Mobility

September 21, 2006
Mobile Music Piracy: Crippling the VAS Industry

Geetanjali Babbar

INTRO -- Piracy, which till date has been seen or heard of in the music, Bollywood or software industry, has now taken a leap forward and is slowly and steadily creeping into the VAS industry. Piracy, which is known to cripple an industry, is now taking roots in the value added services segment of the telecom industry which is resulting in huge losses to VAS developers and providers. The money invested by VAS providers towards innovation is not getting realised for the developer due to the piracy. As a result it is getting difficult for VAS developers to complete the value chain and reinvest into developing new and innovative products which will ultimately lead to consumers not getting innovative and new VAS products. To tackle this new menace and to safeguard the innovation, VAS operators have started moving toward getting patents and copyrights for their products as well as protect their rights to the innovation that they have done under the IPR.

NEW DELHI -- According to the Cellular Operators Association of India (COAI), the mobile music industry in India is worth nearly Rs 5 billions, and is on the verge of overtaking the legal, conventional music industry. The size of the conventional music industry , as per a recent report by FICCI and PwC, is around Rs 7 billion, and is estimated to end 2006-07 at Rs 7.2 billion. By the end of this financial year, COAI expects that the mobile music industry, which is growing at the rate of 40 percent to 50 percent, will be worth in excess of Rs. 7.2 billion.

As per the industry survey, mobile music download is growing at a scorching pace, stagnating the growth of legal conventional music. In fact, the size of the mobile music market may be a lot bigger that conventional music already.

In a country like India where a VAS was all about SMS, thundering success of mobile music consisting of ringtones, CRBTs, and music clippings ring tones is a lucrative business opportunity.

Courtesy a market where carrying a high-end mobile phone is a rage, coupled with the strong affinity of Indians toward bollywood, mobile music has emerged as the most prominent segment of VAS providers.

Piracy: Plaguing the Industry

However, the picture is not all that rosy. A major problem plaguing the mobile music industry is that of illegitimate downloads. Illegitimate downloads refer to the free transfer of music from one handset to another (like music downloaded from a friend's mobile) and according to the music industry, pirated downloads have reached a volume which is three times the legal music.

Music piracy can be defined as any illegal manner in which music may be procured by a person. This may include download of music illegally from websites, duplication of audio CDs, conversion of music into mp3 or other formats not offered by the music company and circulated in the markets, for personal or commercial use can be categorised under music piracy.

Piracy of music has been witnessed by the industry for a long time now. With the popularity of music in the telecom industry through ringtones, music downloads, etc. it is now started taking roots in this industry as well. A ringtone, which is downloaded by a mobile subscriber on his cell phone and transferred to his friends is also piracy. More and more mobile subscribers who transfer downloaded music using technologies like Infrared, Bluetooth, WiFi, etc. are indulging in piracy.

The piracy today is both at the handset and network level. The money invested by VAS providers toward innovation is not getting realised for the developer due to the piracy. As a result, it is getting difficult for VAS developers to complete the value chain and reinvest into developing new and innovative products, which will ultimately lead to consumers not getting innovative and new VAS products.

Content can be transferred onto a mobile device through various genres such as SMS, WAP, Hard coded/embedded content, WEB, IVR. Content can also be forwarded to handsets using Wi-Fi, Bluetooth, Infrared and data cable among others. A greater threat stems from the falling price and expanding capacity of memory cards, which allow loads of songs to be transferred by sharing the card. Both techniques are being used by school children.

According to Mandar Thakur, general manager, Soundbuzz India, music piracy occurs when a consumer downloads a piece of music from any source and does not pay the rightful IPR owner. Piracy also happens via the fact that some illegal businesses give away free music or charge for the music and do not pay the IPR owner for it. Music piracy is catching up because, today, consumers can download music freely over the Internet from anywhere."

Savinder Sarna, head, marketing and business alliances, Cellebrum, said: "Over the last one and a half years, after working hard day-in and day-out, we created a service, converted it into a full-fledged product, sold the concept to all operators, kept selling and finally hit the jackpot!! Today we are on with all India implementations with IDEA, Reliance, Spice, HFCL and few circles of Airtel too! All of a sudden, certain service providers have sprung up from nowhere and claim to have the product."

"Well, VAS is not about Rocket Science!! It is all about innovation, service conceptualisation, creation and marketing. Anybody can copy. We anticipated this and have of late started moving toward getting patents and copyrights for our products and to protect our rights to innovation under the IPR," he added..

Are Regulations in Place?

"Currently none , as far as I know , but the government really needs to get involved here and be a little more strict on the entire piracy issue," added Thakur.

The fact is that the real piracy is on the Internet front and not on the mobile front. Digital Rights Management (DRM) technology has helped curb piracy on mobiles. "Soundbuzz has India’s first and only mobile DRM platform for mobiles and has successfully implemented it with Airtel for it’s full song and video services. This technology platform is based on OMA ( open mobile alliance), that offers interoperatibility and prevents mobile piracy," he informed.

There is also a need to educate the public at large of the crime they are indulging in. A collaborative effort of VAS developers, telecom operators and the government to put together the norms and guidelines for the regulations to curb piracy will be the most ideal situation. However, VAS developers have started moving toward getting patents and copyrights for their products as well as protect their rights to their innovation under the IP rights.

Sarna added: "The industry can have laws or regulations with the regulatory authority for having a registration process of the product post, which certain penalty can be imposed on the person who has done the piracy of the idea or the concept."

Commening on weather mobile music piracy is going to be a tsunami, Thakur said: "Most definitely not."

Most of the handsets today are 'forward locked' by the manufacturers themselves , for basic commodity product like mono tones and polyphonic ringtones. Most mobile piracy happens on the retail front where some grey market stores, burn songs/videos on the handset or SIM card at the point of purchase, probably to 'value add'.

However, on the same issue, Sarna holds a different set of views. He added: "Certainly. Piracy in the VAS sector is going to turn out to be a tsunami if not tapped in time. VAS is all about innovation, service conceptualisation, creation and marketing. With piracy adversely affecting the VAS industry, one perceives huge notional losses. Unless, we protect the IP, it shall be very difficult to survive and the market shall stop seeing innovation, hence new products."

DRM: Need of the Hour

DRM is put on the content, and not on the handset. It is a code wherein the content that has been downloaded cannot be forwarded, in simpler terms, there is forwarding disabled on the same. Putting DRM on content is the need of the hour. With DRM-enabled content coming in the market, service developers and operators can look forward to providing DRM-protected content to their customers. It will help check mobile music piracy.

According to industry experts, one way of stopping piracy is encoding the music content in mobile phones. To restrict the loss of revenue through Bluetooth, a joint policy decision on DRM needs to be developed between operator, manufacturer and the content providers. In the west, they are strictly enforcing DRM, under which one cannot transfer licensed files through any means. This policy needs to be fully operational in India.

Can Mobile Phones Overtake Internet?

Why predict when the fact remains that today, mobile penetration in India is far higher than the penetration of Internet in the country. Having said that, fact also remains that the ratio of VAS as compared to voice revenues is currently a mere 30:70. Globally, this is almost the reverse.

However, VAS is catching very fast in the country and there is a significant change the industry is witnessing in terms of contribution to revenues. The coming of 3G will further fuel this growth. It is one of the most advanced technologies in the GSM arena. Affordable 3G handsets and the availability of the technology will further augment mobile penetration making it the most preferred medium for downloading music.

"With spectrum issues looming over the telecom industry, it is hard to tell when the Indian consumer will be able to make the most of it. However, we at Cellebrum are geared up for 3G, with our 3G-competency centre set up in Singapore," commented Saket Agarwal, COO, Cellebrum.

Mobile music industry is poised to grow multi-folds in the near future with new and innovative music-oriented value-added services and products coming up in the market. Newer technologies such as 3G will catalyse the development of music applications for mobile devices and will also provide a huge momentum to the industry.

Thakur expects mobile music retail to soon overtake physical music retail such as CDs and cassettes.

Security Threat?

The security of mobile devices is going to be a major concern for the telecom market. Virus is only one of the various threats hovering around the telecom industry. Piracy is the latest impediment in the way of innovative and creative services. With telecom industry witnessing phenomenal changes, the impediments are bound to creep in.

Did virus grow because PC got sophisticated? "Virus did not grow because the PC got sophisticated; it grew due to the Internet. The mobile is today still a small virus target, but might not face a similar threat due to the nature of connectivity," noted Thakur.

Mobile music is growing at an exciting rate, thereby becoming a boon to the VAS as well as music industry. Ringtones have provided an appreciable thrust to the growth trajectory of mobile music and command a major chunk of the VAS industry. Music selection for the subscriber spans across bollywood, regional music, instrumental, devotional, emoticons, various sounds, etc. acting as a major source of revenue generation for service operators and providers. Almost four lakh ringtones are downloaded per day whereas combined music services account for 6-7.5 lakh downloads a day. Music in any form has been the source of excitement for the mobile subscriber; the onus is on the VAS vendors to innovate the various packaging for the same vis-à-vis CRBT, Ringtone, BGM etc.

Many believe that while globally music companies are more secure about their business, their Indian counterparts are cagey about competition. This, industry watchers think, could stymie the growth of mobile music in India. But ultimately , it is a numbers game — the greater the number of consumers with music-enabled handsets, the more pliable everyone else at the table will have to be.