Case #1: As Sheetal Mehta (not her real name) enters her first-floor office in one of the most impressive commercial complexes in Gurgaon, she gets a wide smile from several of her colleagues. Her claim to fame—she has a built a music bank of around 5,000 songs in the past two years and, hence, is the ‘official’ supplier of music CDs to many in the 250-employee office. With her brand-new 8-4-32 CDRW drive, it takes her less than 15 minutes to "process" a request, and presto, her colleague walks away with 120 songs of his/her choice, promising to buy her lunch in return. The total expenditure incurred, Rs 10, and that too on buying the CDR. Most of the songs have been downloaded from the Internet and the rest have been copied from original CDs borrowed from her large pool of friends. The benefit—assuming that the original CD had a minimum of 12 songs, a straight saving of Rs 1,490 that one would have spent on purchasing at least 10 CDs. In reality, however, the spending would certainly have been higher as one rarely gets all the songs one wants in a single CD.

Case #2: As they make their way through the crowd in New Delhi’s Palika Bazar, a young girl drags her father toward a shop selling Video CDs. They ask for a copy of the latest Shah Rukh-starrer Devdas. "Rs 90 for average quality and Rs 150 for the premium one," declares the shopkeeper. Two hours later, the family of five and two of the girl’s friends are watching the blockbuster in the comfort of their home. The money on movice tickets saved—Rs 900.

While incidents like theseare often shrugged off as innocent attempts to save cost, a Dataquest estimation of the impact of such ‘innocent’ acts suggests a whopping Rs 10,420 crore loss for the Indian music industry. According to a joint Ficci (Federation of Indian Chambers of Commerce and Industry) and Arthur Andersen report, the Indian music market was worth Rs 1,350 crore in financial 2001-02, selling around 230 million music cassettes (MS) and around 15 million compact discs (CDs). Ironically, while the Indian music industry ranks fifth in terms of volumes, it is way down in value terms—at #19. This, according to the Indian entertainment industry report by Khandwala Securities, is more because of the dominance of music cassettes, where margins are low. However, the report also points out that the growth in compact disk sales has consistently been higher than cassette sales over the last few years.

What is piracy?
Piracy essentially is a result of bypassing copyright laws. Piracy is rampant in films (by illegally screening films on cable networks) and in music—(by the sale of counterfeit cassettes, CDs and MP3s and in broadcasting through the unauthorized of pay channel signals).

The rapid development of new technologies, meanwhile, has compounded the issue of piracy. When it comes to availing the benefits of piracy, consumers are not averse to using the product and service in question, unlike the pharmaceutical or food industry, where using counterfeit products could result in personal bodily harm.

According to the International Intellectual Property Alliance (IIPA) 2002 Special 301 report on piracy, counterfeits, pirated copies and pirated CDs are decimating the legitimate music business in India, as also the rest of the Asia-pacific region and also the world. According to this report, counterfeits can be defined as those products in which the inlay cards differ in quality and color of printing. These products also do not bear the name of the company that has the license to manufacture them.

Similarly, pirated copies are those in which the name and contact details of the company manufacturing the cassette, the copyright owner and the year of publication are missing. Also, the inlay card shows poor-quality printing and usually bears an unknown brand-name. Compilations of ‘Hit Songs’ from different albums under names such as ‘Top Ten’ or ‘Bollywood Hits’ fall under this category.

Why the crossover?
According to a report by the Indian music industry (IMI) association, the shift happened due to a change in the carrier format of music—from analog to digital. What this also means is that the demand for audio compact disks, MP3 CDs and CDRs is higher than ever before. This has been triggered by the availability of blank (read "recordable") CDs (CDRs) and an astonishing drop in prices—from around Rs 200 in 1998-99 to Rs 10 in 2001-02. The abundant supply of blank CDs or CDRs (over 200,000 units a day) has not only fueled the preference for this medium in larger cities, it has also taken smaller towns by storm. Unfortunately, almost all these CDRs are used for the illegal recording and distribution of music.

According to the IIPA report, a large chunk of audio cassette piracy in India happens at the street-vendor level. Retail outlets in major cities are increasingly using CDRWs that enable them to deliver compiled music at the request of a customer.

But CDRs alone are not to blame. Other than the change in carrier format, India has also witnessed unprecedented growth in the availability CDRW and RW combo drives, as well as MP3 and CD devices going into music systems. While the CDD/DVD market grew from 110,000 units per month in January 2002 to 120,000 units in August, the demand for CDRW combos has grown from around 12,000 to 40,000 units in the same period.

According to Samsung Electronics India, while the total market for RWs stood at just 22,000 in June this year, the market has doubled to touch 44,000 units per month, barely two months later. Similarly, IMI suggests that the demand for such cheap digital audio hardware—ranging between Rs 2,000 and Rs 4,000 and with capabilities to play VCD, audio CDs, and MP3 CDs—is around 300,000 units per month. What this also means is that with an installed base of 3.5 million units in March 2002, the population of this hardware has already exceeded the base of high-quality compact disk players built in the country’s metros over the last ten years.

Ironically, this extraordinary growth of CDRW drives and such CD players has hurt the music industry more than what should have been a normally expected advantage. The consumer has substituted the purchase of music cassettes not with music CDs but with pirated CDs copied by the like of Sheetal Mehta or by those businesses that are out to make a quick buck at minimum investment levels.

According to IMI, music catalogue sales have also been severely dented by the new wave—with pirated music CDs offering around 120 songs in MP3 format at Rs 50 per CD. In addition, pirated MP3 CDs of the latest new Hindi films (10 films on one MP3 CD) are also released by these local operators, thereby causing a massive loss—unimaginably high, in fact (see tables)—to the film industry.

How wide is the rift?
So what is the actual damage caused by this technology-led menace? According to Dataquest estimates, the installed base for MP3 and compact disk devices in white goods will increase from 2.6 million units in 2001-02 to 6.2 million units in the current fiscal.

Similarly, the total number of desktops with CDD, CDRW and RW combos is also expected to move up from 4.9 million units to 6.6 million during the same period, taking the total installed base of devices capable of playing CDs to 12.8 million units. This is a massive growth of 72% over the fiscal 2001-02 base of 7.5 million units.

Further, we assumed that 65% owners of the total installed base of these devices—both in the PC and white good segment—would be active MP3 users, and therefore, would be either purchasing ready-to-play pirated CDs or getting someone in their immediate circle to duplicate it for them.

With a playing device in hand, and given the ready availability of low-cost songs in MP3 format, we estimate that an average listener will buy, download or share about 1,000-1,500 MP3 songs annually or pick up 10-15 CDs of MP3 songs at Rs 40 each. To be able to listen to a similar number of songs, a user will need to buy 100-150 legitimate CDs per year.

Also, unlike while cutting one’s own CD, a user may actually have to buy even more CDs because not all numbers in an original CD may be of the users’ interest. At an average price of Rs 125 per CD, the music industry loses Rs 12,500 per user. Multiply this with the number of active MP3 listeners—an estimated 6.4 million during fiscal 2002-03—and we can safely say that the new CDR wave will bleed the Indian music industry to the tune of Rs 10,420 crore in the ongoing year. And this is just the beginning.

While the total size of the legitimate Indian music industry during fiscal 2001-02 was about Rs 801 crore and is expected to grow by 8% to touch Rs 875 in the current fiscal, the parallel market of pirated music is expected to grow by almost 72%!

So what can the industry or the authorities do to tackle the menace? At the personal, indivudual level—meaning those who download music from the Internet and burn that on to CDRs on their personal equipment, not much. At the same personal level, where close friends of colleagues exchange CDs or burn CDs for one another, not much again.

It is only at the commercial level that some stringent action and policing may achieve strong enough results (see box, What India Needs to do to Protect IPR). Among the steps—establish a centralized body dedicated to intellectual property protection, as there’s no national coordination body devoted to enforcement of anti-piracy laws in India. Another, adopt an optical media law to deal with increasing optical media piracy. A third, improve and strengthen existing state level intellectual property police cells...

SHUBHENDU PARTH in new Delhi with inputs from YOGRAJ VARMA

Page(s)   1  2  3  4  5