Digital Music: The Distribution Game

VoicenData Bureau
New Update

Low PC penetration is one of the primary constraints of digital music

distribution in a developing market like India. If one excludes the enterprises,

small offices and SME segments, PC penetration in the home segment is very

small. Internet penetration in home segment is even lesser.


Another major constraint that stifles the growth of digital music

distribution is the time taken to download a song through the Internet. Whether

you download through wireless connections such as GSM or CDMA or wired broadband

connections such as ADSL, 60 minutes of music will take anywhere between 40-90

minutes to download.

Another factor that needs consideration is, how many people who otherwise use

the PC and Internet for chatting, e-mail etc, would prefer to come to their PC

to listen or manage their downloaded music content.

So when one combines all these factors, it is clear that digital music (using

current business models) can never become a mass-market phenomenon.


That is why, all players are looking at digital music distribution as a

premium-play value added service, addressed to the top most cream of the market.

A New Approach

While the population of India is 1000 mn, atleast 500 mn of these are

potential consumers of music. The mobile subscriber base in India has already

touched 100 mn. It is growing at a robust pace. Many entry-level mobile

instruments already have FM Radio capability. So, adding a flash memory based

MP3 player isn't going to add to the cost much. Stand-alone MP3 players can

also be made at low cost for non-mobile users.

So, the market potential for digital music distribution in India is between

100 mn to 500 mn.


The Revenue Potential

The average revenue per user in the mobile market is now approximately Rs

400 per month.

Like in the mobile phone market, here too, the actual revenue per user could

vary widely between Rs 50 per month to Rs 1000 per month. However, making a safe

assumption that for music alone, the average revenue per user could be

approximately Rs 200 per month at 100 mn consumers and Rs 100 per month at 500

mn consumers. That works out to a market size of Rs 20 bn to Rs 50 bn (per

month) or Rs 240-600 bn a year.

To put it in perspective, the current total size of the Indian music industry

itself is just about Rs 6 bn per annum. So, a new business paradigm as proposed

here, could grow the Indian music industry 50-100 times its present size.


Key Drivers

To tap in to this enormous opportunity there are a few key drivers that we

need to have in place.

User Devices: The

primary reason why low cost portable MP3 players (or entry level mobile phones

with MP3 capability) have not taken off in India is because its usefulness is

tied to the PC and the Internet. If only we could liberate consumers from this

unreasonable demand of having a PC and a broadband connection, the market for

these devices will explode.

A mobile phone to some extent liberates the consumer from the PC, however,

the cost and more importantly the time to download music is too prohibitive to

be of any relevance in the mass-market context.




  • Smart Card


  • USB/Bluetooth


  • Broadband/ADSL


  • Touch Screen


  • Local Language


  • Built in Hard disk

  • Built-in Battery

    Power Backup

  • Size: Wall

    Mountable like a PCO


The crux of the whole business model lies on the Software

  • Software that

    resides on the MVM

  • Content management

    and retail management software that is used to manage the MVM network

    from remote servers

Server Side Content:

The market cannot take off unless popular content is available at an

attractive price. This requires a tie-up with all music label companies and if

required direct tie-ups with film producers. The packaging and pricing of the

content should be flexibly varied, depending on the demographic profile of the


Music Vending Machine (MVM):

It is now obvious that driver 1 and driver 2 are absolutely useless,

unless there is something in between to bridge the gap between the consumer and

the content. And, that bridge cannot be and should not be a PC or Internet

connection for reasons already explained. A music vending machine with hard disk

can deliver a 45-minute music album through its USB port or Bluetooth to the

consumer device in less than a minute.


A music vending machine with hard disk can act as a stockist of popular

content. The consumer can instantly choose and download what he wants. Here the

options could vary from ready to download packaged content, or individual

selection of assorted songs from different categories.

A music vending machine with hard disk can dynamically change what its stocks

and what it does, depending on the shifting preferences, trends and

geographical, demographical profile of its consumers.

For example, an MVM installed in a mall will stock different content from a

MVM that is put up on a public bus stand. Similarly what is moving fast today,

could become dead stock a few weeks later and hence has to be replaced with

faster moving content.


This dynamic change in stock position across the market comes without any

risk of material wastage as it happens in the case of cassettes and CDs.

The stock at each MVM can be managed and updated through a virtual private

network on Broadband Internet, mostly using off-peak bandwidth that is lying

idle during the nighttime.

A music vending machine can also capture detailed consumption patterns across

demographical, geographical segments and the data can be shared with content

owners and creators of music. Thus, a network of music vending machines can act

as a “virtual repository for the content owned by the consumer” (by looking

at the purchase history of the consumer from a central server).

This means that the consumer has the assurance that he need not to pay again

for listening to the same music that he has already bought once.

This is the killer application that will finally liberate the consumer from

owning a PC or any kind of media, because ownership of content is

dematerialized. It is held virtually in the server database against the consumer


This will also liberate the consumer from the limitations of MP3 players that

have limited memory. The consumer can buy music into his/her player, but can

later overwrite them to listen to something else, because he or she is always

assured that his/her owned content can be accessed anytime anywhere on the MVM


Standards: Since

there will be different types of devices in the market, and there will be

multiple music distributors operating to serve the huge market of 100-500 mn

consumers, we need some standards to complete the picture:

MVM to User Device-Handshaking Protocols

The MVM should be able to recognize the make and type of the device held by

the consumer so that downloads are allowed only on approved models. The

interface is through USB or Bluetooth.

Three levels DRM Standard linked to pricing should be set dynamically at the

time of delivery, by the MVM. The DRM should be enforced through the firmware of

the MP3 player. The pricing of the content should be dynamically decided at the

time of delivery based on the type of DRM standard chosen and the type of device

connected by the consumer.

  • Download from MVM, upload to any PC or other devices and do what you want.
  • Download from MVM, cannot upload/transfer to any other device but hold

    content in the device as long as you want. Overwrite content with new one if

    the space is full. Can refill previously purchased content free of cost from

    any MVM.
  • Download from MVM, cannot upload to any other device. Validity limited to

    no of “plays” or no of “days” as required. (Subscription model)

Virtual Repository

When there are multiple operators selling music in the market, we would need

a few virtual repositories that hold the consumer's account details and

purchase history. All operators can access these repositories.

Common Smart Card

It would be ideal if a consumer can use a common smart card to access music

sold by multiple operators. Cash could be loaded in to this smart card by paying

at the retail outlet where the MVM is located, or could be transferred in to the

smart card-online from the consumer's credit card or debit card account. The

MVM will double up as an online payment collection point for this.

A network of hundreds of thousands of music vending machines could not only

revolutionize music distribution, but could also be used for distributing video

content, games etc. In that sense the MVM will become a DVM (digital vending


Ramkumar RS

consultant, Strategic Marketing and Organizational Development,

MEL Systems and Services