Study Reveals Why The Indian Recorded Music Industry Is Underperforming

As clichéd as it may sound, Cinema & Recorded Music in India are twins separated at birth at the village fair that always end up meeting on the silver screen. That is the symbiotic relationship between Indian Cinema & Recorded Music. 70% of recorded music in India is film-based; the other 30% is largely classical, devotional, folk and independent. If one goes to India’s southern and eastern states, about 90% of the local music is film based. The phenomenon of cinema and recorded music is so deeply entrenched that a new trend of content for OTT Video platforms is emerging where recorded soundtracks embedded in OTT content are becoming popular and making it to the national charts.  

Since 70% of recorded music in India is film-based, the growth of the film industry should have led to the growth of the recorded music industry. However, despite this symbiotic relationship, today the film industry is valued at  ₹ 19,100 cr., while the music industry is valued at a mere  ₹1,500 cr.

In order to examine why there is a wide variation in the growth rates of the recorded music industry and the film industry that have up to 70% in common, the Indian Music Industry released a case study titled, ‘Free Market Economics Indian Recorded Music Industry’.  

The paper also aimed to determine the reasons for the phenomenal growth of the film industry and contrast it with the stunted growth of the recorded music industry. Further, to study the hopes to establish the need for bringing in free market economics to the recorded music industry to enable the recorded music industry to reach its full potential. 

Highlights 

Through this paper, it was concluded that with the film industry, the flywheel effect eventually led production houses to invest in and reap rich dividends from new genres of films such as 3 Idiots, English Vinglish and Bahubali. However, in the case of the recorded music industry, due to the lack of free market economics, there was no incentive to invest in new genres. Those who invested in new genres despite all hurdles have not been able to effectively monetise their investments.  

The contributing variables to successful growth in both the industries depend primarily on financial fuel i.e., investment. When free-market conditions prevail, investors tend to take on high risks as can be clearly seen in the case of the film industry. However, if the free-market economy is disturbed, it would affect fair market values negatively, leading to a decline in investments as is evident in the case of the recorded music industry.  

The export potential is huge for the recorded music industry, a song can travel far and wide in the digital era. A liberal economic policy for the recorded music industry and its ensuing flywheel effect would result in:  

1. Greater employment generation: This goes beyond singers there are also authors, composers, publishers, sessions musicians, record labels, platforms like Spotify and GAANA.  

2. Increased earning on the periphery of the organised music industry: Once songs are created there are members of the local music cottage industry like the Nukkad DJ ‘S and the Brass Bandwallas who also benefit.  

3. Higher Infrastructure development: expect AIG, and Ticketmaster to create venues like the O2, Staples, Madison Square Garden.  

4. Increased export earnings and growth: Brazil’s music revenues are around US$ 313 million (Source: IFPI GMR 2020) of which it is estimated approximately 50% comes from exports.  

The Government of India needs to let free market conditions play in the recorded music industry for it to experience the film industry’s revenue growth. The recorded music industry in turn is ready and willing to support the Government of India on All India Radio (AIR) and Prasar Bharathi (PB) in the interest of promoting social good.  

Further, given that the film industry and recorded music industry are symbiotic, there is no reason why they should have different licensing regimes. Had it been allowed to operate with free market values, the ₹1,277 cr. Indian recorded music industry, which was ranked 15th globally in 2019 (Source: IFPI GMR 2020), would have been worth approximately ₹3,332 cr. to ₹4,107 cr. in 2019, placing it in the top 10 music markets in the world.  

Instead, the Indian recorded music industry is hampered by potential revenue losses of around ₹2,016 cr. to ₹2,791 cr. annually and a consequent decline in investments.  

“Since India’s linguistic heterogeneity — 22 languages recognised by the constitution of India and 19,569 local dialects — mirror the cultural diversity of Continental Europe, it is plausible to believe that India can aim to be on par with the size of the European music market in a decade. This will happen mainly on the back of the currently 448mn smartphone users growing up to 973 million by 2025 compounded with the lowest data pricing in the world currently at $0.09 per GB of data. In addition, the 700 million unique bank accounts, swift moves towards digital transactions — around 2.3 billion UPI transactions happen in a month — and the Government of India’s Bharat Broadband programme BharatNet will bolster progress. The World Economic Forum predicts the Indian Middle-Income population to be 386 million by 2030 compared to 293 million in 2018, the same report indicates that in 2030, 77% of India’s population will comprise of Millennials and Gen Z. The digital advertising market has been growing at a CAGR of 24.12% from 2016-20 and in 2020 was ₹21,726 Cr.  Assuming the CAGR follows a similar growth pattern over the current decade, the digital advertising market is estimated to be ~₹1.66 lakh cr. by 2030. A digital regulatory system being built around JAM (JanDhan – universal basic income, Aadhar – unique identification program and Mobile) controlled by the state which is promoting an interoperable ecosystem, to prevent a winner takes all situation, thereby enabling a number of digital services to co-exists and the market to bloom,“ said Blaise Fernandes, President of IMI and author of the paper.