An interesting development happened this month in India’s music industry. Music Bharti, the music related arm of Bharti — the biggest telecom operator in India, became the biggest music company in India by revenues.

As I see it, it signifies following things:

1) Despite being in the market for so long, and having huge marketing budgets, the old conventional players like Saregama, HMV, Sony-BMG have not been able to maintain their leadership. This means that Piracy is killing the traditional music business comapnies in India. Bharti Music does not suffer from the problem of Piracy.

2) Being the biggest telecom company in India with over 70 million users, and has the biggest one-to-one distribution network in India. This coupled with aggressive marketing, Indians’ tendency to splurge on their mobiles with hello-tunes, ringtones, caller tunes and what not, has opened up a totally legal way of making money from music. No traditional music company can hope to reach this distribution scale without spending helluva money.

As Chris Anderson talked about this in his book The Long Tail, the marginal cost of adding another song to its library is zero for Bharti, and it results in virtually unlimited choice to its users. For a music buyer, the chances of a song being available with Bharti Airtel would be higher compared to finding it in a neighborhood music shop.

However, One important point that is missed in the headline is about the profits. Bharti still has to license its music from the record labels, and that would cost money. Now, as I know it, the power has been with the telecom operators when it comes to content developers of games and applications. However, with music contracts, I don’t know as of now. But it can be argued that when even the multiplex owners have more power over the movie revenues in India (cause of ongoing tussle between multiplex owners and Hindi commercial cinema industry), then consolidated telecom firms would definitely have more power over the music companies. So, the ground has shifted for the music companies.

In US, it was Apple with its iTunes. In India, it’s Telecom companies that are calling the shots. Where would the music companies go to find their profits?

Update: The folks at Medianama have done some calculations and asked some industry people to do the maths of money split-up between telecom operators, platform owners and content owners/aggregators. In case you’re interested, do read the links.

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Crossposted on HalfRebel.