Industry Insiders Fear Imminent Collapse Of Indian Music Industry

Industry leaders here are warning that the Indian music industry is nearing the brink of collapse.

One high-profile industry figure, Abhik Mitra—managing director of Calcutta-based label Saregama India—sums up the prevailing mood by warning that unless corrective steps are taken now, the Indian music industry will collapse, as Pakistan's has. According to the International Federation of the Phonographic Industry (IFPI), Pakistan saw its already minuscule legitimate music market decline in value terms from $9.2 million in calendar year 2000 to $3.2 million in 2001.

Market figures for 2002 are not yet available, but the IFPI currently estimates Pakistan's piracy rate is more than 50%. That situation has caused many leading Pakistani acts to sign deals with labels outside their home country. In the case of rock band Junoon, it signed with EMI Arabia and Virgin Records India.

Right now in India, according to Virgin Music India managing director Mohan Mahapatra, "Piracy is a life-threatening issue."

Labels body the Indian Music Industry (IMI) says the trade value of sales of prerecorded music (net of returns) by its 63 member companies (which account for more than 80% of the legitimate music market in India) totaled 5.9 billion rupees ($123 million) between April 1, 2001, and March 31, 2002. That represented a 23% decline from the previous business year. The IMI estimates that by the end of the current business year for companies here on March 31, total sales by its member companies will have declined a further 20% to 4.48 billion rupees ($90 million).

Mitra says there are three main reasons for the current slump. "First, it's the new wave of piracy caused by cheap blank CDs and affordable hardware," he notes. "Second, the problem of cover versions and remixes of Bollywood songs is a menace." A loophole in Indian copyright legislation means there is no provision for royalty payments to original rights holders, and cover versions can be produced without the permission of the original copyright holder.

"Third," Mitra says, "there is an A&R problem, since one can always argue that the quality of music can be better, especially when it comes to the poor performance of non-film albums."

According to the IMI, the retail value of sales of pirated recorded music in India totaled 18 billion rupees ($37.5 million) in the three years between April 1, 1999, and March 31, 2002. Those figures were first announced at a December 2002 conference held in New Delhi titled "Sound of Silence"; that is also the name of the latest round of the IMI's ongoing anti-piracy campaign, on which the IMI spends 50 million rupees ($1 million) annually.

Nonetheless, IMI president Vijay Lazarus, who is also managing director of Mumbai-based Universal Music India, claims he remains optimistic about the Indian industry's long-term prospects. "We've hit the bottom," he says, "so the only way to go is up."

He adds that cassettes—which account for the vast majority of music sales in India—suffer from a 40%-50% piracy rate, while for CDs the piracy level is 60%.

The overall sales decline is also partly blamed on a slump in the entertainment industry, a result of the huge number of Indian films that have recently flopped at the box office in a music market heavily dominated by soundtrack sales.

Mitra adds that the low price of blank CD-Rs—which sell here for 8 rupees (16 cents) each—and the easy availability of CD-R writers (with prices as low as 4,000 rupees [$90]) are spurring piracy in India. Pirated CDs containing around 100 songs each in the MP3 format retail for about 40 rupees (83 cents). Legitimate CDs, in contrast, sell for between 99 rupees and 150 rupees ($2-$3).

Lazarus says the latest phase of the IMI's anti-piracy campaign will focus on increasing public awareness and on working more closely with government ministries to strengthen anti-piracy legislation. The IMI says that in the past two business years, there have been only 196 anti-piracy convictions in India, of which fewer than 10% have resulted in prison sentences of at least one year and/or heavy fines.