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Sound Recordings

In India music has always remained as the principal means of entertainment. The Gramophones were first sold in the country way back in 1895 by the Mutoscope Biograph company. But the first record factory came into existence in the year 1907 when the Gramophone  and Typewriter Company (Gramco) was established in Calcutta.   In the next year the company started a recording studio and a record pressing plant simultaneously with similar factories in U.K. Soon afterwards the Calcutta factories obtained exclusive rights to use in India the trade mark ‘His Master’s Voice’ (HMV). Even today the HMV brand is the most popular and widely recognised music trade marks in the country.

The 1920’s saw competition hotting up in the music market with the entry of Viel-O-Phone and Ramagraph, Odeon and Ruby Recording Company.  But by 1943, with the extinction of others, the HMV again regained supremacy.  In 1950 came the revolutionary magnetic tape recorder with a frequency response of 50 to 10,000 cycles per second.  This resulted in improved sound quality with minimum losses of raw materials. By the mid-1960’s better tape recorder with higher frequency response became available. Subsequently stereophonic recording was also started.

For nearly half a century from its beginning, the Gramophone Company of India, which was better known as HMV- its brand name - enjoyed a virtual monopoly position.  In 1969, Polydor of India Ltd. was started as a subsidiary of the European multinational Polygram of West Germany. In the early 1970’s the HMV and Polydor ruled the Indian market having a market share of 60:40 respectively. The glory, however, did not last long as by 1980’s records started giving way to audio cassettes and the market leaders could not make a quick switch over.    Besides this, the entry of Super Cassettes Industries in the mid-eighties with its low-cost, cheap varieties of both pre-recorded and blank tapes made a significant shift in the Indian audio market.  The competition started soaring up both  in the areas of price and quality.

Today there are about a dozen big manufactures of audio products with hundreds of other small producers spread all over the country.  The Gramophone Company of India Ltd. (GCIL) is still the market leader with 15-20 percent market share.   The other major players are Tips, Polygram, Venus, BMG-Crescendo, Magnasound, Time and Ultra. If 1980’s saw change over from record to cassettes, the 1990’s is witnessing a shift from cassettes to Compact Discs (CD’s).  Even though today CD market is limited to metros and other major urban centres, in the coming years CDs has the highest growth potential for  Indian music companies.

Further, Indian music industry in the present decade is noteworthy in many other respects as well. For the first time in the current century, the music industry is trying to make a move from its traditional arena, which has so far been preoccupied by a single medium i.e. film sound tracks.  These days music video is coming up in the country and Indian pops and raps are attracting audience both inside and outside India.  Another important feature is the presence of satellite based music channels such as MTV, Channel V, ATN etc, which are popularising music across a variety of listeners. Yet another development is the participation of foreign majors. After the liberalisation policy in 1991, restrictions on equity ownership have been relaxed and foreign companies, on application to the Foreign Investment Promotion Board, can be granted  a controlling share of their affiliated business.  As a result, a few foreign collaborations have taken place. Polygram has taken a 51 % share in Music India ( formerly Polydor) and since 1995 the company has been renamed as Polygram India Ltd. Similarly, BMG International has got a majority equity share in Crescendo Music and the collaboration is now known as BMG Crescendo (India) Pvt. Ltd.

Foreign participation has given a new dimension to Indian Music industry. The industry has started plugging some of their existing loopholes. Distribution, a hitherto neglected area, is taken up for rejuvenation.  More selling outlets are established, especially in the semi-urban and rural areas and big manufacturers are thinking more in terms of distribution and marketing tie-ups. Music companies are also diversifying into movies, videos and concerts. The present trend is towards entertainment business covering films, music and television programmes.

In India so far no study has been conducted to find out the contribution of the copyright industry in general and the music industry in particular in the country’s Gross Domestic Product (GDP). Therefore, no reliable secondary source of information is existing today in the country which can be used as benchmarks to arrive at the market estimates. Even at the industry association level no data pertaining to production or sales for the entire industry are available. Of course, journalists in their despatches, sometimes, give information on sales turnover, piracy levels etc. based merely on bits of information, generalised to yield gustimates. To cite one example, one article in the Economic Times (Corporates Dossier, Sept 5-11, 1997) mention total industry turnover as Rs.1500 crores.  Another article in the same daily within a weeks time (Brand Equity, Sept.17-23) mentions a turnover figure of Rs.750 crores.  In the absence of any reliable data at the secondary level, the figures quoted in such articles are largely based on the guessing capacity of the authors.

The London based International Federation of the Phonographic Industry (IFPI) publishes data on sales and piracy of the music industry on regular intervals.  Their latest publication (The Recording Industry in Numbers ‘97) shows India as among the top 20 music sellers of the world (Table 4.1).   According to this report, India is the largest market for audio cassettes in the world at present. The country, in 1996, sold 353 million cassettes and 4.4 million CDs and it had a sales turnover of Rs 10560.50 million.  The Industry is also growing at about 10 % per annum (Table 4.2). Although with about 1 per cent  share in the world market, India is one of the leading music markets in the Asian region (Table 4.3).

Market Estimates based on Survey Findings 

As a part of our survey we contacted 30 leading music companies in the country.  But the response from the music companies was very poor.   Inspite of  our repeated efforts, the big manufacturers did not supply us any information on their (respective) production and sales.  Even their opinions regarding extent of piracy, public awareness and enforcement of the Copyright Act, which do not have any bearing upon their secret business information such as sales etc. could not be obtained. We could get only 14 filled in questionnaires from the small producers confined mostly to regional level.  This poses a real handicap to arrive at any supply side estimate.

On the demand side, we could get responses from 128 endusers of audio products scattered over 6 survey locations. According to a report from IFPI (India Market Report, 1996), India had 32 million cassette  recorder owning households in the year 1993-94.  Another report (Economic Times, Jan 15, 1997) indicates the market for audio systems in the country to be  increasing at an average of 3 million sets per annum.  Taking this into account the total number of cassette recorder owning households in India by 1996-97 would be in the range of 41 million. Our survey reveals that average number of audio cassettes bought by a household in 1996 is the highest in Chennai (28.9) and the lowest (8.9) in Delhi (Table 4.4). The overall (i.e. average of six cities where survey took place) average number of cassettes bought by a household during the year 1996 is 14.64.  If we multiply this (14.64) with the number of households owning cassette recorders, we may arrive at the aggregate demand for audio cassettes in the country. But this has a limitation.   This is because the number of cassettes bought in the small urban and rural centres would be less than what we found in the six big cities of the country.  The reason being in rural areas, due to poor distribution network, the availability of audio cassettes would be  less.  Secondly, the proportion of households who can afford to buy audio products would definitely be less in the  rural areas when compared to their urban counterparts.  However, since our survey was confined to only urban areas we do not have any knowledge of the rural purchase  pattern.  A study conducted by the ORG-MARG during Feb-Mar ‘96 on various aspects of the Indian Music Industry assumed that average number of cassettes bought by a rural household was six.  If we take this figure for the rural households and 14.64 for the urban households, the mean of these two (i.e.10.32) would give us the national average. This when multiplied by 41 million cassette recorder owning households would give us the estimate of market size at 423.12 million cassettes during 1996.

In India CDs market is still confined to only major urban centres, especially metro cities. Our survey reveals that only 27 households out of 128 are using CDs as against all of them are using cassettes. Thus the penetration level of CD is about 21%.  For the country as a whole the proportion of CD users is  very low (about 1 to 2 percent).  The IFPI sales figure for 1996 shows (Table 4.2) that CDs constitute just 1.23 % of the total sales (in number) of cassettes & CDs. Taking this into account the number of CDs demanded can be estimated as 5.27 million in a year.  In our survey the average price of a cassette and a CD are found to be Rs 23 and Rs 245 respectively.  The number of units multiplied by unit price would give the size of the market in value (Rs) terms at Rs. 9731.76 million for cassettes and Rs. 1291.15 million for CDs.  The aggregate size of Indian Music market is thus estimated to be Rs.11022.91 million. The schematic presentation of the demand side estimation is shown at  Table 4.5.

As mentioned earlier (chapter II), the piracy in sound recordings takes three principal forms.  First, songs from different cassettes/CDs  are copied in a single cassette/CD without taking proper authorisation.  These are generally copied in blank tapes, mostly at the instance of buyers.  A large number of music lovers in the country demand recent hits in a single medium.  Since no single legitimate cassette/CD can fulfil this demand (as songs belong to different rightholders and are available in separate medium), pirates step in. Second, there is the  counterfeiting where pirated version is similar to that of original in almost all respects including appearance and price.  Buyers at the time of buying feel that they are buying original products.  Only during use it can be found out to be a pirated one. The third category is bootlegging where unauthorised recordings of performance are made without the  knowledge of anybody.  

Another related problem that arises in this segment is noticed while producing cover versions, though strictly speaking this is not purely a copyright violation. Cover version is the reproduction of (old) songs by different artists (singers) using the same tune and lyrics.   The law permits cover version production subject to fulfilment of certain formalities such as payment of fee to the original producer (the rightholder). But problem arises when  the producers of cover version  try to give the impression of bringing out the same songs (by using similar inlay cards as that of the original producer) with lower price.  The ordinary endusers feel as if they are buying the same songs at cheaper rates.  But the fact remains that  cover version songs are sung by different (generally less familiar) artists and thus different from the original ones.  This sometimes may incur loss of sales revenue to the original producer(s).  In the past years two big music companies in India are seen to be involved in legal battles with respect to a number of cover version productions.
 

The reasons behind copyright piracy in sound recordings are numerous.  Of course the first and the foremost among these is pecuniary in nature.   If ordinary buyers can get certain products at lower price, they do not mind buying these even if they may be pirated ones. The pirates also can afford to sell at lower prices because they need not spend in advertising, infrastructure and payments towards the state exchequer. Therefore, pirates always enjoy price advantages compared to the legitimate sellers. The instruments to beat the pirates could be only through quality.  Generally pirated products are of lower qualities.  But with advancement of technology, copying has become simpler and less costly.  Therefore, many a times pirated products are also equally of good quality, which makes the task of legitimate producers more difficult.

Besides the above, piracy also thrives because of demand-supply gap. When there is  demand for a product and the legitimate market is not in a position to supply, piracy creeps in.  The distribution network with respect to audio products is still not very strong in the country. This leaves a wide gap-especially in the semi urban and rural areas.  The pirates reign in such areas.  The rural markets having buyers without much knowledge of piracy are thus controlled by the pirates.

While piracy is an integral part of the Indian music market, the exact extent of it is very difficult to know. The IFPI India Market Report (1996) mentions that piracy level has come down from as high as 95 % in 1985 to about 30% in 1995.  The piracy Reports published by IFPI shows that in 1995 India is the world’s third largest pirate market in volume terms and the sixth in value terms.  Table 4.6  shows the sale of pirated  audio products against their legitimate sales in India during 1991-95.  As can be seen from the table, the pirate sales (in number) has almost doubled within four years between 1991 and 1995.  The pirated sales in value has also increased from $ 69 million to $ 82.1 million during the same period, thus achieving a growth rate of 19 percent (Table 4.7).  The  piracy percentage, however, is showing a  regular decline when measured in value terms and it is fluctuating in terms of units sold during the same period (Table 4.6 & 4.7).  Another point to be mentioned here is the extent of piracy in CDs (measured in percentage term) is much lower than in cassettes.  In 1995, against a piracy level of 29 % in cassettes, the CD piracy stood at single digit level at 9%. This may be due to low penetration of CD players among Indian consumers. With the spread of use of CDs this may change drastically in the years to come. 

The Survey Findings

During the survey we asked a number of questions through a set  of structured questionnaires which are directly or indirectly aimed at   finding the piracy levels. The target groups comprises manufacturers, sellers and endusers of audio products. As mentioned earlier, the response from the manufacturers were very poor. But we got overwhelming response in case of other categories . 10 out of 14 (71%) music companies are aware of some kind of copyright violations of their respective works.  But most of them could not furnish reliable information on number of violations and loss due to such violation.  Since the exact extent of piracy is not known even to the right holders, such responses are not surprising. Similarly, 63% of the sellers (authorised dealers/distributors) feel their products are being pirated. But only 31% of them admit loss due to such piracy.

Among endusers, 47 out of 128 (37%) admitted buying pirated audio products.  Of these, 24 (51%) are buying it knowingly and the rest 49% had no knowledge of piracy at the time of buying.  This 49% can be considered as the extent of counterfeiting, where endusers buy pirated products thinking these as originals. The purchase of total and pirated cassettes by the endusers in six survey locations are given in Table 4.8.  The shows the extent of piracy at endusers level is the highest in Mumbai (33%) and the least in Calcutta (17%), the overall rate being about 25 percent.

The music companies and the sellers of audio products were asked what they perceive as the existing  piracy levels in the country with respect to audio products.  According to music companies the average piracy level has increased from 56.7% in 1994-95 to 58.6% in 1996-97.  The sellers, however, feel that piracy in music is not that high as has been perceived.  According to them, from a low of 34% piracy in 1994-95 it has increased to 38% in 1996-97 (Table 4.9). Regarding trend in piracy level in the current decade as compared to the 1980’s, the majority of the music companies (86%) feel piracy has increased in 1990’s.  A large proportion (67%) of sellers also feel likewise. This contradicts the IFPI findings which claim that piracy level has come down drastically from 95% in the mid eighties to about 30% in the mid nineties.

Among the types of music pirated the most,  film songs are ahead of others.  About 79% of the music companies feel that a high degree (more than 50%) of piracy takes place in case of film songs.  The corresponding figures for the sellers category is 68%.  This is quite expected for a country where film songs especially Hindi film songs historically occupy a larger chunk of the market.  Out of 128 endusers interviewed in the survey 120 (94%) are found to buy Indian film songs.

The music companies as well as sellers of audio products were asked their opinion on reasons for audio piracy in India.  The majority of the sellers identified high price of original cassettes/CDs as the main factor responsible for piracy (Table 4.11).  The music companies on the other hand, feel the tendency of people to record songs of their own choice in a single cassette/CD is the main factor leading to audio piracy (Table 4.10). The observations from the endusers support the above findings.  When asked why bought pirated products knowingly, 67% of the endusers cited either low price (36%) or non availability (31%) of the product of their choice as the reasons.

The piracy takes away certain portion of revenue from the legal owner of copyrights. The commercial exploitation of copyrights also yields income to the creative persons in the form of royalties.  The state gets income in the form of excise duty, sales tax, income tax etc, which pirates do not pay.   Therefore, piracy brings in losses for all involved in the legitimate production and distribution of copyright items. The important among these are the trade loss and loss to the state exchequer.

The trade loss could be determined from the percentage of sales lost to the pirates.  However, arriving at a unique percentage is not a simple task.   As discussed earlier the piracy level is varying across various estimates.  The estimates using IFPI data showed piracy level in terms of value at 22% (Table 4.7) in 1995. Our survey findings based on purchase behaviour of endusers show the piracy level (in terms of units bought) in 1996 was 25 %.  The sellers, on the other hand, perceived an average piracy level of 38 % in 1996-97.  But when asked to quantify their own loss (gross as well as a percent of sales), only 31 out of 42 admitted losing, and could  provide the figures for 1996.  The distribution of these respondents in terms of percentage lost are presented in Table 4.12.  As can be seen that   in 1996, while 9 out of 30 (30%) reported losing between 10-20 percent and 8 (about 27 %) seemed to have lost between  20 to 30 % loss.  7 (23%) seemed to be losing in the range of 40 to 50 percent and another 6 (20%) happened to lose within 10% of their sales. The (weighted) average loss per seller in 1996 is calculated to be 23.67 percent. This shows that even though sellers perceived a higher piracy percent for the audio market as a whole, their own experience is different. Similarly, the piracy percent as perceived by the music companies are somewhat on the higher side and therefore needs to discounted.

The piracy level estimate based on endusers purchase behaviour is closer to that of estimation based on sellers losses.  If  we take the average of these two, the estimated piracy level in 1996-97 could be 24.5 percent.  This falls in between IFPI estimate based on units sold  and value of sales.  The trade loss thus can be estimated as about Rs. 270 crores in 1996-97.

Table 4.1 :    Top 20 Countries in the Music Industry 

Source: Same as Table 4.1.

Table 4.3 :   Sale of Pre-recorded Music in 1996 in the 

Source : Same as Table 4.1

Table 4.4: Purchase of Audio Cassettes by Endusers

Source : NPC Survey

Table 4.5 :  The Demand side Estimate of Indian Music Industry

Table 4.6 : Sales of  Legitimate & Pirated Audio Products in India During 1991-1995

Note:  Extent of piracy is calculated as pirated sales as a percentage of total (legitimate & pirated) sales

Source: Pirate sales are from Piracy Reports (various years) and legitimate figures are from Recording Industry in Numbers ‘97 both from IFPI, London

Table 4.7: Extent of Piracy in Audio Products in Terms of Sales Value (Retail)

Source: Same as Table 4.6 

Tables 4.8 : Piracy Extent as Observed from Buying Behaviour of Endusers During 1996

Source: NPC Survey

Table 4.9 : Extent of Piracy During 1994-95 to 96-97

Source  : NPC Survey

Table 4.10 :    Reasons for Music Piracy in India as Perceived by  Music Companies 

No. of Respondents giving  (Ranks)

Source : NPC Survey

Table 4.11.   Reasons for Music Piracy in India  as perceived by Audio   products Sellers

No. of Respondents giving (Ranks)

  Source : NPC Survey  

Table 4.12 :   Loss (as % of Sales) suffered by Audio  Products Sellers

No. of Respondents suffering losses

Source: NPC Survey

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