 25 million downloads since it was launched in September 2015, with 60% of Wynk music installs are non-Airtel customer.
Industry observers believe that while original content will help in bringing in new users, the cost of running the business will increase. “Music streaming apps need to look at another model called access revenue stream. Under this a particular music app becomes the default app on an user’s phone. Music apps can tie-up with telecom operators, who under a revenue share model can provide interesting deals to users.” says Jehil Thakkar, head of media and entertainment at KPMG India.